[Federal Register Volume 61, Number 106 (Friday, May 31, 1996)]
[Proposed Rules]
[Pages 27444-27708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13613]




[[Page 27443]]


_______________________________________________________________________

Part II





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



_______________________________________________________________________



42 CFR Part 412, et al.



Medicare Program; Changes to the Hospital Inpatient Prospective Payment 
Systems and Fiscal year 1997 Rates; Proposed Rule

Federal Register / Vol. 61, No. 106 / Friday, May 31, 1996 / Proposed 
Rules

[[Page 27444]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, and 489

[BPD-847-P]
RIN 0938-AH34


Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 1997 Rates

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment systems for operating costs and capital-related 
costs to implement necessary changes arising from our continuing 
experience with the systems. In addition, in the addendum to this 
proposed rule, we are describing proposed changes in the amounts and 
factors necessary to determine prospective payment rates for Medicare 
hospital inpatient services for operating costs and capital-related 
costs. These changes would be applicable to discharges occurring on or 
after October 1, 1996. We are also setting forth proposed rate-of-
increase limits as well as proposing changes for hospitals and hospital 
units excluded from the prospective payment systems.

DATES: Comments will be considered if received at the appropriate 
address, as provided below, no later than 5 p.m. on July 31, 1996.

ADDRESSES: Mail written comments (an original and 3 copies) to the 
following address:

Health Care Financing Administration, Department of Health and Human 
Services, Attention: BPD-847-P, P.O. Box 7517, Baltimore, MD 21207-
0517.

    If you prefer, you may deliver your written comments (an original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-09-26, Central Building, 7500 Security Boulevard, Baltimore, MD 
21244-1850.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-847-P. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's offices at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).
    For comments that relate to information collection requirements, 
mail a copy of comments to: Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 10235, New Executive 
Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA 
Desk Officer.

    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8.00. As an alternative, you can view 
and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
academic libraries throughout the country that receive the Federal 
Register.

FOR FURTHER INFORMATION CONTACT:

Nancy Edwards (410) 786-4531, Operating Prospective Payment, DRG, Wage 
Index Issues.
Tzvi Hefter (410) 786-4529, Capital Prospective Payment, Excluded 
Hospitals.

SUPPLEMENTARY INFORMATION:

I. Background

A. Summary

    Under section 1886(d) of the Social Security Act (the Act), a 
system of payment for the operating costs of acute care hospital 
inpatient stays under Medicare Part A (Hospital Insurance) based on 
prospectively-set rates was established effective with hospital cost 
reporting periods beginning on or after October 1, 1983. Under this 
system, Medicare payment for hospital inpatient operating costs is made 
at a predetermined, specific rate for each hospital discharge. All 
discharges are classified according to a list of diagnosis-related 
groups (DRGs). The regulations governing the hospital inpatient 
prospective payment system are located in 42 CFR part 412. On September 
1, 1995, we published a final rule with comment period (60 FR 45778) to 
implement changes to the prospective payment system for hospital 
operating costs beginning with Federal fiscal year (FY) 1996.
    For cost reporting periods beginning before October 1, 1991, 
hospital inpatient operating costs were the only costs covered under 
the prospective payment system. Payment for capital-related costs had 
been made on a reasonable cost basis because, under sections 1886(a)(4) 
and (d)(1)(A) of the Act, those costs had been specifically excluded 
from the definition of inpatient operating costs. However, section 
4006(b) of the Omnibus Budget Reconciliation Act of 1987 (Public Law 
100-203) revised section 1886(g)(1) of the Act to require that, for 
hospitals paid under the prospective payment system for operating 
costs, capital-related costs would also be paid under a prospective 
payment system effective with cost reporting periods beginning on or 
after October 1, 1991. As required by section 1886(g) of the Act, we 
replaced the reasonable cost-based payment methodology with a 
prospective payment methodology for hospital inpatient capital-related 
costs. Under the new methodology, effective for cost reporting periods 
beginning on or after October 1, 1991, a predetermined payment amount 
per discharge is made for Medicare inpatient capital-related costs. 
(See subpart M of 42 CFR part 412, and the August 30, 1991 final rule 
(56 FR 43358) for a complete discussion of the prospective payment 
system for hospital inpatient capital-related costs.)

B. Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the 
Medicare hospital inpatient prospective payment systems for both 
operating costs and capital-related costs. This proposed rule would be 
effective for discharges occurring on or after October 1, 1996. 
Following is a summary of the major changes that we are proposing to 
make:
1. Changes to the DRG Classifications and Relative Weights
    As required by section 1886(d)(4)(C) of the Act, we must adjust the 
DRG classifications and relative weights at least annually. Our 
proposed changes for FY 1997 are set forth in section II of this 
preamble.
2. Changes to the Hospital Wage Index
    In section III of this preamble, we discuss revisions to the wage 
index and the annual update of the wage data. Specific issues addressed 
in this section include:
    <bullet> FY 1997 wage index update.

[[Page 27445]]

    <bullet> Revisions to the wage index based on hospital 
redesignations.
    <bullet> Solicitation of public comment on possible changes to the 
following:

--Contract labor--expansion of allowable costs.
--Revision in Puerto Rico labor market areas.

    <bullet> Medicare Geographic Classification Review Board--
composition and criteria.
3. Rebasing and Revision of the Hospital Market Baskets
    In section IV of this preamble, we discuss our proposal to use a 
rebased and revised hospital market basket in developing the FY 1997 
update factor for the operating prospective payment rates, the capital 
prospective payment rates, and the excluded hospital rate-of-increase 
limits.
4. Other Changes to the Prospective Payment System for Inpatient 
Operating Costs
    In section V of this preamble, we discuss several provisions of the 
regulations in 42 CFR parts 412, 413, and 489 and set forth certain 
proposed changes concerning the following:
    <bullet> Sole community hospitals.
    <bullet> Rural referral centers.
    <bullet> Disproportionate share adjustment.
    <bullet> Direct graduate medical education programs.
    <bullet> Hospital distribution of ``An Important Message from 
Medicare.''
5. Changes and Clarifications to the Prospective Payment System for 
Capital-Related Costs
    In section VI of this preamble, we discuss several provisions of 
the regulations in 42 CFR part 412 and set forth certain proposed 
changes concerning the following:
    <bullet> Use of simplified cost accounting.
    <bullet> The capital Federal and hospital-specific rates.
6. Changes for Hospitals and Hospital Units Excluded From the 
Prospective Payment Systems
    In section VII of this preamble, we discuss a clarification 
concerning the calculation of payments to hospitals excluded from the 
prospective payment system.
7. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits
    In the addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the FY 1997 
prospective payment rates for operating costs and capital-related 
costs. We are also proposing update factors for determining the rate-
of-increase limits for cost reporting periods beginning in FY 1997 for 
hospitals and hospital units excluded from the prospective payment 
system. In addition, we have included a detailed discussion of our 
methodology for setting thresholds for outlier cases. We are inviting 
comments on our methodology and any suggestions for changes in that 
methodology that could help us better predict outlier payments.
8. Impact Analysis
    In Appendix A, we set forth an analysis of the impact that the 
proposed changes described in this rule would have on affected 
entities.
9. Capital Acquisition Model
    Appendix B contains the technical appendix on the proposed FY 1997 
capital acquisition model.
10. Rebased Market Basket Data Sources
    Appendix C sets forth the data sources used to determine the market 
basket relative weights and choice of price proxies.
11. Report to Congress on the Update Factor for Prospective Payment 
Hospitals and Hospitals Excluded From the Prospective Payment System
    Section 1886(e)(3)(B) of the Act requires that the Secretary report 
to Congress on our initial estimate of an update factor for FY 1997 for 
both hospitals included in and hospitals excluded from the prospective 
payment systems. This report is included as Appendix D to this proposed 
rule.
12. Proposed Recommendation of Update Factor for Hospital Inpatient 
Operating Costs
    As required by sections 1886(e)(4) and (e)(5) of the Act, Appendix 
E provides our recommendation of the appropriate percentage change for 
FY 1997 for the following:
    <bullet> Large urban area and other area average standardized 
amounts (and hospital-specific rates applicable to sole community 
hospitals) for hospital inpatient services paid for under the 
prospective payment system for operating costs.
    <bullet> Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by hospitals and 
hospital units excluded from the prospective payment system.
13. Discussion of Prospective Payment Assessment Commission 
Recommendations
    The Prospective Payment Assessment Commission (ProPAC) is directed 
by section 1886(e)(2)(A) of the Act to make recommendations on the 
appropriate percentage change factor to be used in updating the average 
standardized amounts. In addition, section 1886(e)(2)(B) of the Act 
directs ProPAC to make recommendations regarding changes in each of the 
Medicare payment policies under which payments to an institution are 
prospectively determined. In particular, the recommendations relating 
to the hospital inpatient prospective payment systems are to include 
recommendations concerning the number of DRGs used to classify 
patients, adjustments to the DRGs to reflect severity of illness, and 
changes in the methods under which hospitals are paid for capital-
related costs. Under section 1886(e)(3)(A) of the Act, the 
recommendations required of ProPAC under sections 1886(e)(2)(A) and (B) 
of the Act are to be reported to Congress not later than March 1 of 
each year.
    We are printing ProPAC's March 1, 1996 report, which includes its 
recommendations, as Appendix F of this document. The recommendations, 
and the actions we are proposing to take with regard to them (when an 
action is recommended), are discussed in detail in the appropriate 
sections of this preamble, the addendum, or the appendices to this 
proposed rule. See section VIII of this preamble for specific 
information concerning where individual recommendations are addressed. 
For a brief summary of the ProPAC recommendations, we refer the reader 
to the beginning of the ProPAC report as set forth in Appendix F of 
this proposed rule. For further information relating specifically to 
the ProPAC report, contact ProPAC at (202) 401-8986.

II. Proposed Changes to DRG Classifications and Relative Weights

A. Background

    Under the prospective payment system, we pay for inpatient hospital 
services on the basis of a rate per discharge that varies by the DRG to 
which a beneficiary's stay is assigned. The formula used to calculate 
payment for a specific case takes an individual hospital's payment rate 
per case and multiplies it by the weight of the DRG to which the case 
is assigned. Each DRG weight represents the average resources required 
to care for cases in that particular DRG relative to the average 
resources used to treat cases in all DRGs.
    Congress recognized that it would be necessary to recalculate the 
DRG relative weights periodically to account

[[Page 27446]]

for changes in resource consumption. Accordingly, section 1886(d)(4)(C) 
of the Act requires that the Secretary adjust the DRG classifications 
and relative weights annually. These adjustments are made to reflect 
changes in treatment patterns, technology, and any other factors that 
may change the relative use of hospital resources. The proposed changes 
to the DRG classification system and the proposed recalibration of the 
DRG weights for discharges occurring on or after October 1, 1996 are 
discussed below.

B. DRG Reclassification

1. General
    Cases are classified into DRGs for payment under the prospective 
payment system based on the principal diagnosis, up to eight additional 
diagnoses, and up to six procedures performed during the stay, as well 
as age, sex, and discharge status of the patient. The diagnosis and 
procedure information is reported by the hospital using codes from the 
International Classification of Diseases, Ninth Edition, Clinical 
Modification (ICD-9-CM). The Medicare fiscal intermediary enters the 
information into its claims system and subjects it to a series of 
automated screens called the Medicare Code Editor (MCE). These screens 
are designed to identify cases that require further review before 
classification into a DRG can be accomplished.
    After screening through the MCE and any further development of the 
claims, cases are classified by the GROUPER software program into the 
appropriate DRG. The GROUPER program was developed as a means of 
classifying each case into a DRG on the basis of the diagnosis and 
procedure codes and demographic information (that is, sex, age, and 
discharge status). It is used both to classify past cases in order to 
measure relative hospital resource consumption to establish the DRG 
weights and to classify current cases for purposes of determining 
payment. The records for all Medicare hospital inpatient discharges are 
maintained in the Medicare Provider Analysis and Review (MedPAR) file. 
The data in this file are used to evaluate possible DRG classification 
changes and to recalibrate the DRG weights.
    Currently, cases are assigned to one of 492 DRGs in 25 major 
diagnostic categories (MDCs). Most MDCs are based on a particular organ 
system of the body (for example, MDC 6, Diseases and Disorders of the 
Digestive System); however, some MDCs are not constructed on this basis 
since they involve multiple organ systems (for example, MDC 22, Burns).
    In general, principal diagnosis determines MDC assignment. However, 
there are five DRGs to which cases are assigned on the basis of 
procedure codes rather than first assigning them to an MDC based on the 
principal diagnosis. These are the DRGs for liver, bone marrow, and 
lung transplant (DRGs 480, 481, and 495, respectively) and the two DRGs 
for tracheostomies (DRGs 482 and 483). Cases are assigned to these DRGs 
before classification to an MDC.
    Within most MDCs, cases are then divided into surgical DRGs (based 
on a surgical hierarchy that orders individual procedures or groups of 
procedures by resource intensity) and medical DRGs. Medical DRGs 
generally are differentiated on the basis of diagnosis and age. Some 
surgical and medical DRGs are further differentiated based on the 
presence or absence of complications or comorbidities (hereafter CC).
    Generally, GROUPER does not consider other procedures; that is, 
nonsurgical procedures or minor surgical procedures generally not 
performed in an operating room are not listed as operating room (OR) 
procedures in the GROUPER decision tables. However, there are a few 
non-OR procedures that do affect DRG assignment for certain principal 
diagnoses, such as extracorporeal shock wave lithotripsy for patients 
with a principal diagnosis of urinary stones.
    The changes we are proposing to make to the DRG classification 
system for FY 1997 and other decisions concerning DRGs are set forth 
below.
2. Pre-MDC DRGs
    Effective October 1, 1994, ICD-9-CM procedure code 41.04, 
Autologous hematopoietic stem cell transplant, was created to capture 
the transplantation of stem cells obtained from bone marrow or 
peripheral blood. At that time, we designated the code as non-OR. This 
transplant procedure was previously assigned to procedure code 99.73, 
Therapeutic erythrocytapheresis, which is designated as a non-OR 
procedure. When we created this code, we received comments requesting 
that it be designated as an OR procedure and assigned to DRG 481 (Bone 
Marrow Transplant) based on the resource use associated with the type 
of transplant. However, as we stated in the September 1, 1994 final 
rule (59 FR 45340), when a new code is introduced, our longstanding 
practice is to assign it to the same DRG category as its predecessor 
code. One compelling reason for this practice is our inability to move 
the cases associated with a new code to a new DRG assignment as part of 
DRG reclassification and recalibration. Because we could not separately 
identify the stem cell transplant cases from the other cases coded with 
99.73 in order to reclassify them and their charges to a new DRG, we 
were unable to predict the new weights of both the DRGs in which this 
code currently is classified and the new DRG to which it would be 
assigned. Therefore, we were prevented from redesignating code 41.04 as 
an OR procedure or assigning it to a DRG. However, we stated that we 
would analyze the stem cell cases as soon as the FY 1995 cases were 
available.
    This year, the FY 1995 Medicare Provider Analysis and Review 
(MedPAR) file is available for use in DRG analysis and weight setting 
for FY 1997. In the December 1995 update to the FY 1995 MedPAR file, 
there are a total of 178 cases reporting the performance of a stem cell 
transplant. Of that number, 13 cases also reported the performance of a 
bone marrow transplant. Those cases were removed from our analysis 
because they are already classified to DRG 481. Of the remaining 165 
cases, 100 cases did not meet the coverage criteria for Medicare 
payment. As set forth in the Medicare Coverage Issues Manual at section 
35-30.1 (see Transmittal No. 84, April 1996), autologous stem cell 
transplants are not covered when performed for the following 
conditions:
    <bullet> Acute leukemia not in remission (diagnosis codes 204.00, 
205.00, 206.00, 207.00, and 208.00).
    <bullet> Chronic granulocytic leukemia (diagnosis codes 205.10 and 
205.11).
    <bullet> Solid tumors (other than neuroblastomas) (diagnosis codes 
140.0 through 199.1)
    <bullet> Multiple myeloma (diagnosis codes 203.00, 203.01 and 
238.6).
    After eliminating the noncovered cases, 65 cases of stem cell 
transplant remained. The average standardized charge for these cases 
was approximately $83,000. The average standardized charge for bone 
marrow transplant cases in the FY 1995 MedPAR file is approximately 
$98,000. Thus, since the average resource use associated with stem cell 
transplant is similar to that associated with bone marrow transplant, 
we are proposing to assign procedure code 41.04 to DRG 481 effective 
with discharges occurring on or after October 1, 1996. The overall 
average charge for stem cell and bone marrow combined is just under 
$93,000. In addition, we propose to designate stem cell transplant as 
an OR procedure.

[[Page 27447]]

3. MDC 1 (Diseases and Disorders of the Nervous System)

a. Sleep Apnea

    We have received correspondence requesting that we review the DRG 
assignment of cases in which surgery is performed to correct 
obstructive sleep apnea (diagnosis code 780.57). When coded as a 
principal diagnosis, sleep apnea is assigned to DRGs 34 and 35 (Other 
Disorders of the Nervous System)\1\ in MDC 1.
---------------------------------------------------------------------------

    \1\ A single title combined with two DRG numbers is used to 
signify pairs. Generally, the first DRG is for cases with CC and the 
second DRG is for cases without CC. If a third number is included, 
it represents cases of patients who are age 0-17. Occasionally, a 
pair of DRGs is split on age>17 and age 0-17.
---------------------------------------------------------------------------

    Recently, new surgical interventions to correct sleep apnea have 
been introduced. The procedures most frequently performed for this 
condition are the following:

Code and Description

27.69  Other plastic repair of palate
29.4  Plastic operation on pharynx
29.59  Other repair of pharynx

    Since none of these surgical procedures is assigned to MDC 1, cases 
of sleep apnea treated with one of these surgeries are assigned to DRG 
468 (Extensive OR Procedure Unrelated to Principal Diagnosis) in the 
case of codes 25.59 and 78.49 or to DRG 477 (Nonextensive OR Procedure 
Unrelated to Principal Diagnosis) in the case of code 29.4.
    We are proposing to address this situation by assigning the three 
surgical procedures to MDC 1. Based on the charges associated with 
these cases and the fact that they are not clinically similar to the 
other surgical DRGs in MDC 1, we are proposing to include them in DRGs 
7 and 8 (Peripheral and Cranial Nerve and Other Nervous System 
Procedures).

b. Guillain-Barre Syndrome

    Guillain-Barre syndrome (diagnosis code 357.0) is a post-infectious 
polyneuropathy in which severely affected patients may require 
ventilatory assistance and long stays in intensive care. In recognition 
of the high resource consumption associated with this diagnosis, 
effective with FY 1991, we reassigned code 357.0 from DRGs 18 and 19 
(Cranial and Peripheral Nerve Disorders) to DRG 20 (Nervous System 
Infection Except Viral Meningitis). (See the September 4, 1990 final 
rule (55 FR 36024).) A commenter stated that although DRG 20 would 
provide a higher payment for these cases, it would still be inadequate 
to cover the costs of treating these patients, and we agreed that we 
would monitor this issue.
    We have recently received requests that we again review this 
assignment. These commenters stated that the treatment for these cases 
remains very costly and often entails long hospital stays. Therefore, 
we conducted an analysis of the cases assigned to DRG 20 using the 10 
percent random sample of the FY 1995 MedPAR file that we use for 
analyzing possible classification changes.
    Cases coded with 357.0 comprise approximately 20 percent of the 
cases assigned to DRG 20. As the commenters predicted, the average 
standardized charges for these cases, approximately $22,400, was higher 
than the average charge for the DRG, approximately $17,100. However, 
the length of stay was only slightly higher, 9.1 days compared to 8.4. 
We believe that DRG 20 is the appropriate assignment clinically for 
Guillain-Barre cases and the average charge is well within the 
variation in charges for this DRG. In addition, DRG 20 is the most 
resource-intensive, and, thus, the highest-weighted medical DRG in MDC 
1.
    However, in reviewing the other cases assigned to DRG 20, we noted 
that the average charges for two diagnoses were significantly lower 
than the overall average charge. These diagnoses, herpes zoster of the 
nervous system (code 053.10) and herpes zoster of the nervous system, 
NEC (code 053.19) had average charges of only $7,700 and $7,100, 
respectively. They also had significantly lower average lengths of stay 
(4.4 and 4.2 days, respectively). Because these two diagnoses also 
account for approximately 20 percent of the cases in DRG 20, their low 
average charge has the effect of significantly lowering the average 
charge for the DRG. Removing these two codes from DRG 20 increases the 
average charge to approximately $20,000. After reviewing the remaining 
medical DRGs in MDC 1, we believe that reassigning codes 053.10 and 
053.19 to DRGs 18 and 19 is appropriate both clinically and in terms of 
resource consumption. In the 10 percent MedPAR file, these DRGs had an 
average charge of approximately $8,000 and $5,300, respectively. 
Therefore, we are proposing to make this DRG classification change 
effective for FY 1997. This change would significantly increase the 
relative weight for DRG 20 and provide higher payment for the Guillain-
Barre cases. The proposed weight for DRG 20 is 2.4782, an increase of 
17 percent over the FY 1996 weight of 2.1157.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
    Effective for discharges occurring on or after October 1, 1995, we 
created a new code for insertion of a coronary artery stent (procedure 
code 36.06). Until creation of the new code, insertion of coronary 
artery stent had been included in the codes for percutaneous 
transluminal coronary angioplasty (PTCA) (procedure codes 36.01, 36.02, 
and 36.05).
    As discussed above in section II.B.2, when a new code is 
introduced, our longstanding practice is to assign it to the same DRG 
category as its predecessor code or codes. Therefore, in the June 2, 
1995 proposed rule, we assigned procedure code 36.06 to DRG 112 
(Percutaneous Cardiovascular Procedures), the DRG to which PTCA is 
assigned. In response to comments received, in the September 1, 1995 
final rule, we explained our policy on DRG assignment of new codes (60 
FR 45785). We also stated that the resource use and other data 
associated with procedure code 36.06 will be available in the FY 1996 
Medicare cases which are used for analysis as part of FY 1998 DRG 
changes. We will evaluate the DRG assignment of coronary artery stent 
insertion at that time.
    Since publication of the September 1, 1995 final rule, we have 
received data on stent cases provided by the manufacturer of one of the 
two stent devices currently approved by the Food and Drug 
Administration (FDA). In addition, the manufacturer has provided us 
with an analysis of the charges and length of stay of approximately 
7,500 Medicare patients who received stents in FY 1995. Because there 
was no code for the procedure during that year, the manufacturer 
matched its list of stent recipients with the FY 1995 MedPAR file.
    The manufacturer's analysis found that the FY 1995 average charge 
for PTCA cases without stent is approximately $15,700 and the average 
charge for cases with stent is approximately $21,000. However, our 
analysis of the data shows that there is wide variation in the hospital 
standardized charges reported for cases with implant of coronary artery 
stent. Individual hospital average charges for these cases range from 
about $9,000 to over $45,000.
    This inconsistency in the data illustrates why our policy of not 
reassigning new codes until we have collected an entire year of coded 
Medicare data for analysis is prudent. The uncertainty associated with 
using incomplete data collected outside the

[[Page 27448]]

Medicare program that cannot be verified remains a problem. Therefore, 
we are not proposing any DRG assignment change for implant of coronary 
artery stent. As noted above, a full year of coded FY 1996 Medicare 
data will be available in early 1997 for analysis. We will review the 
data at that time, and any proposed DRG changes will be announced in 
the FY 1998 proposed rule.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
    In the September 1, 1995 final rule (60 FR 45790), we responded to 
a comment we received regarding the DRG assignment in MDC 8 of bipolar 
hip replacement cases. The commenter requested that cases of bipolar 
hip replacement be assigned to DRGs 210, 211, and 212 (Hip and Femur 
Procedures Except Major Joint) rather than to its current assignment, 
DRG 209 (Major Joint and Limb Reattachment Procedures of Lower 
Extremity). The commenter stated that the procedure for partial hip 
replacement (code 81.52) is very similar to the procedure for open 
reduction of fracture of the femur with internal fixation (code 79.35), 
which is assigned to DRGs 210, 211, and 212. Further, the commenter 
believes that partial hip replacement patients are more frail 
individuals than the population that elects total hip replacement 
surgery and need longer hospital stays to recover.
    In the September 1, 1995 final rule, we stated that we would 
reexamine this assignment as part of our DRG agenda for FY 1997. Using 
the FY 1995 MedPAR file, we compared charges and lengths of stay for 
cases assigned to DRG 209 in which the procedures 81.51 (total hip 
replacement), 81.52, and 81.53 (revision of hip replacement) were 
performed with the charges for the entire DRG. The average standardized 
charges for these cases are very similar to each other as well as the 
other cases assigned to DRG 209. The average charge was $18,310 for 
partial hip replacement, $19,924 for total hip replacement, and $23,094 
for revision of hip replacement. The $1,278 difference between the 
average charge for partial hip replacement cases in DRG 209 and the 
average charge of $19,588 for all cases in DRG 209 is within the normal 
range of charges for that DRG. However, the average charge for cases in 
DRG 210 was $15,119, or $2,157 less than the partial hip replacement 
charges.
    A comparison of lengths of stay yields slightly different results. 
The partial hip replacement cases in DRG 209 had an average stay of 8.6 
days. The overall average lengths of stay for DRGs 209 and 210 were 6.7 
days and 8.5 days, respectively. Based on these data alone, it would 
seem that the commenter is correct that partial hip replacement 
patients are more similar to the patients in DRG 210, in terms of 
hospital length of stay. However, we also must consider these cases' 
higher average charges. The higher charges of the partial hip 
replacement cases indicate that they are more resource-intense than the 
cases in DRG 210. The proposed relative weights for DRG 209 and 210 are 
2.2617 and 1.8458, respectively. Therefore, we believe that DRG 209 is 
the most appropriate assignment for procedure code 81.52 so that 
payment will most closely relate to the costs of care for these 
patients.
6. Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different DRG within the MDC to which the principal diagnosis is 
assigned. It is, therefore, necessary to have a decision rule by which 
these cases are assigned to a single DRG. The surgical hierarchy, an 
ordering of surgical classes from most to least resource intensive, 
performs that function. Its application ensures that cases involving 
multiple surgical procedures are assigned to the DRG associated with 
the most resource-intensive surgical class.
    Because the relative resource intensity of surgical classes can 
shift as a function of DRG reclassification and recalibration, we 
reviewed the surgical hierarchy of each MDC, as we have for previous 
reclassifications, to determine if the ordering of classes coincided 
with the intensity of resource utilization, as measured by the same 
billing data used to compute the DRG relative weights.
    A surgical class can be composed of one or more DRGs. For example, 
in MDC 5, the surgical class ``heart transplant'' consists of a single 
DRG (DRG 103) and the class ``coronary bypass'' consists of two DRGs 
(DRGs 106 and 107). Consequently, in many cases, the surgical hierarchy 
has an impact on more than one DRG. The methodology for determining the 
most resource-intensive surgical class, therefore, involves weighting 
each DRG for frequency to determine the average resources for each 
surgical class. For example, assume surgical class A includes DRGs 1 
and 2 and surgical class B includes DRGs 3, 4, and 5, and that the 
average charge of DRG 1 is higher than that of DRG 3, but the average 
charges of DRGs 4 and 5 are higher than the average charge of DRG 2. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weight the average 
charge of each DRG by frequency (that is, by the number of cases in the 
DRG) to determine average resource consumption for the surgical class. 
The surgical classes would then be ordered from the class with the 
highest average resource utilization to that with the lowest, with the 
exception of ``other OR procedures'' as discussed below.
    This methodology may occasionally result in a case involving 
multiple procedures being assigned to the lower-weighted DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER searches for the procedure in the 
most resource-intensive surgical class, which may sometimes occur in 
cases involving multiple procedures, this result is unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average relative 
weight is ordered above a surgical class with a higher average relative 
weight. For example, the ``other OR procedures'' surgical class is 
uniformly ordered last in the surgical hierarchy of each MDC in which 
it occurs, regardless of the fact that the relative weight for the DRG 
or DRGs in that surgical class may be higher than that for other 
surgical classes in the MDC. The ``other OR procedures'' class is a 
group of procedures that are least likely to be related to the 
diagnoses in the MDC but are occasionally performed on patients with 
these diagnoses. Therefore, these procedures should only be considered 
if no other procedure more closely related to the diagnoses in the MDC 
has been performed.
    A second example occurs when the difference between the average 
weights for two surgical classes is very small. We have found that 
small differences generally do not warrant reordering of the hierarchy 
since, by virtue of the hierarchy change, the relative weights are 
likely to shift such that the higher-ordered surgical class has a lower 
average weight than the class ordered below it.
    Based on the preliminary recalibration of the DRGs, we are 
proposing to modify the surgical hierarchy as set forth below. As we 
stated in the September 1, 1989 final rule (54 FR 36457), we are unable 
to test the effects of the proposed revisions to the surgical hierarchy 
and to reflect these changes in the proposed relative

[[Page 27449]]

weights due to the unavailability of revised GROUPER software at the 
time this proposed rule is prepared. Rather, we simulate most major 
classification changes to approximate the placement of cases under the 
proposed reclassification and then determine the average charge for 
each DRG. These average charges then serve as our best estimate of 
relative resource use for each surgical class. We test the proposed 
surgical hierarchy changes after the revised GROUPER is received and 
reflect the final changes in the DRG relative weights in the final 
rule. Further, as discussed below in section II.C of this preamble, we 
anticipate that the final recalibrated weights will be somewhat 
different from those proposed, since they will be based on more 
complete data. Consequently, further revision of the hierarchy, using 
the above principles, may be necessary in the final rule.
    At this time, we would revise the surgical hierarchy for the Pre-
MDC DRGs, MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and 
Throat), and MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders) as follows:
    <bullet> In the Pre-MDC DRGs, we would reorder Tracheostomy Except 
for Face, Mouth and Neck Diagnoses (DRG 483) above Liver Transplant 
(DRG 480).
    <bullet> In MDC 3, we would reorder Cleft Lip and Palate Repair 
(DRG 52) and Sinus and Mastoid Procedures (DRGs 53 and 54) above 
Tonsillectomy and Adenoidectomy, Except Tonsillectomy and/or 
Adenoidectomy Only (DRGs 57 and 58).
    <bullet> In MDC 10, we would reorder Adrenal and Pituitary 
Procedures (DRG 286) above Amputation of Lower Limb for Endocrine, 
Nutritional, and Metabolic Disorders (DRG 285).
7. Refinement of Complications and Comorbidities List
    There is a standard list of diagnoses that are considered 
complications or comorbidities (CCs). We developed this list using 
physician panels to include those diagnoses that, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity.
    In previous years, we have made changes to the standard list of 
CCs, either by adding new CCs or deleting CCs already on the list. At 
this time, we do not propose to delete any of the diagnosis codes on 
the CC list.
    In the September 1, 1995 final rule (60 FR 45782), we added 
diagnosis code 008.49 (Bacterial enteritis) to the CC list. In response 
to a request from one commenter that we also add diagnosis code 008.45 
(Clostridium difficile), we stated that we would review that request as 
part of our DRG analysis for FY 1997. We have reevaluated diagnosis 
code 008.45 as well as the remainder of the ``family'' of codes 
assigned to Intestinal infections due to other specified bacteria 
(008.41, 008.42, 008.43, 008.44, 008.46, and 008.47). Our analysis 
shows that all of these diagnoses, when present as a secondary 
condition, do lead to higher resource use. Therefore, we are proposing 
to add the following diagnosis codes to the CC list:

008.41  Intestinal infections due to staphylococcus
008.42  Intestinal infections due to pseudomonas
008.43  Intestinal infections due to campylobacter
008.44  Intestinal infections due to yersinia enterocolitica
008.45  Intestinal infections due to clostridium difficile
008.46  Intestinal infections due to other anaerobes
008.47  Intestinal infections due to other gram-negative bacteria

    These diagnoses would be considered CCs for any principal diagnosis 
not shown in Table 6f, Additions to the CC Exclusions List (see 
discussion of CC Exclusions list in section V of the Addendum below).
    This same commenter also requested that we add the following codes 
to the CC list:

331.0  Alzheimer's disease
423.9  Unspecified disease of the pericardium
348.5  Cerebral edema
333.4  Huntington's chorea
458.0  Orthostatic hypotension
458.9  Hypotension, not otherwise specified

    Our analysis of these codes demonstrates that their presence as a 
secondary diagnosis does not significantly add to the resource use of 
the case. Therefore, we are not proposing to add them to the CC list.
    Finally, the commenter suggested that the following diagnoses be 
added as cardiovascular complications for DRG 121 (Circulatory 
Disorders with AMI and Cardiovascular Complications, Discharged Alive):

434.xx  Occlusion of cerebral arteries
436  Acute, but ill-defined, cerebrovascular disease

    Using the 10 percent analysis file of the FY 1995 MedPAR data, we 
analyzed the cases assigned to DRG 121 that had these diagnoses coded 
as secondary conditions. The charges associated with those cases were 
indeed comparable to the other cases assigned to DRG 121. When we 
sought the advice of our medical specialists (physicians who work 
directly for or under contract with HCFA), however, they strongly 
opposed adding these codes to the list of conditions for DRG 121 based 
on the fact that these are not cardiovascular complications. Therefore, 
they are not clinically similar to other cases assigned to this DRG.
    However, our analysis of this DRG did reveal a large variation in 
the charges and lengths of stay within this DRG. We believe that a 
close examination of the list of complicating conditions assigned to 
DRG 121 is needed. Therefore, we plan to perform a thorough analysis of 
the cases assigned to that DRG as part of our DRG analysis agenda for 
FY 1998. In the meantime, we are not proposing any change to DRG 121.
    In the September 1, 1987 final notice concerning changes to the DRG 
classification system (52 FR 33143), we modified the GROUPER logic so 
that certain diagnoses included on the standard list of CCs would not 
be considered a valid CC in combination with a particular principal 
diagnosis. Thus, we created the CC Exclusions List. We made these 
changes to preclude coding of CCs for closely related conditions, to 
preclude duplicative coding or inconsistent coding from being treated 
as CCs, and to ensure that cases are appropriately classified between 
the complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice concerning changes to the DRG 
classification system (52 FR 18877), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
    <bullet> Chronic and acute manifestations of the same condition 
should not be considered CCs for one another (as subsequently corrected 
in the September 1, 1987 final notice (52 FR 33154)).
    <bullet> Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for a condition should not be considered CCs for 
one another.
    <bullet> Conditions that may not co-exist, such as partial/total, 
unilateral/bilateral, obstructed/unobstructed, and benign/malignant, 
should not be considered CCs for one another.
    <bullet> The same condition in anatomically proximal sites should 
not be considered CCs for one another.
    <bullet> Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. The FY 1988 revisions were intended to be 
only a first step toward refinement of the CC list in that the

[[Page 27450]]

criteria used for eliminating certain diagnoses from consideration as 
CCs were intended to identify only the most obvious diagnoses that 
should not be considered complications or comorbidities of another 
diagnosis. For that reason, and in light of comments and questions on 
the CC list, we have continued to review the remaining CCs to identify 
additional exclusions and to remove diagnoses from the master list that 
have been shown not to meet the definition of a CC. (See the September 
30, 1988 final rule for the revision made for the discharges occurring 
in FY 1989 (53 FR 38485); the September 1, 1989 final rule for the FY 
1990 revision (54 FR 36552); the September 4, 1990 final rule for the 
FY 1991 revision (55 FR 36126); the August 30, 1991 final rule for the 
FY 1992 revision (56 FR 43209); the September 1, 1992 final rule for 
the FY 1993 revision (57 FR 39753); the September 1, 1993 final rule 
for the FY 1994 revisions (58 FR 46278); the September 1, 1994 final 
rule for the FY 1995 revisions (59 FR 45334); and the September 1, 1995 
rule for the FY 1996 revisions (60 FR 45782).)
    We are proposing a limited revision of the CC Exclusions List to 
take into account the changes that will be made in the ICD-9-CM 
diagnosis coding system effective October 1, 1996, as well as the 
proposed CC changes described above. (See section II.B.8, below, for a 
discussion of ICD-9-CM changes.) These proposed changes are being made 
in accordance with the principles established when we created the CC 
Exclusions List in 1987.
    The changes discussed above have been added to Table 6g, Additions 
to the CC Exclusions List, in section V of the Addendum to this 
proposed rule.
    Tables 6g and 6h in section V of the Addendum to this proposed rule 
contain the proposed revisions to the CC Exclusions List that would be 
effective for discharges occurring on or after October 1, 1996. Each 
table shows the principal diagnoses with proposed changes to the 
excluded CCs. Each of these principal diagnoses is shown with an 
asterisk and the additions or deletions to the CC Exclusions List are 
provided in an indented column immediately following the affected 
principal diagnosis.
    CCs that are added to the list are in Table 6g--Additions to the CC 
Exclusions List. Beginning with discharges on or after October 1, 1996, 
the indented diagnoses will not be recognized by the GROUPER as valid 
CCs for the asterisked principal diagnosis.
    CCs that are deleted from the list are in Table 6h--Deletions from 
the CC Exclusions List. Beginning with discharges on or after October 
1, 1996, the indented diagnoses will be recognized by the GROUPER as 
valid CCs for the asterisked principal diagnosis.
    Copies of the original CC Exclusions List applicable to FY 1988 can 
be obtained from the National Technical Information Service (NTIS) of 
the Department of Commerce. It is available in hard copy for $92.00 
plus $6.00 shipping and handling and on microfiche for $20.50, plus 
$4.00 for shipping and handling. A request for the FY 1988 CC 
Exclusions List (which should include the identification accession 
number, (PB) 88-133970) should be made to the following address: 
National Technical Information Service; United States Department of 
Commerce; 5285 Port Royal Road; Springfield, Virginia 22161; or by 
calling (703) 487-4650.
    Users should be aware of the fact that all revisions to the CC 
Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, 1994, 1995, and 
1996) and those in Tables 6g and 6h of this document must be 
incorporated into the list purchased from NTIS in order to obtain the 
CC Exclusions List applicable for discharges occurring on or after 
October 1, 1996.
    Alternatively, the complete documentation of the GROUPER logic, 
including the current CC Exclusions List, is available from 3M/Health 
Information Systems (HIS), which, under contract with HCFA, is 
responsible for updating and maintaining the GROUPER program. The 
current DRG Definitions Manual, Version 13.0, is available for $195.00, 
which includes $15.00 for shipping and handling. Version 14.0 of this 
manual, which will include the final FY 1997 DRG changes, will be 
available in October 1996 for $195.00. These manuals may be obtained by 
writing 3M/HIS at the following address: 100 Barnes Road; Wallingford, 
Connecticut 06492; or by calling (203) 949-0303. Please specify the 
revision or revisions requested.
8. Review of Procedure Codes in DRGs 468, 476, and 477 Each Year, We 
Review Cases Assigned to DRG 468
(Extensive OR Procedure Unrelated to Principal Diagnosis), DRG 476 
(Prostatic OR Procedure Unrelated to Principal Diagnosis), and DRG 477 
(Nonextensive OR Procedure Unrelated to Principal Diagnosis) in order 
to determine whether it would be appropriate to change the procedures 
assigned among these DRGs.
    DRGs 468, 476, and 477 are reserved for those cases in which none 
of the OR procedures performed is related to the principal diagnosis. 
These DRGs are intended to capture atypical cases, that is, those cases 
not occurring with sufficient frequency to represent a distinct, 
recognizable clinical group. DRG 476 is assigned to those discharges in 
which one or more of the following prostatic procedures are performed 
and are unrelated to the principal diagnosis:

60.0  Incision of prostate
60.12  Open biopsy of prostate
60.15  Biopsy of periprostatic tissue
60.18  Other diagnostic procedures on prostate and periprostatic tissue
60.21  Transurethral prostatectomy
60.29  Other transurethral prostatectomy
60.61  Local excision of lesion of prostate
60.69  Prostatectomy NEC
60.81  Incision of periprostatic tissue
60.82  Excision of periprostatic tissue
60.93  Repair of prostate
60.94  Control of (postoperative) hemorrhage of prostate
60.95  Transurethral balloon dilation of the prostatic urethra
60.99  Other operations on prostate

    All remaining OR procedures are assigned to DRGs 468 and 477, with 
DRG 477 assigned to those discharges in which the only procedures 
performed are nonextensive procedures that are unrelated to the 
principal diagnosis. The original list of the ICD-9-CM procedure codes 
for the procedures we consider nonextensive procedures if performed 
with an unrelated principal diagnosis was published in Table 6C in 
section IV of the Addendum to the September 30, 1988 final rule (53 FR 
38591). As part of the final rules published on September 4, 1990, 
August 30, 1991, September 1, 1992, September 1, 1993, September 1, 
1994, and September 1, 1995, we moved several other procedures from DRG 
468 to 477. (See 55 FR 36135, 56 FR 43212, 57 FR 23625, 58 FR 46279, 59 
FR 45336, and 60 FR 45783, respectively.)

a. Adding Procedure Codes to MDCs

    We annually conduct a review of procedures producing DRG 468 or 477 
assignments on the basis of volume of cases in these DRGs with each 
procedure. Our medical consultants then identify those procedures 
occurring in conjunction with certain principal diagnoses with 
sufficient frequency to justify adding them to one of the surgical DRGs 
for the MDC in which the diagnosis falls. This year's review did not 
identify any necessary changes; therefore, we are not proposing

[[Page 27451]]

to move any procedures from DRG 468 or DRG 477 to one of the surgical 
DRGs.

b. Reassignment of Procedures Among DRGs 468, 476, and 477

    We also reviewed the list of procedures that produce assignments to 
DRGs 468, 476, and 477 to ascertain if any of those procedures should 
be moved from one of these DRGs to another based on average charges and 
length of stay. Generally, we move only those procedures for which we 
have an adequate number of discharges to analyze the data. Based on our 
review this year, we are proposing to move one procedure from DRG 468 
to DRG 477.
    In reviewing the list of OR procedures that produce DRG 468 
assignments, we analyzed the average charge and length of stay data for 
cases assigned to that DRG to identify those procedures that are more 
similar to the discharges that currently group to either DRG 476 or 
477. We identified one procedure--Closed endoscopic biopsy of lung 
(code 33.27), a needle biopsy--that is significantly less resource 
intensive than the other procedures assigned to DRG 468. Therefore, we 
are proposing to move procedure code 33.27 to the list of procedures 
that result in assignment to DRG 477.
    In reviewing the list of procedures assigned to DRG 477, we did not 
identify any procedures that should be assigned to either DRG 468 or 
476. We did, however, identify the following procedures that we believe 
should be reassigned from an OR to a non-OR designation:

08.81  Linear repair of laceration of eyelid or eyebrow
08.82  Repair of laceration involving lid margin, partial-thickness
08.83  Other repair of laceration of eyelid, partial thickness
08.84  Repair of laceration involving lid margin, full-thickness
08.85  Other repair of laceration of eyelid, full-thickness
08.86  Lower eyelid rhytidectomy
08.87  Upper eyelid rhytidectomy
08.89  Other eyelid repair

    Our analysis of the data associated with these eyelid repair 
procedures leads us to conclude that the procedures are performed 
following accidental injury or falls, incurred while the patient is in 
the hospital. These procedures, which are normally performed at bedside 
and do not necessitate a trip to the operating room, are significantly 
less resource intensive than other procedures designated as OR 
procedures. Therefore, we are proposing to change the procedures from 
OR to non-OR procedures. We note that these procedures are assigned to 
surgical DRGs in MDCs 2, 9, 21, 22, and 24. With this proposed change, 
cases in which procedure codes 08.81 through 08.89 are the only OR 
procedure codes listed would no longer be assigned to a surgical DRG.
    All of these proposed changes would be effective with discharges 
occurring on or after October 1, 1996.
9. Changes to the ICD-9-CM Coding System
    As discussed above in section II.B.1 of this preamble, the ICD-9-CM 
is a coding system that is used for the reporting of diagnoses and 
procedures performed on a patient. In September 1985, the ICD-9-CM 
Coordination and Maintenance Committee was formed. This is a Federal 
interdepartmental committee charged with the mission of maintaining and 
updating the ICD-9-CM. That mission includes approving coding changes, 
and developing errata, addenda, and other modifications to the ICD-9-CM 
to reflect newly developed procedures and technologies and newly 
identified diseases. The Committee is also responsible for promoting 
the use of Federal and non-Federal educational programs and other 
communication techniques with a view toward standardizing coding 
applications and upgrading the quality of the classification system.
    The Committee is co-chaired by the National Center for Health 
Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the 
ICD-9-CM diagnosis codes included in Volume 1--Diseases: Tabular List 
and Volume 2--Diseases: Alphabetic Index, while HCFA has lead 
responsibility for the ICD-9-CM procedure codes included in Volume 3--
Procedures: Tabular List and Alphabetic Index.
    The Committee encourages participation in the above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding fields, such 
as the American Health Information Management Association (AHIMA) 
(formerly American Medical Record Association (AMRA)), the American 
Hospital Association (AHA), and various physician specialty groups as 
well as physicians, medical record administrators, health information 
management professionals, and other members of the public to contribute 
ideas on coding matters. After considering the opinions expressed at 
the public meetings and in writing, the Committee formulates 
recommendations, which then must be approved by the agencies.
    The Committee presented proposals for coding changes at public 
meetings held on May 5 and November 30, 1995, and finalized the coding 
changes after consideration of comments received at the meetings and in 
writing within 30 days following the November 1995 meeting. The initial 
meeting for consideration of coding issues for implementation in FY 
1998 will be held on June 6, 1996. Copies of the minutes of these 
meetings may be obtained by writing to one of the co-chairpersons 
representing NCHS and HCFA. We encourage commenters to address 
suggestions on coding issues involving diagnosis codes to: Donna 
Pickett, Co-Chairperson; ICD-9-CM Coordination and Maintenance 
Committee; NCHS; Room 1100; 6525 Belcrest Road; Hyattsville, Maryland 
20782. Comments may be sent by E-mail to: <a href="/cdn-cgi/l/email-protection#d0b1bcb2e890beb3b8e0e9b1feb5bdfeb3b4b3feb7bfa6"><span class="__cf_email__" data-cfemail="4b2a2729730b2528237b722a652e2665282f28652c243d">[email protected]</span></a>.
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination 
and Maintenance Committee; HCFA, Office of Hospital Policy; Division of 
Prospective Payment System; C5-06-27; 7500 Security Boulevard; 
Baltimore, Maryland 21244-1850. Comments may be sent by E-mail to: 
<a href="/cdn-cgi/l/email-protection#85f5e7f7eaeaeef6c5ede6e3e4abe2eaf3"><span class="__cf_email__" data-cfemail="49392b3b2626223a09212a2f28672e263f">[email protected]</span></a>.
    The ICD-9-CM code changes that have been approved will become 
effective October 1, 1996. The new ICD-9-CM codes are listed, along 
with their proposed DRG classifications, in Tables 6a and 6b (New 
Diagnosis Codes and New Procedure Codes, respectively) in section V of 
the Addendum to this proposed rule. As we stated above, the code 
numbers and their titles were presented for public comment in the ICD-
9-CM Coordination and Maintenance Committee meetings. Both oral and 
written comments were considered before the codes were approved. 
Therefore, we are soliciting comments only on the proposed DRG 
classification.
    Further, the Committee has approved the expansion of certain ICD-9-
CM codes to require an additional digit for valid code assignment. 
Diagnosis codes that have been replaced by expanded codes, other codes, 
or have been deleted are in Table 6c (Invalid Diagnosis Codes). The 
procedure codes that have been replaced by expanded codes or have been 
deleted are in Table 6d (Invalid Procedure Codes). These invalid 
diagnosis and procedure codes will not be recognized by the GROUPER 
beginning with discharges occurring on or after October 1, 1996. The

[[Page 27452]]

corresponding new or expanded codes are included in Tables 6a and 6b. 
Revisions to diagnosis and procedure code titles are in Tables 6e 
(Revised Diagnosis Code Titles) and 6f (Revised Procedure Code Titles), 
which also include the proposed DRG assignments for these revised 
codes.

C. Recalibration of DRG Weights

    We are proposing to use the same basic methodology for the FY 1997 
recalibration as we did for FY 1996. (See the September 1, 1995 final 
rule (60 FR 45791).) That is, we would recalibrate the weights based on 
charge data for Medicare discharges. However, we would use the most 
current charge information available, the FY 1995 MedPAR file, rather 
than the FY 1994 MedPAR file. The MedPAR file is based on fully-coded 
diagnostic and surgical procedure data for all Medicare inpatient 
hospital bills.
    The proposed recalibrated DRG relative weights are constructed from 
FY 1995 MedPAR data, based on bills received by HCFA through December 
1995, from all hospitals subject to the prospective payment system and 
short-term acute care hospitals in waiver States. The FY 1995 MedPAR 
file includes data for approximately 10.6 million Medicare discharges.
    The methodology used to calculate the proposed DRG relative weights 
from the FY 1995 MedPAR file is as follows:
    <bullet> To the extent possible, all the claims were regrouped 
using the proposed DRG classification revisions discussed above in 
section II.B of this preamble. As noted in section II.B.6, due to the 
unavailability of revised GROUPER software, we simulate most major 
classification changes to approximate the placement of cases under the 
proposed reclassification. However, there are some changes that cannot 
be modeled.
    <bullet> Charges were standardized to remove the effects of 
differences in area wage levels, indirect medical education costs, 
disproportionate share payments, and, for hospitals in Alaska and 
Hawaii, the applicable cost-of-living adjustment.
    <bullet> The average standardized charge per DRG was calculated by 
summing the standardized charges for all cases in the DRG and dividing 
that amount by the number of cases classified in the DRG.
    <bullet> We then eliminated statistical outliers, using the same 
criteria as was used in computing the current weights. That is, all 
cases that are outside of 3.0 standard deviations from the mean of the 
log distribution of both the charges per case and the charges per day 
for each DRG.
    <bullet> The average charge for each DRG was then recomputed 
(excluding the statistical outliers) and divided by the national 
average standardized charge per case to determine the relative weight. 
A transfer case is counted as a fraction of a case based on the ratio 
of its length of stay to the geometric mean length of stay of the cases 
assigned to the DRG. That is, a 5-day length of stay transfer case 
assigned to a DRG with a geometric mean length of stay of 10 days is 
counted as 0.5 of a total case.
    <bullet> We established the relative weight for heart and heart-
lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner 
consistent with the methodology for all other DRGs except that the 
transplant cases that were used to establish the weights were limited 
to those Medicare-approved heart, heart-lung, liver, and lung 
transplant centers that have cases in the FY 1995 MedPAR file. 
(Medicare coverage for heart, heart-lung, liver, and lung transplants 
is limited to those facilities that have received approval from HCFA as 
transplant centers.)
    <bullet> Acquisition costs for kidney, heart, heart-lung, liver, 
and lung transplants continue to be paid on a reasonable cost basis. 
Unlike other excluded costs, the acquisition costs are concentrated in 
specific DRGs (DRG 302 (Kidney Transplant); DRG 103 (Heart Transplant 
for heart and heart-lung transplants); DRG 480 (Liver Transplant); and 
DRG 495 (Lung Transplant)). Because these costs are paid separately 
from the prospective payment rate, it is necessary to make an 
adjustment to prevent the relative weights for these DRGs from 
including the effect of the acquisition costs. Therefore, we subtracted 
the acquisition charges from the total charges on each transplant bill 
that showed acquisition charges before computing the average charge for 
the DRG and before eliminating statistical outliers.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We propose to use that same case threshold 
in recalibrating the DRG weights for FY 1997. Using the FY 1995 MedPAR 
data set, there are 37 DRGs that contain fewer than 10 cases. We 
computed the weights for the 37 low-volume DRGs by adjusting the FY 
1996 weights of these DRGs by the percentage change in the average 
weight of the cases in the other DRGs. We note that the FY 1996 weights 
for the low-volume DRGs were recalculated based on non-Medicare data we 
acquired from 19 States. This was the first update of the weights since 
they were initially calculated for FY 1984 based on data from Maryland 
and Michigan. For a complete description of this process, see the 
September 1, 1995 final rule (60 FR 45781).
    The weights developed according to the methodology described above, 
using the proposed DRG classification changes, result in an average 
case weight that is different from the average case weight before 
recalibration. Therefore, the new weights are normalized by an 
adjustment factor, so that the average case weight after recalibration 
is equal to the average case weight before recalibration. This 
adjustment is intended to ensure that recalibration by itself neither 
increases nor decreases total payments under the prospective payment 
system.
    Section 1886(d)(4)(C)(iii) of the Act requires that beginning with 
FY 1991, reclassification and recalibration changes be made in a manner 
that assures that the aggregate payments are neither greater than nor 
less than the aggregate payments that would have been made without the 
changes. Although normalization is intended to achieve this effect, 
equating the average case weight after recalibration to the average 
case weight before recalibration does not necessarily achieve budget 
neutrality with respect to aggregate payments to hospitals because 
payment to hospitals is affected by factors other than average case 
weight. Therefore, as we have done in past years and as discussed in 
section II.A.4.b of the Addendum to this proposed rule, we are 
proposing to make a budget neutrality adjustment to assure that the 
requirement of section 1886(d)(4)(C)(iii) of the Act is met.

III. Proposed Changes to the Hospital Wage Index

A. Background

    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary must adjust the standardized amounts ``for area differences 
in hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level.'' In 
accordance with the broad discretion conferred by this provision, we 
currently define hospital labor market areas based on the definitions 
of Metropolitan Statistical Areas (MSAs) (and New England County 
Metropolitan Areas), issued by the Office of Management and Budget. In 
addition, as discussed below, we adjust the wage

[[Page 27453]]

index to take into account the geographic reclassification of hospitals 
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act.
    Section 1886(d)(3)(E) of the Act also requires that the wage index 
be updated annually beginning October 1, 1993. Furthermore, this 
section provides that the Secretary base the update on a survey of 
wages and wage-related costs of short-term, acute care hospitals. The 
survey should measure, to the extent feasible, the earnings and paid 
hours of employment by occupational category, and must exclude the 
wages and wage-related costs incurred in furnishing skilled nursing 
services.

B. FY 1997 Wage Index Update

    The proposed FY 1997 wage index (effective for hospital discharges 
occurring on or after October 1, 1996 and before October 1, 1997) is 
based on the data collected from the Medicare cost reports submitted by 
hospitals for cost reporting periods beginning in FY 1993 (the FY 1996 
wage index is based on FY 1992 wage data). We propose to use the same 
categories of data that were used in the FY 1996 wage index. Therefore, 
the proposed FY 1997 wage index reflects the following:
    <bullet> Total salaries and hours from short-term, acute care 
hospitals.
    <bullet> Home office costs and hours.
    <bullet> Fringe benefits associated with hospital and home office 
salaries.
    <bullet> Direct patient care contract labor costs and hours.
    <bullet> The exclusion of salaries and hours for nonhospital type 
services such as skilled nursing facility services, home health 
services, or other subprovider components that are not subject to the 
prospective payment system.
    Finally, we are also proposing to make a minor revision to 
Sec. 412.63(s)(1) to state clearly that we update the wage index 
annually as required by section 1886(d)(3)(E) of the Act.
1. Verification of Wage Data From the Medicare Cost Report
    The data for the proposed FY 1997 wage index were obtained from 
Worksheet S-3, Part II of the Medicare cost report. The data file used 
to construct the proposed wage index includes FY 1993 data submitted to 
the Hospital Cost Report Information System (HCRIS) file as of the end 
of January 1996. As in past years, we performed an intensive review of 
the wage data, mostly through the use of edits designed to identify 
aberrant data.
    Of the 5,222 hospitals in the data base, 2,814 hospitals had data 
elements that failed an initial edit. In mid-February 1996, 
intermediaries contacted hospitals to revise or verify data elements 
that resulted in the edit failures. Next, to check any revisions since 
the first edit, as well as to apply additional edits based on the 
distribution of the data, we subjected all of the data to edits a 
second time. The intermediaries were instructed to transmit any 
revisions in hospitals' wage data made as a result of this second 
review. As of March 14, 1996, only 21 hospitals still had unresolved 
data elements. These unresolved data elements are included in the 
calculation of the proposed FY 1997 wage index pending their resolution 
before calculation of the final FY 1997 wage index. We have instructed 
the intermediaries to complete their verification of questionable data 
elements and to transmit any changes to the wage data (through HCRIS) 
no later than June 17, 1996. We expect that all unresolved data 
elements will be resolved by that date, and that the revised data will 
be reflected in the final rule.
2. Computation of the Wage Index
    The method used to compute the proposed wage index is as follows:
    Step 1--As noted above, we are proposing to base the FY 1997 wage 
index on wage data reported on the FY 1993 cost reports. We gathered 
data from each of the non-Federal short-term, acute care hospitals for 
which data were reported on the Worksheet S-3, Part II of the Medicare 
cost report for the hospital's cost reporting periods beginning on or 
after October 1, 1992 and before October 1, 1993. In addition, we 
included data from a few hospitals that had cost reporting periods 
beginning in September 1992 and reported a cost reporting period 
exceeding 52 weeks. The data were included because no other data from 
these hospitals would be available for the cost reporting period 
described above, and particular labor market areas might be affected 
due to the omission of these hospitals. However, we generally describe 
these wage data as FY 1993 data.
    Step 2--For each hospital, we subtracted the excluded salaries 
(that is, direct salaries attributable to skilled nursing facility 
services, home health services, and other subprovider components not 
subject to the prospective payment system) from gross hospital salaries 
to determine net hospital salaries. To determine total salaries plus 
fringe benefits, we added direct patient care contract labor costs, 
hospital fringe benefits, and any home office salaries and fringe 
benefits reported by the hospital, to the net hospital salaries.
    Step 3--For each hospital, we adjusted the total salaries plus 
fringe benefits resulting from Step 2 to a common period to determine 
total adjusted salaries. To make the wage inflation adjustment, we used 
the percentage change in average hourly earnings for each 30-day 
increment from October 14, 1992 through September 15, 1994, for 
hospital industry workers from Standard Industry Classification 806, 
Bureau of Labor Statistics Employment and Earnings Bulletin. The annual 
inflation rates used were 4.8 percent for FY 1992, 3.6 percent for FY 
1993, and 2.7 percent for FY 1994. The inflation factors used to 
inflate the hospital's data were based on the midpoint of the cost 
reporting period as indicated below.

                    Midpoint of Cost Reporting Period                   
------------------------------------------------------------------------
         After                    Before             Adjustment factor  
------------------------------------------------------------------------
10/14/92...............           11/15/92                 1.044482     
11/14/92...............           12/15/92                 1.041408     
12/14/92...............           01/15/93                 1.038343     
01/14/93...............           02/15/93                 1.035287     
02/14/93...............           03/15/93                 1.032240     
03/14/93...............           04/15/93                 1.029203     
04/14/93...............           05/15/93                 1.026174     
05/14/93...............           06/15/93                 1.023154     
06/14/93...............           07/15/93                 1.020143     
07/14/93...............           08/15/93                 1.017141     
08/14/93...............           09/15/93                 1.014147     
09/14/93...............           10/15/93                 1.011163     
10/14/93...............           11/15/93                 1.008920     
11/14/93...............           12/15/93                 1.006683     
12/14/93...............           01/15/94                 1.004450     
01/14/94...............           02/15/94                 1.002223     
02/14/94...............           03/15/94                 1.000000     
03/14/94...............           04/15/94                 0.997782     
04/14/94...............           05/15/94                 0.995570     
05/14/94...............           06/15/94                 0.993362     
06/14/94...............           07/15/94                 0.991159     
07/14/94...............           08/15/94                 0.988961     
08/14/94...............           09/15/94                 0.986767     
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 1993 and ending December 31, 1993 is June 30, 1993. An 
inflation adjustment factor of 1.020143 would be applied to the wages 
of a hospital with such a cost reporting period. In addition, for the 
data for any cost reporting period that began in FY 1993 and covers a 
period of less than 360 days or greater than 370 days, we annualized 
the data to reflect a 1-year cost report. Annualization is accomplished 
by dividing the data by the number of days in the cost report and then 
multiplying the results by 365.
    Step 4--For each hospital, we subtracted the reported excluded 
hours from the gross hospital hours to determine net hospital hours. We

[[Page 27454]]

increased the net hours by the addition of any direct patient care 
contract labor hours and home office hours to determine total hours.
    Step 5--As part of our editing process, we deleted data for eight 
hospitals for which we lacked sufficient documentation to verify data 
that failed edits because the hospitals are no longer participating in 
the Medicare program or are in bankruptcy status. We retained the data 
for other hospitals that are no longer participating in the Medicare 
program because these hospitals reflected the relative wage levels in 
their labor market areas during their FY 1993 cost reporting period.
    Step 6--Each hospital was assigned to its appropriate urban or 
rural labor market area prior to any reclassifications under sections 
1886(d)(8)(B) or 1886(d)(10) of the Act. Within each urban or rural 
labor market area, we added the total adjusted salaries plus fringe 
benefits obtained in Step 3 for all hospitals in that area to determine 
the total adjusted salaries plus fringe benefits for the labor market 
area.
    Step 7--We divided the total adjusted salaries plus fringe benefits 
obtained in Step 6 by the sum of the total hours (from Step 4) for all 
hospitals in each labor market area to determine an average hourly wage 
for the area.
    Step 8--We added the total adjusted salaries plus fringe benefits 
obtained in Step 3 for all hospitals in the nation and then divided the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage. Using the data as described above, the 
national average hourly wage is $19.5094.
    Step 9--For each urban or rural labor market area, we calculated 
the hospital wage index value by dividing the area average hourly wage 
obtained in Step 7 by the national average hourly wage computed in Step 
8.
3. Revisions to the Wage Index Based on Hospital Redesignation
    Under section 1886(d)(8)(B) of the Act, hospitals in certain rural 
counties adjacent to one or more MSAs are considered to be located in 
one of the adjacent MSAs if certain standards are met. Under section 
1886(d)(10) of the Act, the Medicare Geographic Classification Review 
Board (MGCRB) considers applications by hospitals for geographic 
reclassification for purposes of payment under the prospective payment 
system.
    The methodology for determining the wage index values for 
redesignated hospitals is applied jointly to the hospitals located in 
those rural counties that were deemed urban under section 1886(d)(8)(B) 
of the Act and those hospitals that were reclassified as a result of 
the MGCRB decisions under section 1886(d)(10) of the Act. Section 
1886(d)(8)(C) of the Act provides that the application of the wage 
index to redesignated hospitals is dependent on the hypothetical impact 
that the wage data from these hospitals would have on the wage index 
value for the area to which they have been redesignated. Therefore, as 
provided in section 1886(d)(8)(C) of the Act, the wage index values 
were determined by considering the following:
    <bullet> If including the wage data for the redesignated hospitals 
reduces the MSA wage index value by 1 percentage point or less, the MSA 
wage index value determined exclusive of the wage data for the 
redesignated hospitals applies to the redesignated hospitals.
    <bullet> If including the wage data for the redesignated hospitals 
reduces the wage index value for the area to which the hospitals are 
redesignated by more than 1 percentage point, the hospitals that are 
redesignated are subject to the wage index value of the area that 
results from including the wage data of the redesignated hospitals (the 
``combined'' wage index value). However, the wage index value for the 
redesignated hospitals cannot be reduced below the wage index value for 
the rural areas of the State in which the hospitals are located.
    <bullet> If including the wage data for the redesignated hospitals 
increases the MSA wage index value, the MSA and the redesignated 
hospitals receive the combined wage index value.
    <bullet> Rural areas whose wage index values would be reduced by 
excluding the data for hospitals that have been redesignated to another 
area continue to have their wage index calculated as if no 
redesignation had occurred. Those rural areas whose wage index values 
increase as a result of excluding the wage data for the hospitals that 
have been redesignated to another area have their wage indexes 
calculated exclusive of the redesignated hospitals.
    <bullet> The wage index value for an urban area is calculated 
exclusive of the wage data for hospitals that have been reclassified to 
another area. However, geographic reclassification may not reduce the 
wage index for an urban area below the Statewide rural average, 
provided the wage index prior to reclassification was greater than the 
Statewide rural wage index value.
    <bullet> A change in classification of hospitals from one area to 
another may not result in the reduction in the wage index for any urban 
area whose wage index is below the rural wage index for the State. This 
provision also applies to any urban area that encompasses an entire 
State.
    We note that, except for those rural areas where redesignation 
would reduce the rural wage index value, and those urban areas whose 
wage index values are already below the rural wage index and would be 
reduced by redesignations, the wage index value for each area is 
computed exclusive of the data for hospitals that have been 
redesignated from the area for purposes of their wage index. As a 
result, several MSAs listed in Table 4a have no hospitals remaining in 
the MSA. This is because all the hospitals originally in these MSAs 
have been reclassified to another area by the MGCRB. These areas 
receive the prereclassified wage index value. The prereclassified wage 
index value will apply as long as the MSA remains empty.
    The proposed revised wage index values for FY 1997 are shown in 
Tables 4a, 4b, and 4c in the Addendum to this proposed rule. Hospitals 
that are redesignated should use the wage index values shown in Table 
4c. For some areas, more than one wage index value will be shown in 
Table 4c. This occurs when hospitals from more than one State are 
included in the group of redesignated hospitals, and one State has a 
higher Statewide rural wage index value than the wage index value 
otherwise applicable to the redesignated hospitals. Tables 4d and 4e 
list the average hourly wage for each labor market area, prior to the 
redesignation of hospitals, based on the FY 1993 wage data. (We note 
that in Tables 4a, 4c, and 4d, we have revised several of the titles 
for urban areas to be consistent with OMB titles. For example, the 
title for urban area 1123 is changed from Boston-Brockton-Nashua, MA-NH 
to Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH. These are 
nomenclature changes only.) In addition, Table 3C in the Addendum to 
this proposed rule includes the adjusted average hourly wage for each 
hospital based on the FY 1993 data. The MGCRB will use the average 
hourly wage published in the final rule to evaluate a hospital's 
application for reclassification, unless that average hourly wage is 
later revised in accordance with the wage data correction policy 
described in Sec. 412.63(s)(2). In such cases, the MGCRB will use the 
most recent revised data used for purposes of the hospital wage index. 
Hospitals that choose to apply before publication of the final rule can 
use the proposed wage data in applying to the MGCRB for wage index 
reclassifications that would be effective for FY 1998. We note that in

[[Page 27455]]

adjudicating these wage reclassification requests during FY 1997, the 
MGCRB will use the average hourly wages for each hospital and labor 
market area that are reflected in the final FY 1997 wage index.
    At the time this proposed wage index was constructed, the MGCRB had 
completed its review. The proposed FY 1997 wage index values 
incorporate all 391 hospitals redesignated for purposes of the wage 
index (hospitals redesignated under section 1886(d)(8)(B) or 
1886(d)(10) of the Act) for FY 1997. The final number of 
reclassifications may be different because some MGCRB decisions are 
still under review by the Administrator and because some hospitals may 
withdraw their requests for reclassification.
    Any changes to the wage index that result from withdrawals of 
requests for reclassification, wage index corrections, appeals, and the 
Administrator's review process will be incorporated into the wage index 
values published in the final rule. The changes may affect not only the 
wage index value for specific geographic areas, but also whether 
redesignated hospitals receive the wage index value for the area to 
which they are redesignated, or a wage index that includes the data for 
both the hospitals already in the area and the redesignated hospitals. 
Further, the wage index value for the area from which the hospitals are 
redesignated may be affected.
    Under Sec. 412.273, hospitals that have been reclassified by the 
MGCRB are permitted to withdraw their applications within 45 days of 
the publication of this Federal Register document. The request for 
withdrawal of an application for reclassification that would be 
effective in FY 1997 must be received by the MGCRB by July 15, 1996. A 
hospital that requests to withdraw its application may not later 
request that the MGCRB decision be reinstated.

C. Requests for Wage Data Corrections

    To allow hospitals more time to evaluate the wage data used to 
construct the proposed FY 1997 hospital wage index, we have made 
available to the public a diskette containing the FY 1993 hospital wage 
data. In a memorandum dated March 1, 1996, we instructed all Medicare 
intermediaries to inform the prospective payment hospitals they serve 
that the diskette would be available approximately mid-March 1996. The 
intermediaries were also instructed to advise hospitals of the 
alternative availability of these data either through their 
representative hospital organizations or directly from HCFA (using 
order forms provided by the intermediary). Additional details on 
ordering this data file are discussed below in section VIII.B of this 
preamble, ``Requests for Data from the Public.''
    In addition, as discussed above in section III.B.3 of this 
preamble, Table 3C, in the Addendum to this proposed rule, contains 
each hospital's adjusted average hourly wage used to construct the 
proposed wage index values. A hospital can verify its average hourly 
wage as reflected on its cost report (after taking into account any 
adjustments made by the intermediary) by dividing the adjusted average 
hourly wage in Table 3C by the applicable wage inflation adjustment 
factors as set forth above in Step 3 of the computation of the wage 
index. An updated Table 3C (along with applicable wage inflation 
adjustment factors) will be included in the final rule.
    We believe hospitals have had ample time to ensure the accuracy of 
their FY 1993 wage data. Moreover, the ultimate responsibility for 
accurately completing the cost report rests with the hospital, which 
must attest to the accuracy of the data at the time the cost report is 
filed. However, if after review of the diskette or Table 3C, a hospital 
believes that its FY 1993 wage data have been incorrectly reported, the 
hospital must submit corrections along with complete supporting 
documentation to its intermediary by May 15, 1996. To be reflected in 
the final wage index, any wage data corrections must be reviewed by the 
intermediary and transmitted to HCFA (through HCRIS) on or before June 
17, 1996. These deadlines, which correspond to the deadlines we used 
last year for the FY 1996 wage index, are necessary to allow sufficient 
time to review and process the data so that the final wage index 
calculation can be completed for development of the final prospective 
payment rates to be published by September 1, 1996. We cannot guarantee 
that corrections transmitted to HCFA after June 17, 1996, will be 
reflected in the final wage index.
    After reviewing requested changes submitted by hospitals, 
intermediaries will transmit any revised cost reports to HCRIS and 
forward a copy of the revised Worksheet S-3, Part II to the hospitals. 
If requested changes are not accepted, fiscal intermediaries will 
notify hospitals in writing of reasons why the changes were not 
accepted. This procedure will ensure that hospitals have every 
opportunity to verify the data that will be used to construct their 
wage index values. We believe that fiscal intermediaries are generally 
in the best position to make evaluations regarding the appropriateness 
of a particular cost and whether it should be included in the wage 
index data. However, if a hospital disagrees with the intermediary's 
resolution of a requested change, the hospital may contact HCFA in an 
effort to resolve the dispute. We note that the June 17 deadline also 
applies to these requested changes.
    We have created the process described above to resolve all 
substantive wage data correction disputes before we finalize the wage 
data for the FY 1997 payment rates. Accordingly, hospitals that do not 
meet the procedural deadlines set forth above will not be afforded a 
later opportunity to submit wage corrections or to dispute the 
intermediary's decision with respect to requested changes.
    We intend to make another diskette available in mid-August that 
will contain the wage data that will be used to construct the wage 
index values in the final rule. As with the diskette made available in 
March 1996, HCFA will make the August diskette available to hospital 
associations and the public. This August diskette, however, is being 
made available only for the limited purpose of identifying any 
potential errors made by HCFA or the intermediary in the entry of the 
final wage data that result from the process described above, not for 
the initiation of new wage data correction requests. Hospitals are 
encouraged to review their hospital wage data promptly after the 
release of the second diskette.
    If, after reviewing the August diskette, a hospital believes that 
its wage data are incorrect due to a fiscal intermediary or HCFA error 
in the entry or tabulation of the final wage data, it should send a 
letter to both its fiscal intermediary and HCFA. The letters to the 
intermediary and HCFA should outline why the hospital believes an error 
exists. These requests must be received by HCFA and the intermediaries 
no later than September 16, 1996. We have set this year's deadline one 
week earlier than last year's deadline because we found the later 
deadline made it difficult to evaluate the requests and recalculate the 
wage index values before the start of FY 1997 (that is, October 1, 
1996). Requests should be sent to: Health Care Financing 
Administration; Office of Hospital Policy; Attention: Stephen Phillips, 
Technical Advisor; Division of Prospective Payment System; C5-06-27; 
7500 Security Boulevard; Baltimore, Maryland 21244-1850. The 
intermediary will review requests upon receipt, and, if it is 
determined that an intermediary or HCFA error exists, the fiscal 
intermediary will notify HCFA immediately.

[[Page 27456]]

    After mid-August, we will make changes to the hospital wage data 
only in those very limited situations involving an error by the 
intermediary or HCFA that the hospital could not have known about 
before its review of the August diskette. Specifically, after that 
point, neither the intermediary nor HCFA will accept the following 
types of requests in conjunction with this process:
    <bullet> Requests for wage data corrections that were submitted too 
late to be included in the data transmitted to the HCRIS system on or 
before June 17, 1996;
    <bullet> Requests for correction of errors made by the hospital 
that were not, but could have been, identified during the hospital's 
review of the March 1996 data; or,
    <bullet> Requests to revisit factual determinations or policy 
interpretations made by the intermediary or HCFA during the wage data 
correction process.
    Verified corrections to the wage index received timely (that is, by 
September 16, 1996) will be effective October 1, 1996.
    Again, we believe the wage data correction process described above 
provides hospitals with sufficient opportunity to bring errors made 
during the preparation of the Worksheet S-3 to the intermediary's 
attention. Moreover, because hospitals will have access to the wage 
data in mid-August, they will have the opportunity to detect any data 
entry or tabulation errors made by the intermediary or HCFA before the 
implementation of the FY 1997 wage index on October 1, 1996. If 
hospitals avail themselves of this opportunity, the wage index 
implemented on October 1 should be free of such errors. Nevertheless, 
in the unlikely event that such errors should occur, we retain the 
right to make midyear changes to the wage index under very limited 
circumstances.
    Specifically, in accordance with Sec. 412.63(s)(2), we may make 
midyear corrections to the wage index only in those limited 
circumstances where a hospital can show: (1) that the intermediary or 
HCFA made an error in tabulating its data, and (2) that the hospital 
could not have known about the error, or did not have an opportunity to 
correct the error, before the beginning of FY 1997 (that is, by the 
September 16, 1996 deadline). As indicated earlier, since a hospital 
will have the opportunity to verify its data, and the intermediary will 
notify the hospital of any changes, we do not foresee any specific 
circumstances under which midyear corrections would be made. However, 
should a midyear correction be necessary, the wage index change for the 
affected area will be effective prospectively from the date the 
correction is made.

D. Contract Labor--Costs Included in the Hospital Wage Index

    Our policy concerning inclusion of contract labor costs for 
purposes of calculating the wage index has evolved over the past 
several years. Primarily, this has occurred as we recognized the role 
of contract labor in meeting special personnel needs of many hospitals. 
In addition, improvements in the wage data have allowed us to more 
accurately identify contract labor costs and hours. As a result, 
effective with the FY 1994 wage index, we included the costs of direct 
patient care contract services in the wage index calculation. Effective 
with the FY 1999 wage index, which will use data from FY 1995 cost 
reports, we will begin to include the costs and hours of certain 
management contract services.
    In this proposed rule, we are soliciting comments from the public 
regarding further expansion of the types of contract labor costs 
included in the wage index. The following background discussion 
provides a general overview of the issues related to including contract 
labor costs in the wage index calculation. We also list nine specific 
issues for which we are seeking public comment.
    In the May 9, 1990 proposed rule (55 FR 19442), we reported the 
results of the 1988 wage index survey which collected, among other 
information, data on the costs and hours associated with direct patient 
care contract labor. All prospective payment hospitals completed the 
wage survey for their cost reporting periods ending in calendar year 
1988. The survey data indicated that hospitals had difficulty in 
tracking and recording the actual hours worked associated with the 
contract labor. In addition, there were reporting inconsistencies. For 
example, some hospitals inappropriately reported patient care services 
furnished directly by physicians, which are not included in the wage 
data because they are paid under Medicare Part B rather than Part A.
    In the May 9, 1990 proposed rule, we also discussed public comments 
we received in response to issues we raised related to including 
contract labor costs in the wage index. Specifically, in the May 8, 
1989 proposed rule (54 FR 19647), we requested comment on the following 
issues:
    <bullet> Should the wage index include data on contract labor?
    <bullet> Should the definition of contract services in the wage 
index survey be expanded to include services indirectly related to 
patient care, such as billing or housekeeping services?
    A majority of the commenters supported the inclusion of contract 
services, and many argued for the expansion of contract labor services 
to include indirect patient care services. Those opposed to including 
contract services, in addition to some commenters who supported 
including contract service costs, were concerned about the difficulty 
of accurately tracking and recording hours worked for all types of 
contract labor. Other commenters were also concerned that if a hospital 
contracts for services from outside its labor market area, the contract 
wages could artificially increase or decrease the hospital's area wage 
index. Based on the comments and the overall poor quality of the 1988 
survey data, we decided to exclude all contract labor from the FY 1991 
wage index.
    We stated that we would continue our analysis of contract labor. In 
addition, we announced that we would develop a new wage index survey 
with improved instructions and auditing criteria to facilitate the 
inclusion of contract labor in future wage index updates. The new 
survey, Worksheet S-3, Part II, was included in the hospital cost 
report effective with cost reporting periods beginning on or after 
October 1, 1989.
    The Worksheet S-3, Part II consists of detailed information for use 
in the hospital wage index including contract labor for direct patient 
care services. In the instructions for completing this worksheet, 
contract labor costs and hours were limited to labor-related payments 
and hours attributable to direct patient care contract services, such 
as nursing services. Specifically, we instructed hospitals to exclude 
indirect patient care contract services (for example, management and 
housekeeping services), nonlabor-related expenses (for example, 
equipment and supplies), and any contract services for which labor-
related payments and hours could not be accurately determined.
    In the September 4, 1990 final rule (55 FR 36036), we discussed 
additional comments we received on the contract labor issue. Those 
commenters who supported the inclusion of contract labor stated that 
some hospitals, especially rural hospitals, are dependent on contract 
labor for nursing services, and it would be unfair not to include these 
wage data. Other commenters requested that the definition of contract

[[Page 27457]]

labor be expanded to include indirect patient care services.
    We also received several comments requesting that we continue to 
exclude contract labor from the wage index. These commenters stated 
that the contract labor data are not reliable because of the difficulty 
in tracking and reporting hours and the lack of consistency in the 
reporting of contract labor. In addition, inclusion of nonlabor 
contract costs would inappropriately drive up labor costs, and contract 
labor brought in from outside the labor market area would artificially 
increase or decrease the area wage index value. Finally, commenters 
were concerned that contract labor costs are too variable, temporary, 
and not reflective of true wage costs. Therefore, some suggested that 
contract labor should not be included in the wage index.
    The FY 1994 wage index, which was based on the data collected on 
the Worksheet S-3, Part II, was the first to include direct patient 
care contract labor costs. In making the decision to include these 
costs, we analyzed hospitals' FY 1990 data to determine if it was 
sufficiently complete for inclusion in the wage index calculation (see 
the May 26, 1993 proposed rule (58 FR 30236)). We noted that, in most 
labor market areas, including contract labor in the wage index 
computation had little effect on the average hourly wage. We further 
stated that, based on our analysis of the data, including direct 
patient care contract labor would more accurately and fairly reflect 
wage levels across hospitals and MSAs. In the September 1, 1993 final 
rule, we also responded to comments from the hospital industry 
expressing concern that we did not recognize the costs of certain 
contract management services (58 FR 46296). In particular, many rural 
hospitals stated they were either unable to recruit or afford top 
managers such as hospital administrators and must contract for these 
services.
    In the September 1, 1994 final rule (59 FR 45355), we expanded the 
definition of contract labor for purposes of determining the hospital 
wage index to include the personnel costs and hours associated with 
certain contract management personnel. Contract management services 
would be limited to individuals working in the top four positions in 
the hospital: the Chief Executive Officer/Hospital Administrator, Chief 
Operating Officer, Chief Financial Officer, and Nursing Administrator. 
We noted that while exact titles may vary, individuals should be 
performing essentially the same duties as customarily assigned these 
management positions.
    We further noted that, since the cost report did not provide at 
that time for the collection of management contract data, this revised 
definition would not be effective until cost reporting periods 
beginning on or after October 1, 1994 (FY 1995). Hospitals were 
instructed to continue to exclude all management contract costs and 
hours until the FY 1995 data were reported (these data will be used to 
compute the FY 1999 wage index). In addition, we began requiring 
hospitals to provide descriptions and aggregate totals for all 
management contracts and complete details on all direct patient care 
contracts on the Form HCFA-339 (the Provider Cost Report Reimbursement 
Questionnaire). A hospital must file this form with its corresponding 
cost report.
    We continue to receive requests that we expand our contract labor 
definition to include more types of contract services in the wage 
index. In particular, we have been asked to include the costs for 
pharmacy and laboratory services on the basis that these services are 
consistent with our definition of direct patient care (see the 
September 1, 1995 final rule (60 FR 45792)). Others have asked that we 
expand our definition to include all contracted services, both direct 
and indirect patient care services, in order to more appropriately 
calculate relative hospital wage costs.
    We have limited the contract services that are included in the wage 
index to direct patient care services and specific management services 
for several reasons. First, hospitals reported difficulty in accurately 
tracking the hours associated with contract services, especially for 
off-site facilities that serve more than one hospital. Second, we are 
concerned about the contractor's ability to separate nonlabor costs 
from labor costs. We believe that the generally higher costs for 
contract labor compared to salaried labor, due at least in part to the 
added costs of overhead and supplies not separately identified in most 
contracts, may distort the wage index. Finally, we are concerned that 
it is difficult to remove the costs and hours for services such as 
legal and accounting from total management contracts.
    Our goal is to ensure that our wage index policy continues to be 
responsive to the changing need for contract labor, allowing those 
hospitals that must depend on contract labor to supply needed services 
to reflect those costs in their wage data. At the same time, however, 
we wish to avoid providing an opportunity for hospitals to inflate 
their average hourly wage inappropriately by including nonlabor 
contract costs. The advantage of our approach of including only 
contract labor costs and hours associated with direct patient care and 
specific management services is that it minimizes distortions in the 
wage index that are due to a hospital's inability to identify and 
exclude nonlabor costs. While changes to the wage index values are made 
in a budget neutral manner and are not expected to affect aggregate 
payments, we strive for policies that are equitable for all hospitals.
    Finally, due to the 4-year time lag between the cost reporting 
period itself and the fiscal year when data for that period are used in 
calculating the wage index, it is important that we anticipate any need 
to change our policy on contract labor. Therefore, in order to 
formulate the most responsive and responsible policy, we are soliciting 
comments on the following issues:
    <bullet> To what extent do hospitals rely on the use of contract 
services?
    <bullet> For which services are contracts typically used?
    <bullet> Can hospitals accurately determine hours related to 
contract services?
    <bullet> Can hospitals accurately isolate labor-related costs from 
nonlabor-related costs?
    <bullet> Should the contract labor definition be expanded to 
include contract services indirectly related to patient care?
    <bullet> If contract labor remains limited to direct patient care, 
what categories of services, if any, in addition to those identified 
above, should be included?
    <bullet> Would the wage index more accurately reflect relative wage 
levels if we did not limit contract labor to direct patient care 
(generally high wage) services?
    <bullet> Would expanding the types of contract labor that are 
included in the wage index provide less incentive to hospitals to keep 
their labor costs low, as higher labor costs may result in a higher 
wage index value for that hospital or allow it to reclassify to a labor 
market with a higher wage index?
    <bullet> What other issues should be considered in revising the 
policy for including contract labor in the wage index?

E. Puerto Rico Wage Index Values

    For several years, hospitals in Puerto Rico have experienced large 
swings in their wage index values. In the September 1, 1995 final rule, 
we responded to two comments suggesting changes to the wage index for 
hospitals in Puerto Rico (60 FR 45796). One suggestion was to establish 
a floor for the wage index values of the Puerto Rico labor market areas 
while the other was to eliminate the rural area classification in 
Puerto Rico and classify the rural

[[Page 27458]]

hospitals to the nearest urban area. Although we did not adopt either 
of these suggestions, we stated that we would continue to study the 
issue of wage index values in Puerto Rico.
    To evaluate the effect that these large changes in wage index 
values have on hospitals in Puerto Rico, we examined the most recent 
Medicare cost data for these hospitals. Of the 50 hospitals contained 
in our data base, 64 percent had improved Medicare operating margins 
from 1992 to 1993. Of the 26 hospitals with data available for 1994, we 
found that 65 percent improved financially from 1993 to 1994. Based on 
this analysis, we do not believe that the wage index changes have had a 
detrimental effect on these hospitals as a group. However, there are 
individual hospitals that are not faring as well.
    We recognize that large shifts in the wage index values can cause 
shifts in the payment levels for a particular MSA. Because three of the 
six MSAs in Puerto Rico (Aguadilla, Arecibo, and Caguas) as well as the 
rural area have four or fewer hospitals, a large change in one 
hospital's wage data can cause a large increase or decrease in the wage 
index value for the entire MSA. One possible method to limit these 
annual swings in wage index values would be to create a single labor 
market area encompassing all the hospitals in Puerto Rico. That is, the 
six MSAs and the rural area would be combined into one area with one 
wage index value. A single labor market area would create a much larger 
set of hospitals to develop aggregate wage amounts and would mitigate 
situations where a change in the wage data of a single hospital has a 
large effect on the wage index of an MSA.
    Because creating one MSA for Puerto Rico would be implemented in a 
budget neutral manner, the effect would be to raise wage index values 
for some hospitals in Puerto Rico and to lower the values for others. 
Using the FY 1993 wage data, the following table shows the effect this 
change would have on the proposed wage index levels.

----------------------------------------------------------------------------------------------------------------
                                                               Number of     Proposed     One area     Percent  
                            Area                               hospitals    wage index   wage index     change  
----------------------------------------------------------------------------------------------------------------
Rural.......................................................            4       0.4182       0.4555         8.92
Aguadilla...................................................            2       0.4430       0.4555         2.82
Arecibo.....................................................            2       0.4661       0.4555        -2.27
Caguas......................................................            4       0.4638       0.4555        -1.79
Mayaguez....................................................            5       0.4186       0.4555         8.82
Ponce.......................................................            7       0.4500       0.4555         1.22
San Juan....................................................           29       0.4616       0.4555        -1.32
----------------------------------------------------------------------------------------------------------------

    Because of the negative effects on some hospitals, we are 
soliciting comment on this approach for mitigating the fluctuations in 
wage index values for hospitals in Puerto Rico. The potential change 
would have no impact on hospitals outside Puerto Rico.

F. Proposed Changes to the MGCRB Composition and Criteria

    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the prospective payment system. Guidelines concerning 
the criteria and conditions for hospital reclassification are located 
at Secs. 412.230 through 412.236. The purpose of these criteria is to 
provide direction, to both the MGCRB and those hospitals seeking 
geographic reclassification, with respect to the situations that merit 
an exception to the rules governing the geographic classification of 
hospitals under the prospective payment system. The composition of the 
MGCRB and the procedures it follows in making reclassification 
determinations are set forth in Secs. 412.246 through 412.280.
    As discussed in detail below, we are proposing to make one change 
to the MGCRB regulations. In addition, we are soliciting comments on 
sources of data that could be used to identify the occupational mix in 
a given MSA.
1. MGCRB Composition (Sec. 412.246)
    Section 1886(d)(10)(B)(i) of the Act provides that the MGCRB is 
composed of five members appointed by the Secretary. This provision is 
implemented in regulations at Sec. 412.246(a). Two of the members must 
be representative of the concerns of rural hospitals and at least one 
member must be knowledgeable in the field of analyzing costs of 
providing inpatient hospital services. Under current Sec. 412.246(b), 
the term of office for an MGCRB member is 3 years, and appointments are 
limited to two consecutive 3-year terms. This section further provides 
that to permit staggered terms of office, initial appointments may be 
for shorter terms. Finally, the Secretary is permitted to terminate a 
member's tenure before his or her full term has expired.
    Since the establishment of the MGCRB 6 years ago, we have never 
modified the regulations that govern the MGCRB's composition, which 
were originally modeled after the procedural regulations of the 
Provider Reimbursement Review Board (PRRB). We believe that it is now 
appropriate to update the regulations that govern members' terms of 
office in light of agency experience.
    Appointments to the Board must comply with statutory requirements 
concerning rural representatives and a hospital cost expert. Since the 
appointment of the initial Board, the Secretary has had difficulty 
recruiting additional, qualified persons to serve on the MGCRB. In 
addition, we solicited comment in the June 2, 1995 proposed rule (60 FR 
29218) on the idea of eliminating the MGCRB and transferring its 
functions back to HCFA. This may have caused qualified members to lose 
interest in becoming or remaining Board members. We no longer believe 
that there needs to be a limitation on the number of terms a member may 
serve. Deleting the term limit requirement would allow for increased 
flexibility in appointing and recruiting qualified Board members. 
Flexibility in this area will allow the Secretary to ensure that Board 
members are in place to meet the tight statutory deadlines associated 
with filing and adjudicating MGCRB applications. (Under sections 
1886(d)(10)(C) (ii) and (iii) of the Act, a hospital requesting a 
change in geographic classification must submit its application to the 
Board not later than the first day of the preceding fiscal year. Once 
the application is received the Board must render a decision within 180 
days.) Therefore, we are proposing to eliminate the current requirement 
at Sec. 412.246(b) that a Board member can serve for only two 
consecutive 3-year terms.
    We also considered eliminating any requirement on the length of an 
individual term. However, we believe that maintaining a term of office 
not to exceed 3 years is appropriate. If we

[[Page 27459]]

deleted this requirement, then the Secretary could not periodically 
reevaluate membership of the Board. We would, however, propose that a 
term of office would not be limited only to a term of exactly 3 years. 
Specifically, we would revise Sec. 412.246(b) to provide that an 
appointment to the MGCRB may be for any term not to exceed 3 years. We 
believe that both of these proposed changes would allow the Secretary 
maximum flexibility to recruit and retain qualified Board members.
    Under the proposed revisions, the Secretary would continue to be 
able to terminate a member's tenure before his or her full term has 
expired. This provision was modeled after the provisions of the PRRB 
under which the Secretary has the authority to terminate a Board member 
for good cause. We believe that it is appropriate for the Secretary to 
be able to exercise a similar termination authority over the MGCRB in 
case a member of the MGCRB fails to carry out his or her duties under 
the Act and regulations. Therefore, we would retain this provision. We 
note that the Secretary has not invoked this authority to date with 
either the PRRB or the MGCRB.
2. Occupational Mix Adjustment
    Section 1886(d)(10)(D)(i) of the Act requires the Secretary to 
publish guidelines to be utilized by the MGCRB in rendering decisions 
on applications submitted for geographic reclassification. Those are to 
include guidelines for ``comparing wages, taking into account (to the 
extent the Secretary determines appropriate) occupational mix, in the 
area in which the hospital is classified and the area in which the 
hospital is applying to be classified.''
    Section 412.230(e) describes the criteria for hospital 
reclassification for purposes of the wage index. One of the criteria 
relates to the relationship between the hospital's wages and those of 
the area to which it seeks reclassification. Specifically, 
Sec. 412.230(e)(1)(iv) provides that the hospital must demonstrate that 
its wages are at least 84 percent of the average hourly wage of 
hospitals in the area to which it seeks reclassification, or that the 
hospital's average hourly wage weighted for occupational mix is at 
least 90 percent of the average hourly wage of hospitals in the area to 
which it seeks reclassification. Under Secs. 412.232(c) and 412.234(b), 
a group of hospitals seeking to reclassify must demonstrate that its 
aggregate average hourly wage is at least 85 percent of the average 
hourly wage of the hospitals in the area to which it seeks 
reclassification. These sections also provide that the threshold for 
occupational-mix adjusted hourly wage for hospital groups is the same 
as that for a single hospital, that is, 90 percent.
    In the September 6, 1990 interim final rule (55 FR 36760), we 
stated that the acceptable sources for occupational mix data were the 
American Hospital Association (AHA) or the Bureau of Labor Statistics. 
Since publication of that document, the Bureau of Labor has 
discontinued its hospital wage surveys. Thus, the only currently 
acceptable occupational mix data source is the AHA Survey Data. We have 
been informed by the AHA that the survey for 1993 will be the last 
survey to collect information on the Hospital Personnel by Occupational 
Category. Therefore, requests filed on or before October 1, 1996 for FY 
1998 reclassification, which use FY 1993 wage data, may be the last for 
which we have an appropriate source of occupational mix data.
    As we stated in the June 4, 1991 final rule with comment period (56 
FR 25458), the reclassification process requires the use of 
occupational mix data that are comparable across areas and can be 
consistently applied. We are unaware of any sources other than the AHA 
data that meet these criteria.
    We have not proposed collecting occupational mix data ourselves in 
light of past experience. We attempted to collect such data some time 
ago. In the September 30, 1988 Federal Register (53 FR 38495), we 
reported on our efforts to collect 1986 occupational mix data as part 
of the Medicare National Uniform Reporting Demonstration project, to 
determine the feasibility of developing a wage index that would take 
into account occupational mix. The majority of hospitals (more than 60 
percent) failed to complete or submit the survey. A number of surveys 
that were submitted were not filled out completely and appeared to have 
numerous errors. Moreover, we believe that collecting occupational mix 
data from hospitals would be inappropriately burdensome to the 
hospitals. In the past, we have received several comments from 
hospitals opposing HCFA's collection of occupational mix data (56 FR 
43222), citing the prohibitive cost to hospitals of furnishing 
occupational mix data. Finally, even if we were to decide now to begin 
collecting occupational mix data, it would be at least 6 years before 
the data would be available for use.
    In order to continue to allow the use of wage data weighted by 
occupational mix in wage index reclassification, we are seeking 
suggestions about any occupational mix data sources that are available 
on a national basis. In addition, we are willing to consider 
suggestions about other methods that would account for occupational mix 
in the wage index reclassification process.

IV. Rebasing and Revising of the Hospital Market Baskets

A. Operating Costs

1. Background
    Effective for cost reporting periods beginning on or after July 1, 
1979, we developed and adopted a hospital input price index (that is, 
the hospital ``market basket'') for operating costs. Although ``market 
basket'' technically describes the mix of goods and services used to 
produce hospital care, this term is also commonly used to denote the 
input price index (that is, cost category weights and price proxies 
combined) derived from that market basket. Accordingly, the term 
``market basket'' as used in this document refers to the hospital input 
price index.
    The percentage change in the market basket reflects the average 
change in the price of goods and services hospitals purchase in order 
to furnish inpatient care. We first used the market basket to adjust 
hospital cost limits by an amount that reflected the average increase 
in the prices of the goods and services used to furnish hospital 
inpatient care. This approach linked the increase in the cost limits to 
the efficient utilization of resources.
    With the inception of the hospital inpatient prospective payment 
system on October 1, 1983, we continued to use the hospital market 
basket to update each hospital's 1981 inpatient operating cost per 
discharge used in establishing the FY 1984 standardized payment 
amounts. In addition, the projected change in the hospital market 
basket has been the integral component of the update factor by which 
the prospective payment rates are updated every year. Under section 
1886(b)(3)(B)(i)(XII) of the Act, the prospective payment rates will be 
updated in FY 1997 by the projected increase in the hospital market 
basket minus 0.5 percentage points. A detailed explanation of the 
hospital market basket used to develop the prospective payment rates 
was published in the Federal Register on September 3, 1986 (51 FR 
31461). For additional background information on general development of 
hospital input price indexes, we refer the reader to the article by 
Freeland, Anderson, and Schendler, ``National Hospital Input Price 
Index,'' Health Care Financing Review, Summer 1979, pp 37-61. We also 
refer the reader to the September 4, 1990 Federal Register (55 FR 
35990) in which we discussed the previous

[[Page 27460]]

rebasing of the hospital input price index.
    The hospital market basket is a fixed-weight, Laspeyres-type price 
index that is constructed in three steps. First, a base period is 
selected and total base period expenditures are estimated for mutually 
exclusive and exhaustive spending categories based upon type of 
expenditure. Then, the proportion of total costs that each category 
represents is determined. These proportions are called cost or 
expenditure weights. Second, each expenditure category is matched to an 
appropriate price/wage variable, referred to as a price proxy. These 
price proxies are price levels derived from a publicly available 
statistical series published on a consistent schedule, preferably at 
least on a quarterly basis. Third and finally, the price level for each 
spending category is multiplied by the expenditure weight for that 
category. The sum of these products (that is, the expenditure weights 
multiplied by the price levels) for all cost categories yields the 
composite index level in the market basket in a given year. Repeating 
this step for other years produces a series of market basket index 
levels over time. Dividing one index level by an earlier index level 
produces rates of growth in the input price index.
    The market basket is described as a fixed-weight index because it 
answers the question of how much it would cost, at another time, to 
purchase the same mix of goods and services that was purchased in the 
base period. The effects on total expenditures resulting from changes 
in the quantity or mix of goods and services purchased subsequent to 
the base period are not considered. For example, shifting a 
traditionally inpatient type of care to an outpatient setting might 
affect the volume of inpatient goods and services purchased by the 
hospital, but would not be factored into the price change measured by a 
fixed weight hospital market basket.
    We believe that it is desirable to rebase the market basket 
periodically so the cost weights reflect changes in the mix of goods 
and services that hospitals purchase (hospital inputs) in furnishing 
inpatient care. We last rebased the hospital market basket cost weights 
effective for FY 1991. This market basket, still used through FY 1996, 
reflected base year data from FY 1987 in the construction of the cost 
weights.
    In its April 1, 1985 report to the Secretary (Appendix C of the 
June 10, 1985 proposed rule (50 FR 24446)), ProPAC supported HCFA's 
position on periodic rebasing, stating that the market basket cost 
weights should be recalculated or ``rebased'' at least every 5 years, 
or more frequently if significant changes in the weights occur. We note 
that there are separate market baskets for prospective payment 
hospitals and hospitals and hospital units excluded from the 
prospective payment system. The separate, excluded hospital market 
basket is set forth in section IV.A.5 of this preamble.
2. Rebasing and Revising the Hospital Market Basket
    The terms rebasing and revising, while often used interchangeably, 
actually denote different activities. Rebasing means moving the base 
year for the structure of costs of an input price index (for example, 
we are proposing to move the base year cost structure from FY 1987 to 
FY 1992). Revising means changing data sources, cost categories, or 
price proxies used in the input price index.
    We are proposing to use a rebased and revised hospital market 
basket in developing the FY 1997 update factor for the prospective 
payment rates. The new market basket would be rebased to reflect 1992, 
rather than 1987, cost data.
    In developing the rebased and revised market basket, we reviewed 
hospital operating expenditure data for the market basket cost 
categories. In a change from previous methodology, we are relying 
primarily on Medicare hospital cost report data for the proposed 
rebasing. For the proposed market baskets, we used data on hospital 
expenditures for four major expense categories (wages and salaries, 
employee benefits, pharmaceuticals, and a residual ``all other'') from 
hospital cost reporting periods beginning in FY 1992 (that is, periods 
beginning on or after October 1, 1991 and before October 1, 1992). We 
refer to these as PPS-9 cost reports (the 9th year of the prospective 
payment system (PPS)). The market basket was previously based on 1987 
expense data from the 1988 American Hospital Association (AHA) Annual 
Survey.
    Expenses for wages and salaries, employee benefits, and 
pharmaceuticals were determined using data from PPS-9 cost reports as 
reported in the Hospital Cost Report Information System (HCRIS) files. 
We determined total professional fees using AHA Annual Survey data. 
Total professional fees include medical and nonmedical professional 
fees. Since the medical professional fees included in the compensation 
of provider-based physicians is paid under Medicare Part B, we analyzed 
HCRIS data to determine the professional component of provider-based 
physician compensation and subtracted it from total professional fees 
to obtain an estimate of nonmedical professional fees. Malpractice 
insurance costs were determined using the cost share for PPS-6 (cost 
reporting periods beginning in FY 1989), the last year these costs had 
to be treated separately from all other administrative and general 
costs, trended forward to 1992 based on the relative importance of 
malpractice costs found in the previous market basket. The All Other 
Expenses category was calculated in two steps. First, from PPS-9 cost 
reports, total operating expenses were tabulated by subtracting 
capital-related expenses, direct medical education expenses, and the 
medical professional fees from total expenses. Second, we subtracted 
the total of the five cost category expenses already determined from 
total operating expenses to obtain the All Other Expenses category.
    After totals for these main cost categories (wages and salaries, 
employee benefits, professional fees, pharmaceuticals, malpractice 
insurance, and all other expenses) were calculated, we then determined 
the proportion each category represents of the total costs. These 
proportions represent the major rebased market basket weights. The 
differences between the six major categories for the proposed 1992-
based index and the previous 1987-based index are summarized in Table 1 
below.

   Table 1.--Comparison of 1992 and 1987 Prospective Payment Hospital   
                 Operating Cost Categories and Weights                  
------------------------------------------------------------------------
                                           Rebased 1992     1987-based  
           Expense categories                hospital        hospital   
                                           market basket   market basket
------------------------------------------------------------------------
Wages and Salaries......................          50.244            52.2
Employee Benefits.......................          11.146             9.5
Nonmedical Professional Fees............           2.127             1.6

[[Page 27461]]

                                                                        
Malpractice Insurance...................           1.189             1.4
Pharmaceuticals.........................           4.162             3.9
All Other...............................          31.132            31.4
                                         -------------------------------
    Total...............................         100.000          100.0 
------------------------------------------------------------------------
Note: Although we rounded the weights to the tenths decimal position in 
  the 1987-based market basket as published in the September 4, 1990    
  final rule, we are presenting the 1992 weights in greater specificity.


    Table 2 sets forth the proposed market basket cost categories, 
weights, and price proxies. Weights for the ``Utilities'' and the ``All 
Other'' cost categories, as well as the subcategories, were determined 
using the 1987 Department of Commerce's Bureau of Economic Analysis 
(BEA) Input-Output Table, from which data for the hospital industry 
were extracted. The BEA Input-Output database, which is updated at 5-
year intervals, was most recently described in the Survey of Current 
Business, ``Benchmark Input-Output Accounts for the U.S. Economy, 
1987'' (April 1994). We anticipate that the Department of Commerce will 
soon release 1992 cost data for use in determining the cost weights. If 
the data are released in time to be analyzed, we will use them in the 
final market basket for more refined estimates of cost expenditure 
weights.
    We aged the 1987 cost shares to 1992 using historical price changes 
between 1987 and 1992 for each category. The aged shares were 
normalized to be consistent with the 1992 hospital cost report data. 
Relative weights for the new base year were then calculated for various 
expenditure categories. This work resulted in the identification of 26 
separate cost categories in the rebased hospital market basket, two 
fewer categories than were included in the 1987-based market basket. 
Detailed descriptions of each category and respective price proxy are 
provided in Appendix C to this proposed rule.

Table 2.--Proposed 1992-Based Prospective Payment Hospital Operating Cost Categories, Weights, and Price Proxies
----------------------------------------------------------------------------------------------------------------
                                                Rebased                                                         
                                                  1992                                                          
             Expense categories                 hospital                        Price proxy                     
                                                 market                                                         
                                                 basket                                                         
----------------------------------------------------------------------------------------------------------------
1. Compensation.............................       61.390  .....................................................
    A. Wages and Salaries\1\................       50.244  HCFA Occupational Wage Index.                        
    B. Employee Benefits\1\.................       11.146  HCFA Occupational Benefits Index.                    
2. Professional Fees\1\.....................        2.127  ECI--Compensation for Professional, Specialty &      
                                                            Technical.                                          
3. Utilities................................        2.469  .....................................................
    A. Fuel, Oil, and Gasoline..............        0.345  PPI Refined Petroleum Products.                      
    B. Electricity..........................        1.349  PPI Commercial Electric Power.                       
    C. Natural Gas..........................        0.670  PPI Commercial Natural Gas.                          
    D. Water and Sewerage...................        0.106  CPI-U Water & Sewerage Maintenance.                  
4. Professional Liability Insurance.........        1.189  HCFA Professional Liability Insurance Premium Index. 
5. All Other................................       32.824  .....................................................
    A. All Other Products...................       24.033  .....................................................
        (1.) Pharmaceuticals................        4.162  PPI Ethical (Prescription) Drugs.                    
        (2.) Food...........................        3.459  .....................................................
            a. Direct Purchase..............        2.363  PPI Processed Foods & Feeds.                         
            b. Contract Service.............        1.096  CPI-U Food Away From Home.                           
        (3.) Chemicals......................        3.795  PPI Industrial Chemicals.                            
        (4.) Medical Instruments............        3.128  PPI Medical Instruments & Equipment.                 
        (5.) Photographic Supplies..........        0.399  PPI Photographic Supplies.                           
        (6.) Rubber and Plastics............        4.868  PPI Rubber & Plastic Products.                       
        (7.) Paper Products.................        2.062  PPI Converted Paper & Paperboard Products.           
        (8.) Apparel........................        0.875  PPI Apparel.                                         
        (9.) Machinery and Equipment........        0.211  PPI Machinery & Equipment.                           
        (10.) Miscellaneous Products........        1.074  PPI Finished Goods.                                  
    B. All Other Services...................        8.792  .....................................................
        (1.) Business Services\1\...........        3.823  ECI--Compensation for Private Workers in Business    
                                                            Services.                                           
        (2.) Computer Services\1\...........        1.927  AHE Computer & Data Processing Services.             
        (3.) Transportation Services........        0.188  CPI-U Transportation.                                
        (4.) Telephone Services.............        0.531  CPI-U Telephone Services.                            
        (5.) Postage\1\.....................        0.272  CPI-U Postage.                                       
        (6.) All Other: Labor Intensive*....        1.707  ECI--Compensation for Private Service Occupations.   
        (7.) All Other: Nonlabor Intensive..        0.344  CPI-U All Items.                                     
                                             --------------                                                     
             Total..........................     100.000                                                        
----------------------------------------------------------------------------------------------------------------
\1\ Labor-related.                                                                                              
Note: Due to rounding, weights may not sum to total.                                                            


[[Page 27462]]


    The 1987-based market basket included a separate Blood Services 
cost category. In the 1992-based market basket, Blood Services is 
contained within the Chemicals cost category. In addition, the 1987-
based cost category for Fuel Oil, Coal, etc. has been combined with the 
1987-based Motor Gasoline cost category to form the 1992-based Fuel, 
Oil and Gasoline cost category. Both of these changes are based on 
revised cost categories from BEA. For comparison purposes, the 1987-
based cost categories are set forth in Table 3.

     Table 3.--1987-Based Prospective Payment Hospital Operating Cost Categories, Weights, and Price Proxies    
----------------------------------------------------------------------------------------------------------------
                                                  1987                                                          
                                                hospital                                                        
             Expense categories                  market                         Price proxy                     
                                                 basket                                                         
----------------------------------------------------------------------------------------------------------------
1. Compensation.............................         61.7  .....................................................
    A. Wages and Salaries<SUP>1..................         52.2  HCFA Occupational Wage Index.                        
    B. Employee Benefits<SUP>1...................          9.5  HCFA Occupational Benefits Index.                    
2. Professional Fees<SUP>1.......................          1.6  ECI--Wages & Salaries for Professional, Specialty &  
                                                            Technical.                                          
3. Utilities................................          2.4  .....................................................
    A. Fuel, Oil, Coal, etc.................          0.6  WPI Light Fuel Oils.                                 
    B. Electricity..........................          1.1  WPI Industrial Power.                                
    C. Natural Gas..........................          0.3  WPI Natural Gas.                                     
    D. Motor Gasoline.......................          0.2  WPI Gasoline.                                        
    E. Water and Sewerage...................          0.0  CPI-U Water & Sewerage Maintenance.                  
4. Professional Liability Insurance.........          1.4  HCFA Professional Liability Insurance Premiums.      
5. All Other................................         32.8  .....................................................
    A. All Other Products...................         21.8  .....................................................
        (1.)Pharmaceuticals.................          3.9  WPI Prescription Drugs.                              
        (2.) Food...........................          3.3  .....................................................
            a. Direct Purchase..............          2.1  WPI Processed Foods.                                 
            b. Contract Service.............          1.2  CPI-U Food Away From Home.                           
        (3.) Chemicals......................          3.1  WPI Industrial Chemicals.                            
        (4.) Medical Instruments............          2.7  WPI Medical Instruments & Equipment.                 
        (5.) Photographic Supplies..........          2.6  WPI Photographic Supplies.                           
        (6.) Rubber and Plastics............          2.3  WPI Rubber & Plastic Products.                       
        (7.) Paper Products.................          1.4  PPI Converted Paper & Paperboard Products.           
        (8.) Apparel........................          1.1  WPI Textile House furnishings.                       
        (9.) Machinery and Equipment........          0.4  WPI Machinery & Equipment.                           
        (10.) Miscellaneous Products........          0.8  WPI Finished Goods.                                  
    B. All Other Services...................         11.1  .....................................................
        (1.) Business Services<SUP>1.............          3.8  AHE Business Services.                               
        (2.) Computer Services<SUP>1.............          2.0  AHE Computer & Data Processing Services.             
        (3.)Transportation Services.........          1.2  CPI-U Transportation.                                
        (4.) Telephone Services.............          1.0  CPI-U Telephone Services.                            
        (5.) Blood Services<SUP>1................          0.6  WPI Blood & Derivatives.                             
        (6.) Postage<SUP>1.......................          0.4  CPI-U Postage.                                       
        (7.) All Other: Labor Intensive<SUP>1....          1.2  ECI--Wages and Salaries for Private Service          
                                                            Occupations.                                        
        (8.) All Other: Nonlabor Intensive..          0.8  CPI-U All Items.                                     
                                             -------------------------------------------------------------------
            Total...........................       100.0                                                        
----------------------------------------------------------------------------------------------------------------
\1\ Labor-related.                                                                                              
Note: Due to rounding, weights may not sum to total.                                                            

    In the September 4, 1990 final rule, for purposes of determining 
the labor-related portion of the standardized amounts, we summed the 
percentages of the labor-related items (that is, wages and salaries, 
employee benefits, professional fees, business services, computer and 
data processing, blood services, postage, and all other labor-intensive 
services) in the hospital market basket. This summation resulted in a 
labor-related portion of the hospital market basket of 71.4 percent and 
nonlabor-related portion of 28.6 percent. Under sections 1886 (d)(2)(H) 
and (d)(3)(E) of the Act, in making payments under the prospective 
payment system, the Secretary estimates from time to time the 
proportion of payments that are labor-related. Since October 1, 1990, 
then, we have considered 71.4 percent of costs to be labor-related for 
purposes of the prospective payment system.
    In connection with the rebasing of the hospital market basket, we 
have re-estimated the labor-related share of the standardized amounts. 
Based on the relative weights described in Table 2, the labor-related 
portion that is subject to hospital wage index adjustments (based on 
wages and salaries, employee benefits, professional fees, business 
services, computer and data processing, postage, and all other labor-
intensive services) is 71.246 percent and the nonlabor-related portion 
is 28.754 percent. To implement this change, effective with discharges 
occurring on or after October 1, 1996, we are proposing to recompute 
the labor-related and nonlabor-related shares of the large urban and 
other areas' standardized amounts used to establish the prospective 
payment rates.
    The amounts in Table 4 reflect the revised labor-related and 
nonlabor-related portions. Due to the Bureau of Economic Analysis' 
reclassification of Blood Services to Chemicals, we now allocate Blood 
Services to a nonlabor cost category. We note that, although there are 
revisions of the labor and nonlabor portions, due to both weight 
changes and the Blood Services category change, the labor-related 
portions of the rates published in Table 4 have remained essentially 
the same. The

[[Page 27463]]

labor-related portion has decreased by 0.146 percentage points.

                      Table 4.--Labor-Related Share                     
------------------------------------------------------------------------
                         Cost category                           Weight 
------------------------------------------------------------------------
Wages and Salaries............................................    50.244
Employee Benefits.............................................    11.146
Professional Fees.............................................     2.127
Business Services.............................................     3.823
Computer Services.............................................     1.927
Postal Services...............................................     0.272
All Other Labor Intensive.....................................     1.707
                                                               ---------
    Total Labor-Related.......................................    71.246
                                                               ---------
    Total Nonlabor Related....................................    28.754
------------------------------------------------------------------------

3. Selection of Price Proxies
    After computing the 1992 cost weights for the rebased hospital 
market basket, it is necessary to select appropriate wage and price 
proxies to monitor the rate of increase for each expenditure category. 
Most of the indicators are based on Bureau of Labor Statistics (BLS) 
data and are grouped into one of the following BLS categories:
    <bullet> Producer Price Indexes--Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. For 
example, we used the PPI for ethical drugs, rather than the Consumer 
Price Index (CPI) for prescription drugs. PPIs are preferable price 
proxies for goods that hospitals purchase as inputs in producing their 
outputs. The PPIs we used measure price change at the final stage of 
production.
    <bullet> Consumer Price Indexes--Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by the 
typical consumer. Because they may not represent the price faced by the 
producer, the consumer price indexes were used if no appropriate PPI 
was available, or if the expenditure was more similar to that of retail 
consumers in general rather than a purchase at the wholesale level. For 
example, the CPI for food purchased away from home was used as a proxy 
for contracted food services.
    <bullet> Employment Cost Indexes--Employment Cost Indexes (ECIs) 
measure the rate of change in employee wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. They are not affected by shifts in employment mix.
    <bullet> Average Hourly Earnings--Average Hourly Earnings (AHEs) 
measure the rate of change of hourly earnings for various occupations 
within a given industry, and, therefore, reflect a weighted 
occupational mix within a particular industry. The AHE series is 
calculated by dividing gross payrolls by total hours and measures 
actual earnings rather than pure wage rates. It is a current-weight 
series rather than a fixed-weight index and thus reflects shifts in 
employment mix. An AHE rather than an ECI is used when there is no 
corresponding ECI category that is an appropriate measure of growth for 
a given labor category or when the ECI does not have sufficient length 
of history to be useful for our purpose.
    Our proposed price proxies for the rebased prospective payment 
hospital market basket are shown in Table 2 above and are summarized in 
Appendix C to this proposed rule.
4. The HCFA Blended Compensation Index
    Compensation includes the two largest categories of the rebased 
hospital market basket. Wages and salaries account for 50.244 percent 
and employee benefits account for 11.146 percent of the total weight in 
the prospective payment hospital market basket.
    The proposed HCFA Blended Compensation Index groups hospital 
occupations into nine broad categories. For eight of those occupational 
groups, we believe that hospitals compete for labor generally with 
employers outside the health care sector. Accordingly, we use economy-
wide employment cost indexes (ECI) as price proxies for these eight 
occupational groups. In the case of compensation for nurses, as well as 
for certain other health care technicians and professionals, the 
hospital labor market may be predominant. However, hospitals do compete 
with other industries to obtain certain skilled professional and 
technical staff (for example, computer programmers). Therefore, for 
professional and technical workers, we believe a price proxy that 
reflects an equal blend of internal and external compensation variables 
is appropriate.
    Similar to the methodology used for the previous rebasing, the 
weights for the nine cost categories in the occupational blend index 
were derived from the 1992 Current Population Survey (CPS) produced by 
BLS. Using the CPS, private hospital workers were classified into the 
nine occupational categories. Private hospitals better reflect the mix 
of occupations used to produce acute care services for the prospective 
payment hospital input price index. Government hospitals were excluded 
because their occupational mix reflects the subset of nonacute care 
hospitals. Once private hospital workers were sorted by occupation into 
one of the nine occupational groups, weights were estimated using the 
share of wages and salaries for each of the nine occupations. These 
shares formed the basis of the weights that were used for the market 
basket of occupational categories.
    An additional adjustment was made for contract labor costs. Rather 
than treat contract labor as a distinct noncompensation cost category, 
it was integrated into the occupational blend as a component of 
hospitals' compensation costs for purposes of the market basket index. 
Thus, contract labor is treated the same as other labor expenses. 
Contract labor was allocated to the professional and technical and 
service occupation categories. After adjusting the professional and 
technical and service workers' shares to account for contract labor, 
the weights for the nine occupational blend categories were 
renormalized to equal 100.00 percent. The weights and proxies for the 
nine cost categories of the HCFA Blended Wages and Salaries Index are 
shown in Table 5.

 Table 5.--HCFA Blended Wages and Salaries Index (Wages and Salaries Component of the 1992-Based Market Basket) 
----------------------------------------------------------------------------------------------------------------
                              Cost category                                 Weight           Price proxy        
----------------------------------------------------------------------------------------------------------------
Professional and Technical..............................................     65.729  Equal blend of ECI for     
                                                                                      wages and salaries of     
                                                                                      civilian hospital workers 
                                                                                      and ECI for wages and     
                                                                                      salaries of professional, 
                                                                                      specialty and technical   
                                                                                      workers.                  
Managers and Administrators.............................................      9.554  ECI for wages and salaries 
                                                                                      for executive,            
                                                                                      administrative and        
                                                                                      managerial workers.       
Sales...................................................................      0.402  ECI for wages and salaries 
                                                                                      for sales workers.        
Clerical Workers........................................................     12.379  ECI for wages and salaries 
                                                                                      for administrative support
                                                                                      including clerical        
                                                                                      workers.                  
Craft and Kindred.......................................................      1.689  ECI for wages and salaries 
                                                                                      for precision production, 
                                                                                      craft and repair workers. 

[[Page 27464]]

                                                                                                                
Operatives Except Transport.............................................      0.437  ECI for wages and salaries 
                                                                                      for machine operators,    
                                                                                      assemblers and inspectors.
Transport Equipment Operatives..........................................      0.122  ECI for wages and salaries 
                                                                                      for transportation and    
                                                                                      material moving workers.  
Nonfarm Laborers........................................................      0.084  ECI for wages and salaries 
                                                                                      for handlers, equipment   
                                                                                      cleaners, helpers and     
                                                                                      laborers.                 
Service Workers.........................................................      9.606  ECI for wages and salaries 
                                                                                      for service occupations.  
                                                                         ---------------------------------------
Total Wages and Salaries................................................    100.000  Total Weight for Wages and 
                                                                                      Salaries is 50.2.         
----------------------------------------------------------------------------------------------------------------
Note: Due to rounding, weights may not sum to total.                                                            


5. Separate Market Basket for Hospitals and Hospital Units Excluded 
From the Prospective Payment System
    In its March 1, 1990 report, ProPAC recommended that we establish a 
separate market basket for hospitals and hospital units excluded from 
the prospective payment system. Effective with FY 1991, HCFA adopted 
ProPAC's recommendation to implement separate market baskets. (See the 
September 4, 1990 final rule (55 FR 36044).) Prospective payment and 
excluded hospitals tend to have different case mixes, practice 
patterns, and composition of inputs. The fact that these hospitals are 
not included under the prospective payment system in part reflects 
these differences.
    Studies completed by HCFA, ProPAC, and the hospital industry have 
documented different weights for excluded hospitals and prospective 
payment hospitals. Table 7 compares major weights in the rebased 1992 
market basket for excluded hospitals with weights in the rebased 1992 
market basket for prospective payment system hospitals. Wages and 
salaries are 52.152 percent of total operating costs for excluded 
hospitals compared to 50.244 percent for prospective payment hospitals. 
Employee benefits are 11.569 percent for excluded hospitals compared to 
11.146 percent for prospective payment hospitals. As a result, 
compensation costs (wages and salaries plus employee benefits) for 
excluded hospitals are 63.721 percent of costs compared to 61.390 
percent for prospective payment hospitals. Noncompensation costs are 
36.279 percent for excluded hospitals and 38.610 of costs for 
prospective payment hospitals.
    Two significant differences in the category weights occur in 
Pharmaceuticals and Business Services. Pharmaceuticals represent 4.162 
percent of costs for prospective payment hospitals and 3.070 percent 
for excluded hospitals. Business services represent 3.823 percent of 
costs for prospective payment hospitals and 2.337 percent for excluded 
hospitals. The weights for the excluded hospital market basket were 
derived using the same data sources and methods as for the prospective 
payment market basket (see Appendix C to this proposed rule).
    Differences in weights between the proposed excluded hospital and 
prospective payment hospital market baskets do not necessarily lead to 
significant differences in the rate of price growth for the two market 
baskets. If the individual wages and prices move at the approximately 
same annual rate, both market baskets may have about the same price 
growth even though weights may differ substantially because both market 
baskets use the same wages and prices. Also, offsetting price increases 
for various cost components can result in similar composite price 
growth in both market baskets.
    The wage and price proxies are the same for the excluded hospital 
and prospective payment hospital market baskets. As discussed in 
section IV.A.2 of this preamble, all of the cost expenditure weights 
for both the prospective payment and excluded hospital market baskets 
are subject to refinement if the U.S. Department of Commerce data are 
released in time to be analyzed and incorporated in the final market 
basket.
    The excluded hospital market basket is a composite set of weights 
for Medicare participating psychiatric, long-term care, rehabilitation, 
and children's hospitals. We are proposing to use cost report data for 
excluded hospitals and units whose Medicare average length of stay is 
within 15 percent (that is, 15 percent higher or lower) of the total 
facility average length of stay. This is a change from the 1987-based 
market basket, for which data for all excluded hospitals and units were 
used. We believe that limiting our sample to hospitals with a Medicare 
average length of stay within 15 percent of the total facility average 
length of stay provides a more accurate reflection of the structure of 
costs for Medicare. We note that the proposed forecast for FY 1997 
would be the same even if we had included all excluded hospitals in the 
calculation of weights. The forecast for both the limited and full set 
of excluded hospitals yields a rate of change for FY 1997 of 2.7 
percent.

   Table 6.--Comparison of Significant Weights for 1992-Based Excluded  
        Hospital and Prospective Payment Hospital Market Baskets        
------------------------------------------------------------------------
                                                             Prospective
                   Category                       Excluded     payment  
                                                 hospitals    hospitals 
------------------------------------------------------------------------
Wages and Salaries............................       52.152       50.244
Employee Benefits.............................       11.569       11.146
Professional Fees.............................        2.098        2.127
Pharmaceuticals...............................        3.070        4.162
All Other.....................................       31.111       32.321
                                               -------------------------
    Total.....................................      100.000      100.000
------------------------------------------------------------------------


[[Page 27465]]



      Table 7.--Proposed 1992-Based Excluded Hospital Operating Cost Categories, Weights, and Price Proxies     
----------------------------------------------------------------------------------------------------------------
                                                                              Rebased                           
                                                                                1992                            
                                                                              excluded                          
                             Expense categories                               hospital         Price proxy      
                                                                               market                           
                                                                               basket                           
----------------------------------------------------------------------------------------------------------------
1. Compensation............................................................     63.721                          
    A. Wages and Salaries..................................................     52.152  HCFA Occupational Wage  
                                                                                         Index.                 
    B. Employee Benefits...................................................     11.569  HCFA Occupational       
                                                                                         Benefits Index.        
2. Professional Fees.......................................................      2.098  ECI--Compensation for   
                                                                                         Professional, Specialty
                                                                                         & Technical.           
3. Utilities...............................................................      2.557                          
    A. Fuel, Oil, and Gasoline.............................................      0.357  PPI Refined Petroleum   
                                                                                         Products.              
    B. Electricity.........................................................      1.396  PPI Commercial Electric 
                                                                                         Power.                 
    C. Natural Gas.........................................................      0.694  PPI Commercial Natural  
                                                                                         Gas.                   
    D. Water and Sewerage..................................................      0.110  CPI-U Water & Sewerage  
                                                                                         Maintenance.           
4. Professional Liability Insurance........................................      1.081  HCFA Professional       
                                                                                         Liability Insurance    
                                                                                         Premiums Index.        
5. All Other...............................................................     30.543                          
    A. All Other Products..................................................     23.642                          
        (1.) Pharmaceuticals...............................................      3.070  PPI Ethical             
                                                                                         (Prescription) Drugs.  
        (2.) Food..........................................................      3.581                          
            a. Direct Purchase.............................................      2.446  PPI Processed Foods &   
                                                                                         Feeds.                 
            b. Contract Service............................................      1.135  CPI-U Food Away From    
                                                                                         Home.                  
        (3.) Chemicals.....................................................      3.929  PPI Industrial          
                                                                                         Chemicals.             
        (4.) Medical Instruments...........................................      3.238  PPI Medical Instruments 
                                                                                         & Equipment.           
        (5.) Photographic Supplies.........................................      0.413  PPI Photographic        
                                                                                         Supplies.              
        (6.) Rubber and Plastics...........................................      5.039  PPI Rubber & Plastic    
                                                                                         Products.              
        (7.) Paper Products................................................      2.134  PPI Converted Paper &   
                                                                                         Paperboard Products.   
        (8.) Apparel.......................................................      0.906  PPI Apparel.            
        (9.) Machinery and Equipment.......................................      0.218  PPI Machinery &         
                                                                                         Equipment.             
        (10.) Miscellaneous Products.......................................      1.112  PPI Finished Goods.     
    B. All Other Services..................................................      6.901                          
        (1.) Business Services.............................................      2.337  ECI--Compensation for   
                                                                                         Private Workers in     
                                                                                         Business Services.     
        (2.) Computer Services.............................................      1.415  AHE Computer & Data     
                                                                                         Processing Services.   
        (3.) Transportation Services.......................................      0.195  CPI-U Transportation.   
        (4.) Telephone Services............................................      0.549  CPI-U Telephone         
                                                                                         Services.              
        (5.) Postage.......................................................      0.282  CPI-U Postage.          
        (6.) All Other: Labor Intensive....................................      1.767  ECI--Compensation for   
                                                                                         Private Service        
                                                                                         Occupations.           
        (7.) All Other: Nonlabor Intensive.................................      0.356  CPI-U All Items.        
                                                                            -----------                         
            Total..........................................................   100.000                           
----------------------------------------------------------------------------------------------------------------
Note: Due to rounding, weights may not sum to total.                                                            

    Table 8, below, shows what the excluded hospital weights would be 
if cost data for all excluded hospitals had been used.

  Table 8.--1992 excluded hospital operating cost categories, weights, and proxies using data from all excluded 
                                                    hospitals                                                   
----------------------------------------------------------------------------------------------------------------
                                             Rebased 1992                                                       
                                               excluded                                                         
            Expense categories                 hospital                          Price proxy                    
                                             market basket                                                      
----------------------------------------------------------------------------------------------------------------
1. Compensation...........................          68.074  ....................................................
    A. Wages and Salaries.................          55.714  HCFA Occupational Wage Index.                       
    B. Employee Benefits..................          12.360  HCFA Occupational Benefits Index.                   
2. Professional Fees......................           2.073  ECI--Compensation for Professional, Specialty &     
                                                             Technical.                                         
3. Utilities..............................           2.191  ....................................................
    A. Fuel, Oil, and Gasoline............           0.306  PPI Refined Petroleum Products.                     
    B. Electricity........................           1.196  PPI Commercial Electric Power.                      
    C. Natural Gas........................           0.595  PPI Commercial Natural Gas.                         
    D. Water and Sewerage.................           0.094  CPI-U Water & Sewerage Maintenance.                 
4. Professional Liability Insurance.......           1.081  HCFA Professional Liability Insurance Premiums      
                                                             Index.                                             
5. All Other..............................          26.582  ....................................................
    A. All Other Products.................          20.333  ....................................................
        (1.) Pharmaceuticals..............           2.704  PPI Ethical (Prescription) Drugs.                   
        (2.) Food.........................           3.069  ....................................................
            a. Direct Purchase............           2.096  PPI Processed Foods & Feeds.                        
            b. Contract Service...........           0.973  CPI-U Food Away From Home.                          
        (3.) Chemicals....................           3.367  PPI Industrial Chemicals.                           
        (4.) Medical Instruments..........           2.775  PPI Medical Instruments & Equipment.                

[[Page 27466]]

                                                                                                                
        (5.) Photographic Supplies........           0.354  PPI Photographic Supplies.                          
        (6.) Rubber and Plastics..........           4.319  PPI Rubber & Plastic Products.                      
        (7.) Paper Products...............           1.829  PPI Converted Paper & Paperboard Products.          
        (8.) Apparel......................           0.777  PPI Apparel.                                        
        (9.) Machinery and Equipment......           0.187  PPI Machinery & Equipment.                          
        (10.) Miscellaneous Products......           0.953  PPI Finished Goods.                                 
    B. All Other Services.................           6.248  ....................................................
        (1.) Business Services............           2.337  ECI--Compensation for Private Workers in Business   
                                                             Services.                                          
        (2.) Computer Services............           1.213  AHE Computer & Data Processing Services.            
        (3.) Transportation Services......           0.167  CPI-U Transportation.                               
        (4.) Telephone Services...........           0.471  CPI-U Telephone Services.                           
        (5.) Postage......................           0.242  CPI-U Postage.                                      
        (6.) All Other: Labor Intensive...           1.514  ECI--Compensation for Private Service Occupations.  
        (7.) All Other: Nonlabor Intensive           0.305  CPI-U All Items.                                    
                                           ---------------------------------------------------------------------
            Total.........................         100.000                                                      
----------------------------------------------------------------------------------------------------------------



    The relatively small differences in weights between the proposed 
excluded hospital market basket data from excluded hospitals that have 
a Medicare length of stay within 15 percent of the total facility 
average length of stay and the excluded hospital market basket using 
data from all excluded hospitals do not lead to significant changes in 
the rate of price growth for these two market baskets. If all 
individual wages and prices move at about the same annual rate, both 
market baskets could have about the same price growth even if weights 
are somewhat different. Also, offsetting price increases for various 
costs components can result in the price growth being the same.
    To examine the sensitivity of the change to the limited set of 
excluded hospitals, we developed a comparison for the period 1988-1998. 
Using historical data and forecasts for the market baskets, we compared 
limited and full sets of excluded hospitals.

 Table 9.--A Comparison of the Proposed Excluded Hospital Market Basket 
   and the Excluded Hospital Market Basket Rebased Using All Excluded   
                  Hospitals, Percent Change, 1988-1998                  
------------------------------------------------------------------------
                                 Proposed                               
                               excluded (+/-     Excluded               
                                   15%)      hospital market            
     Federal fiscal year         hospital      basket using   Difference
                                  market       all excluded             
                               basket--1992  hospitals--1992            
                                   base            base                 
------------------------------------------------------------------------
Historical:                                                             
  1988.......................          4.8            4.8          0.0  
  1989.......................          5.5            5.5          0.0  
  1990.......................          4.5            4.6         (0.1) 
  1991.......................          4.3            4.4         (0.1) 
  1992.......................          3.1            3.2         (0.1) 
  1993.......................          3.1            3.2         (0.1) 
  1994.......................          2.6            2.7         (0.1) 
  1995.......................          3.3            3.2          0.1  
Forecasted:                                                             
  1996.......................          2.6            2.6          0.0  
  1997.......................          2.7            2.7          0.0  
  1998.......................          2.9            2.9          0.0  
Historical average:                                                     
  1988-1995..................          3.9            4.0         (0.1) 
Forecasted average:                                                     
  1996-1998..................          2.7            2.7          0.0  
------------------------------------------------------------------------

    Note that the historical average rate of growth for 1988-1995 for 
the proposed excluded hospital market basket including only excluded 
hospitals with Medicare average length of stay within 15 percent of 
total facility average length of stay is virtually identical to that 
for the excluded hospital market basket with all excluded hospitals. 
The rates of growth using the two methodologies are identical for FY 
1996, 1997, and 1998.

B. Capital Costs

Rebasing the Capital Input Price Index
1. Background
    Effective for cost reporting periods beginning on or after October 
1, 1995, the Capital Input Price Index (CIPI) is used to determine the 
price increase associated with prospective payment hospital capital-
related expenses. Capital-related expenses are defined as depreciation 
expenses, capital-related interest expenses, and other capital-related 
expenses, such as insurance and taxes. The CIPI measures the input 
price change of these capital-related expenses, and is included in the 
capital prospective payment update framework to determine a rate of 
increase in capital prospective payments.
    Like the prospective payment hospital operating input price index, 
the CIPI is a fixed-weight price index. A fixed-weight price index 
measures how much it would cost at a later date to purchase the same 
mix of goods and services purchased in the base period. For the 
prospective payment hospital operating and capital input price indexes, 
the base period is selected and cost category weights are determined 
using available data on hospitals. Next, appropriate price proxy 
indexes are chosen for each cost category. Then a price proxy index 
level for each expenditure category is multiplied by the comparable 
cost category weight. The sum of these products (that is, weights 
multiplied by price proxy index levels) for all cost categories yields 
the composite index level of the market basket for a given

[[Page 27467]]

year. Repeating the step for other years produces a time series of 
composite market basket index levels. Dividing an index level by a 
later index level produces a rate of growth in the input price index. 
Since the percent change is computed for the fixed mix of total capital 
inputs with a 1992 base, the index is called fixed-weight.
    Like the operating input price index, the CIPI measures the price 
changes associated with costs during a given year. In order to do so, 
the CIPI must differ from the operating input price index in one 
important aspect. The CIPI must reflect the vintage nature of capital, 
which is the acquisition and use of capital over time. Capital expenses 
in any given year are determined by the stock of capital in that year 
(that is, capital that remains on hand from all current and prior 
capital acquisitions). An index measuring capital price changes needs 
to reflect this vintage nature of capital. Therefore, the CIPI was 
developed to capture the vintage nature of capital by using a weighted-
average of past capital purchase prices up to and including the current 
year. Using Medicare cost reports, AHA data, and Securities Data 
Corporation data, a vintage-weighted price index was developed to 
measure price increases associated with capital expenses. The most 
recent discussion on the CIPI and methodological background was 
published in the September 1, 1995 final rule (60 FR 45817). The 
following Federal Register documents describe development and revisions 
of the methodology involved with the construction of the CIPI:

September 1, 1992 (57 FR 40016), May 26, 1993 (58 FR 30448),
September 1, 1993 (58 FR 46490), May 27, 1994 (59 FR 27876),
September 1, 1994 (59 FR 45517), June 2, 1995 (60 FR 29229), and 
September 1, 1995 (60 FR 45815).

    We periodically update the base year for the operating and capital 
input prices to reflect the changing composition of inputs for 
operating and capital expenses. Currently, both the operating input 
price index and the CIPI are based to FY 1987. We are proposing that 
the base year cost structure be updated to FY 1992, the most recent 
year with relatively complete data for purposes of rebasing. We explain 
the process of rebasing the cost structure weights for the CIPI below.
2. Rebasing the Capital Input Price Index
    We are proposing to use a rebased capital input price index (CIPI) 
in developing the FY 1997 capital update factor for capital prospective 
payment rates. The new CIPI would be rebased to reflect the 1992, 
rather than the 1987, structure of capital costs. In developing the 
rebased CIPI, we reviewed hospital capital expenditure data for capital 
cost categories (depreciation, interest, and other). Two sets of 
weights had to be developed in order to compute the rebased CIPI: (1) 
cost category weights which identify the proportion of total hospital 
capital expenditures attributable to each capital expenditure category, 
and (2) relative vintage weights for depreciation and interest which 
identify the proportion of capital expenditures within a cost category 
that are attributable to each year over the life of capital assets in 
that category. Because capital expense data in the Medicare Cost 
Reports is not available prior to 1980 for use in computing vintage 
weights, the two sets of weights are measured using the best data 
sources available as explained below and in Appendix C to this proposed 
rule. The computations involved with rebasing the CIPI are explained 
for each of these sets of weights.
    a. Capital Cost Category Weights. The capital cost category weights 
in Table 1 below were computed using a combination of the FY 1992 
Medicare Cost Reports and 1992 AHA Annual Survey data. Fiscal Year 1992 
marked the first year for expanded capital data available in the 
Medicare Cost Reports. After reviewing the data, we determined that 
much of the data had been reclassified into different expense 
categories. Therefore, we removed reports that appeared to have 
reclassified data, and matched the remaining reports to the 
corresponding reports in the AHA Annual Survey data set. These 
remaining 2724 reports were used to compute capital cost category 
weights and the expected life of capital, which is used in determining 
vintage weights for depreciation and interest.
    In reviewing the data, we determined that the Medicare Cost Reports 
provided accurate data for depreciation and other capital expenses, but 
had reclassified interest data. We determined that AHA Annual Survey 
data more accurately reflected interest expense, based on past trends 
in interest rates. Therefore, we used the AHA Annual Survey interest 
levels along with the Medicare Cost Report levels for depreciation and 
other capital expenses to develop a more robust capital cost data base.
    After removing depreciation, interest, and other capital expenses 
from total capital expenses, the remainder constitutes lease expenses. 
Lease expenses are not a separate cost category in the CIPI. They are 
distributed to the other cost categories (depreciation, interest, 
other), reflecting an assumption that the underlying cost structure of 
leases is similar to capital costs in general. We assigned 10 percent 
of lease expenses to the other capital expenses cost category as 
overhead, and the remaining lease expenses were distributed to the 
three cost categories based on the weights of depreciation, interest, 
and other capital expenses not including lease expenses. (We base this 
assignment of 10 percent of lease expenses to overhead on the common 
assumption that overhead is 10 percent of costs.)
    We also used the 1992 Medicare Cost Reports to determine weights 
for the building and fixed equipment category and the movable equipment 
category. Expenses for building and fixed equipment and for movable 
equipment were determined using the same sample of reports as was used 
to compute the major cost category weights. The split between building 
and fixed equipment and movable equipment was also used to compute the 
vintage weights described below. Table 10 presents a comparison of the 
rebased 1992 capital cost weights and the 1987 capital cost weights.
    We only used those hospital reports which we considered to have 
capital data that was not reclassified. Because we did not use all 
hospital reports, we were concerned that the hospitals used may not be 
representative of the universe. Therefore, we compared the distribution 
of costs for the hospitals used with the data re-weighted to reflect 
the characteristics of the total universe of hospitals. From this 
analysis we validated that the cost weights derived from the subset we 
used were representative of the cost weights for the entire universe of 
hospitals.

[[Page 27468]]



                           Table 10--Comparison of 1987 and 1992 Cost Category Weights                          
----------------------------------------------------------------------------------------------------------------
                                                               Rebased                                          
              Expense categories                   FY1987       FY1992                  Price proxy             
----------------------------------------------------------------------------------------------------------------
Total.........................................       1.0000       1.0000  ......................................
Total depreciation............................        .6510        .6484  ......................................
    1. Building and fixed equipment                   .3054        .3009  Boeckh Institutional Construction     
     depreciation.                                                         Index--vintage weighted (22 yrs)     
    2. Movable equipment depreciation.........        .3456        .3475  PPI for Machinery and Equipment--     
                                                                           vintage weighted (10 yrs)            
Total interest................................        .3274        .3184                                        
    1. Government/Non Profit Interest.........        .2783        .2706  Average Yield on Domestic Municipal   
                                                                           Bonds (Bond Buyer 20 bonds)--vintage 
                                                                           weighted (22 yrs)                    
    2. For-Profit Interest....................        .0491        .0478  Average Yield on Moody's AAA Bonds--  
                                                                           vintage weighted (22 yrs)            
Other.........................................        .0216        .0332  CPI (U) for Residential Rent          
----------------------------------------------------------------------------------------------------------------
Source: 1992 Medicare Cost Reports, PPS year 9; 1992 AHA Annual Survey.                                         
Note: Due to rounding, weights may not sum to totals.                                                           

    We had planned to incorporate the 1992 data from the Department of 
Commerce for developing capital cost category weights. However, these 
data were not available when we developed this proposed rule. If the 
data become available in time to for us to analyze it, we plan to 
incorporate it as a data input for the final rule.
    b. Relative Vintage Weights for Prices. As we have explained in 
previous Federal Register documents (September 1, 1995, 60 FR 45817), 
the CIPI was developed to capture the vintage nature of capital; that 
is, because capital is acquired and consumed over time, the capital 
expenses in any given year are determined by past and current purchases 
of physical and financial capital. Therefore, a vintage-weighted CIPI 
was developed which used vintage weights for depreciation (physical 
capital) and interest (financial capital) to capture the long-term 
consumption of capital. These vintage weights reflect the purchase 
patterns of building and fixed equipment and movable equipment over 
time. Because depreciation and interest expenses are determined by the 
amount of past and current capital purchases, we use the vintage 
weights to compute vintage-weighted price changes associated with 
depreciation and interest expense, which is the purpose of the CIPI.
    To compute the vintage weights for depreciation and interest 
expenses, we used a time series of capital purchases for building and 
fixed equipment and movable equipment. We found no single source that 
provides the best time series of capital purchases by hospitals for all 
of the above components of capital purchases. The Medicare Cost Reports 
did not have sufficient capital data to meet this need. The AHA Panel 
Survey provides a consistent database back to 1963. While the AHA Panel 
Survey data does not provide annual capital purchases, it does provide 
a time series of depreciation and interest expenses, which can be used 
to infer capital purchases over time. The process of using the AHA data 
to estimate a time series of capital purchases, and eventually vintage 
weights, is explained in detail below.
    In order to estimate capital purchases from AHA data on 
depreciation and interest expenses, the expected life for building and 
fixed equipment, for movable equipment, and for debt instruments is 
needed. The expected life is used in the calculation of vintage weights 
for building and fixed equipment, movable equipment, and debt 
instruments as we explain below.
    We used the same sample of hospitals from FY 1992 Medicare Cost 
Reports and the 1992 AHA Annual Survey explained above in computing 
cost category weights to compute the expected life of building and 
fixed equipment and movable equipment. (The AHA Panel Survey is a 
monthly survey of a sample of hospitals, while the AHA Annual Survey is 
a more detailed survey of all hospitals.) The expected life of any 
piece of equipment can be determined by dividing the historical asset 
cost (excluding fully depreciated assets) by the current year 
depreciation amount. This calculation yields the estimated useful life 
of an asset if depreciation continued at current year levels, assuming 
straight-line depreciation, which is the only depreciation method 
allowed under Medicare. From the FY 1992 costs reports, the expected 
life of building and fixed equipment was determined to be 22 years, and 
the expected life of movable equipment was determined to be 10 years. 
By comparison, the expected life using FY 1987 data was 25 years for 
building and fixed equipment and 10 years for movable equipment.
    It was also necessary to compute the expected life of debt 
instruments held by hospitals. As in prior exercises, we used hospital 
issuances of municipal and commercial bonds from Securities Data 
Corporation to determine the expected life of hospital debt 
instruments, which is used in the estimation of vintage weights for 
interest expense. This data source produced a weighted average life for 
the two types of bonds of 22 years for FY 1992, the same expected life 
as was computed for the 1987-based CIPI.
    An annual series of total expenses and depreciation expenses was 
obtained from the AHA Panel Survey. For the calculation of vintage 
weights, this expense data was needed back to 1963. However, the 
depreciation expense data in the AHA Panel survey was available only 
back to 1976. We noticed an increasing trend in depreciation expenses 
as a percentage of total expenses. We performed a regression on this 
percentage, and used the regression equation to estimate depreciation 
expenses back to 1963. We then used the fixed and movable weights 
derived from the FY 1992 Medicare Cost Reports to partition the AHA 
Panel Survey depreciation expenses into annual amounts of building and 
fixed depreciation and movable depreciation.
    Multiplying the annual depreciation amounts by the expected life 
calculations from the FY 1992 Medicare cost reports, year-end asset 
costs for building and fixed equipment and movable equipment were 
determined. Then by subtracting the previous year asset costs from the 
current year asset costs, annual purchases of building and fixed 
equipment and movable equipment were estimated back to 1963. This 
capital purchase time series is then used to compute the vintage 
weights for building and fixed equipment, movable equipment, and debt 
instruments. Each of these sets of vintage weights is explained in 
detail below.
    For building and fixed equipment vintage weights, the real annual 
capital purchase amounts for building and fixed equipment derived from 
the AHA Panel Survey were used. The real annual purchase amount was 
used to capture the actual amount of the physical acquisition, net of 
the effect of price inflation. This real annual purchase amount for 
building and fixed equipment was produced by deflating

[[Page 27469]]

the nominal annual purchase amount by the building and fixed equipment 
price proxy, the Boeckh institutional construction index. Because 
building and fixed equipment has an expected life of 22 years, the 
vintage weights for building and fixed equipment were deemed to 
represent the average purchase pattern of building and fixed equipment 
over 22-year periods. With real building and fixed equipment purchase 
estimates available back to 1963, nine 22-year periods could be 
averaged to determine the average vintage weights for building and 
fixed equipment. Averaging different periods produces vintage weights 
that are representative of average building and fixed equipment 
purchase patterns over time. Vintage weights for each 22-year period 
are calculated by dividing the real building and fixed capital purchase 
amount in any given year by the total amount of purchases in the 22-
year period. For example, for the 22-year period of 1964-1985, the 
vintage weight for year 1 is calculated by dividing the real annual 
capital purchase amount of building and fixed equipment in 1964 into 
the total amount of real annual capital purchases of building and fixed 
equipment over the entire 1964-1985 period. This calculation is done 
for each year in the 22-year period, and for each of the nine 22-year 
periods. An average is taken of the nine 22-year periods to determine 
the FY 1992 average building and fixed equipment vintage weights, 
presented in Table 11 with the FY 1987 vintage weights.
    For movable equipment vintage weights, the real annual capital 
purchase amounts for movable equipment derived from the AHA Panel 
Survey were used. The real annual purchase amount was used to capture 
the actual amount of the physical acquisition, net of price inflation. 
This real annual purchase amount for movable equipment was produced by 
deflating the nominal annual purchase amount by the movable equipment 
price proxy, the Producer Price Index for machinery and equipment. 
Because movable equipment has an expected life of 10 years, the vintage 
weights for movable equipment were deemed to represent the average 
purchase pattern of movable equipment over 10-year periods. With real 
movable equipment purchase estimates available back to 1963, 21 10-year 
periods could be averaged to determine the average vintage weights for 
movable equipment. Averaging different periods produces vintage weights 
which are representative of average movable equipment purchase patterns 
over time. Vintage weights for each 10-year period are calculated by 
dividing the real movable capital purchase amount for any given year by 
the total amount of purchases in the 10-year period. For example, for 
the 10-year period of 1976-1985, the vintage weight for year 1 is 
calculated by dividing the real annual capital purchase amount of 
movable equipment in 1976 into the total amount of real annual capital 
purchases of movable equipment over the entire 1976-1985 period. This 
calculation is done for each year in the 10-year period, and for each 
of the 21 10-year periods. The average of the 21 10-year periods is 
used to determine the FY 1992 average movable equipment vintage 
weights, presented in Table 11 with the FY 1987 vintage weights.
    For interest vintage weights, the nominal annual capital purchase 
amounts for total equipment (building and fixed, and movable) derived 
from the AHA Panel Survey were used. Nominal annual purchase amounts 
were used to capture the value of the debt instrument. Because debt 
instruments have an expected life of 22 years, the vintage weights for 
interest were deemed to represent the average purchase pattern of total 
equipment over 22-year periods. With nominal total equipment purchase 
estimates available back to 1963, nine 22-year periods could be 
averaged to determine the average vintage weights for interest. 
Averaging different periods produces vintage weights which are 
representative of average capital purchase patterns over time. Vintage 
weights for each 22-year period are calculated by dividing the nominal 
total capital purchase amount for any given year by the total amount of 
purchases in the 22-year period. For example, for the 22-year period of 
1964-1985, the vintage weight for year 1 is calculated by dividing the 
nominal annual capital purchase amount of total equipment in 1964 into 
the total amount of nominal annual capital purchases of total equipment 
over the entire 1964-1985 period. This calculation is done for each 
year in the 22-year period, and for each of the nine 22-year periods. 
The average of the nine 22-year periods is used to determine the FY 
1992 average interest vintage weights, presented in Table 11 with the 
FY 1987 weights.

                          Table 11.--Vintage Weights for Capital-Related Price Proxies                          
----------------------------------------------------------------------------------------------------------------
                                       Building and fixed         Movable equipment             Interest        
                                            equipment        ---------------------------------------------------
                                   --------------------------                                                   
               Year                                Rebased     FY1987  10    Rebased     FY1987  22    Rebased  
                                     FY1987  25   FY1992  22      yrs       FY1992  10      yrs       FY1992  22
                                        yrs          yrs                       yrs                       yrs    
----------------------------------------------------------------------------------------------------------------
1.................................         .015         .019         .064         .069         .007         .007
2.................................         .019         .020         .072         .075         .009         .008
3.................................         .022         .023         .077         .083         .010         .010
4.................................         .024         .026         .085         .091         .011         .012
5.................................         .023         .028         .095         .097         .013         .014
6.................................         .022         .030         .101         .103         .015         .016
7.................................         .020         .031         .109         .109         .017         .018
8.................................         .021         .032         .122         .115         .020         .021
9.................................         .025         .036         .132         .124         .023         .024
10................................         .030         .039         .142         .133         .027         .029
11................................         .033         .043  ...........  ...........         .032         .035
12................................         .034         .047  ...........  ...........         .038         .041
13................................         .034         .050  ...........  ...........         .043         .047
14................................         .035         .052  ...........  ...........         .050         .052
15................................         .038         .055  ...........  ...........         .057         .059
16................................         .043         .059  ...........  ...........         .064         .067
17................................         .049         .062  ...........  ...........         .074         .074
18................................         .053         .065  ...........  ...........         .083         .081
19................................         .056         .067  ...........  ...........         .090         .088

[[Page 27470]]

                                                                                                                
20................................         .057         .069  ...........  ...........         .098         .093
21................................         .060         .072  ...........  ...........         .105         .099
22................................         .066         .073  ...........  ...........         .114         .103
23................................         .071  ...........  ...........  ...........  ...........  ...........
24................................         .075  ...........  ...........  ...........  ...........  ...........
25................................         .077  ...........  ...........  ...........  ...........  ...........
                                   -----------------------------------------------------------------------------
      Total.......................        1.000        1.000        1.000        1.000        1.000       1.000 
----------------------------------------------------------------------------------------------------------------
Sources: AHA Panel Survey, 1963-1993; 1992 Medicare Cost Reports; Securities Data Corporation.                  


3. Selection of Price Proxies
    After the 1992 capital cost category weights were computed, it was 
necessary to select appropriate price proxies to monitor the rate of 
increase for each expenditure category. Our proposed price proxies for 
the FY 1992 based CIPI are the same as those for the FY 1987 based 
CIPI. The rationale for selecting the price proxies is explained in the 
June 2, 1995 proposed rule (60 FR 29227) and the September 1, 1995 
final rule (60 FR 45817). The proposed price proxies are presented in 
Table 10.
4. Forecast of the CIPI for Federal Fiscal Year 1997
    DRI forecasts a 1.0 percent increase in the rebased 1992 CIPI for 
FY 1997, as indicated in Table 12. This is the outcome of a 2.5 percent 
increase in projected depreciation prices (building and fixed 
equipment, and movable equipment) and a 2.3 percent increase in other 
capital expense prices in FY 1997, partially offset by a 3.0 percent 
decline in vintage-weighted interest rates in FY 1997.

   Table 12.--HCFA Capital Input Price Index Percent Changes, Total and Components, Fiscal Years 1979 to 2000   
----------------------------------------------------------------------------------------------------------------
                                                              Depreciation                                      
                                                ---------------------------------------                         
            Fiscal Year                Total                    Building                  Interest      Other   
                                                    Total      and fixed     Movable                            
                                                               equipment    equipment                           
----------------------------------------------------------------------------------------------------------------
Weights (FY92)....................       1.0000       0.6484       0.3009       0.3475       0.3184       0.0332
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                 Price Changes                                                  
                                                                                                                
----------------------------------------------------------------------------------------------------------------
1979..............................          5.4          7.4          7.0          7.7          2.7          7.1
1980..............................          6.9          8.0          7.3          8.5          5.4          8.6
1981..............................          8.7          8.5          7.7          9.1          9.1          8.8
1982..............................          9.2          8.5          8.0          9.0         10.2          8.0
1983..............................          6.7          8.1          7.9          8.2          4.8          6.3
1984..............................          6.3          7.3          7.6          7.1          4.9          5.0
1985..............................          5.2          6.3          7.0          5.8          3.5          5.9
1986..............................          3.7          5.7          6.4          5.1          0.7          6.2
1987..............................          3.1          5.1          5.9          4.5         -0.1          4.5
1988..............................          3.0          4.6          5.4          4.0          0.3          3.8
1989..............................          2.6          4.4          5.2          3.7         -0.5          3.8
1990..............................          2.3          4.0          4.9          3.2         -0.7          4.2
1991..............................          2.0          3.6          4.6          2.7         -1.1          3.9
1992..............................          1.5          3.2          4.4          2.1         -2.0          2.6
1993..............................          1.1          2.9          4.1          1.8         -2.8          2.4
1994..............................          1.1          2.7          3.9          1.7         -2.7          2.3
1995..............................          1.3          2.6          3.8          1.6         -2.0          2.5
1996..............................          0.9          2.5          3.7          1.5         -3.1          2.4
1997..............................          1.0          2.5          3.5          1.5         -3.0          2.3
1998..............................          1.0          2.5          3.4          1.5         -3.1          3.0
1999..............................          1.0          2.4          3.4          1.5         -3.1          2.4
2000..............................          1.1          2.4          3.4          1.5         -3.2         2.8 
----------------------------------------------------------------------------------------------------------------
Source: DRI/McGraw-Hill HCC, 1st Qtr 1996; @USSIM/TREND25YR0296 @CISSIM/CONTROL961.                             
Released By: HCFA, OACT, Office of National Health Statistics.                                                  


[[Page 27471]]


5. Comparison of Percent Changes in the FY 1992 Based CIPI and the FY 
1987 Based CIPI
    Rebasing the CIPI from 1987 to 1992 decreased the percent change in 
the FY 1997 forecast by only 0.2 percentage points, from 1.2 to 1.0 as 
indicated in Table 4. The effect of rebasing is analyzed by comparing 
the 1992-based CIPI forecasted percent changes to the 1987-based CIPI 
forecasted percent changes using the same DRI forecast of component 
prices. As shown in Table 13, there is only a 0.2 percentage point 
difference between the percent changes in the 1992-based CIPI and the 
1987-based CIPI using the first quarter 1996 forecast. The difference 
is caused by changes to: (1) cost category weights, (2) expected life, 
and (3) vintage weights. The changes to cost category weights coupled 
with the wide disparity in price changes between the different cost 
categories contributed to lowering the CIPI percent change in the FY 
1997 forecast. This was the case with fixed depreciation, which has 
faster price growth than the other cost categories and now has a lower 
weight by nearly one-half of a percentage point because of rebasing to 
1992. Also contributing to the 0.2 percentage point difference in FY 
1997 forecast is the change in the expected life of building and fixed 
equipment and the change in the vintage weights for all three 
components: building and fixed equipment, movable equipment, and 
interest. The shorter expected life (22 years in 1992 versus 25 years 
in 1987) of building and fixed equipment slightly decreased the FY 1997 
forecast CIPI percent change because years with higher price increases 
were not included as they had been before. The change in vintage 
weights also tended to decrease the FY 1997 CIPI percent change because 
vintage weights in all cases changed to be spread more evenly over the 
life of the asset, decreasing the weight of more recent years and 
increasing the weight of past years. In the years around FY 1997, 
prices for depreciation and interest are projected to increase slightly 
faster than prices in earlier years.

 Table 13.--Comparison of 1987 and 1992 Based Capital Input Price Index 
         Using the Same DRI Forecast, Percent Change, 1979-1997         
------------------------------------------------------------------------
                                                             CIPI       
                                                     -------------------
                 Federal fiscal year                             Rebased
                                                        1987      1992  
------------------------------------------------------------------------
1979................................................       5.6       5.4
1980................................................       7.1       6.9
1981................................................       8.8       8.7
1982................................................       9.3       9.2
1983................................................       6.7       6.7
1984................................................       6.3       6.3
1985................................................       5.1       5.2
1986................................................       3.7       3.7
1987................................................       3.1       3.1
1988................................................       3.0       3.0
1989................................................       2.7       2.6
1990................................................       2.4       2.3
1991................................................       2.1       2.0
1992................................................       1.7       1.5
1993................................................       1.3       1.1
1994................................................       1.3       1.1
1995................................................       1.5       1.3
1996................................................       1.2       0.9
1997................................................       1.2      1.0 
------------------------------------------------------------------------
Source: DRI/McGraw-Hill HCC, 1st Qtr 1996; @USSIM/TREND25YR0296 @CISSIM/
  CONTROL961.                                                           
Released by: HCFA, OACT, Office of National Health Statistics.          

6. Comparison of Percent Changes in the FY 1997 CIPI Forecast in the 
September 1, 1995 Federal Register and the current FY 1997 CIPI 
Forecast
    The previously published CIPI forecast for FY 1997 of 1.7 percent 
has been revised to 1.0 percent in this proposed rule. As explained 
above in section IV.B.5, 0.2 percentage points of the decline was the 
result of rebasing the CIPI from 1987 to 1992. The remaining 0.5 
percentage point difference in FY 1997 between the 1992-based CIPI and 
the 1987-based CIPI previously published is the result of revised 
projections by DRI. Since making a forecast in the second quarter of 
1995 for the September 1, 1995 Federal Register, DRI has revised their 
projections of price changes downward for every cost category in the 
CIPI. This revised projection accounts for 0.5 of the 0.7 difference 
between the 1992-based CIPI percent changes and the 1987-based CIPI 
percent changes previously published.

V. Other Decisions and Proposed Changes to the Prospective Payment 
System for Inpatient Operating Costs

A. Sole Community Hospital Criteria (Sec. 412.92)

    Under the prospective payment system, special payment protections 
are provided to hospitals that, by reason of factors such as isolated 
location, weather conditions, travel conditions, or absence of other 
hospitals, are the sole source of hospital inpatient services 
reasonably available to Medicare beneficiaries. The criteria a hospital 
must meet to be classified as a sole community hospital (SCH) as well 
as the special payment adjustments available are set forth in the 
regulations at Sec. 412.92.
    One of the ways in which a hospital can qualify for sole community 
status is to be located between 25 and 35 miles from other like 
hospitals and prove that no more than 25 percent of residents who 
become inpatients or no more than 25 percent of the Medicare 
beneficiaries who become inpatients in the hospital's ``service area'' 
are admitted to other like hospitals located within a 35-mile radius of 
the hospital (or its service area, if larger).
    In the rulemaking process for FY 1989, we addressed the criteria 
for qualification as a sole community hospital. ProPAC had recommended 
that we issue guidelines before the beginning of FY 1989 to promote 
greater uniformity in the criteria applied by regional offices to 
designate sole community hospitals. In the final rule published on 
September 30, 1988, we stated: ``A hospital may delineate its service 
area by identifying the zip codes of all its inpatients for the cost 
reporting period ending before the date it applies for SCH status. The 
lowest number of zip codes accounting for at least 75 percent of its 
inpatients would then constitute its service area.'' (53 FR 35810-11).
    In March 1990, we issued a revised manual which inadvertently 
reflected policy prior to October 1, 1988; specifically, section 2810 
A.2.c of the Medicare Provider Reimbursement Manual, Part 1 (HCFA Pub. 
15-1) stated, ``A hospital may define its service area as the lowest 
number of contiguous zip codes from which the hospital draws at least 
75 percent of its inpatients.'' (Emphasis added.) This revision does 
not accurately reflect the definition of ``service area'' that we set 
forth in the FY 1989 final rule in response to ProPAC's recommendation 
that we address the criteria for SCH status. It has come to our 
attention that, accordingly, some hospitals have raised questions about 
the definition of service area. In this proposed rule, we are 
clarifying that, consistent with the language in the September 30, 1988 
final rule, our definition of ``service area'' for purposes of 
determining SCH status does not require contiguous zip code areas. We 
have applied this definition since October 1, 1988 (the effective date 
of the September 30, 1988 final rule). The

[[Page 27472]]

current manual inadvertently reflects previous policy, and does not 
reflect our current policy as set forth in the Federal Register and 
applied since October 1, 1988. We intend to revise the current manual 
accordingly at our earliest opportunity.

B. Rural Referral Centers (Sec. 412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, 
Sec. 412.96 sets forth the criteria a hospital must meet in order to 
receive special treatment under the prospective payment system as a 
rural referral center. For discharges occurring before October 1, 1994, 
rural referral centers received the benefit of payment based on the 
other urban rather than the rural standardized amount. As of that date, 
the other urban and rural standardized amounts are the same. However, 
rural referral centers continue to receive special treatment under both 
the disproportionate share hospital payment adjustment and the criteria 
for geographic reclassification.
    One of the criteria under which a rural hospital may qualify as a 
referral center is to have 275 or more beds available for use. A rural 
hospital that does not meet the bed size criterion can qualify as a 
rural referral center if the hospital meets two mandatory criteria 
(number of discharges and case-mix index) and at least one of three 
optional criteria (medical staff, source of inpatients, or volume of 
referrals). With respect to the two mandatory criteria, a hospital may 
be classified as a rural referral center if its--
    <bullet> Case-mix index is at least equal to the lower of the 
median case-mix index for urban hospitals in its census region, 
excluding hospitals with approved teaching programs, or the median 
case-mix index for all urban hospitals nationally; and
    <bullet> Number of discharges is at least 5,000 discharges per year 
or, if fewer, the median number of discharges for urban hospitals in 
the census region in which the hospital is located. (The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year.)
1. Case-Mix Index
    Section 412.96(c)(1) provides that HCFA will establish updated 
national and regional case-mix index values in each year's annual 
notice of prospective payment rates for purposes of determining rural 
referral center status. In determining the proposed national and 
regional case-mix index values, we follow the same methodology we used 
in the November 24, 1986 final rule, as set forth in regulations at 
Sec. 412.96(c)(1)(ii). Therefore, the proposed national case-mix index 
value includes all urban hospitals nationwide, and the proposed 
regional values are the median values of urban hospitals within each 
census region, excluding those with approved teaching programs (that 
is, those hospitals receiving indirect medical education payments as 
provided in Sec. 412.105).
    These values are based on discharges occurring during FY 1995 
(October 1, 1994 through September 30, 1995) and include bills posted 
to HCFA's records through December 1995. Therefore, in addition to 
meeting other criteria, we are proposing that to qualify for initial 
rural referral center status or to meet the triennial review standards 
for cost reporting periods beginning on or after October 1, 1996, a 
hospital's case-mix index value for FY 1995 would have to be at least--
    <bullet> 1.3332; or
    <bullet> Equal to the median case-mix index value for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec. 412.105) calculated by HCFA for the census region in 
which the hospital is located.
    The median case-mix values by region are set forth in the table 
below:

------------------------------------------------------------------------
                                                                Case-mix
                            Region                                index 
                                                                  value 
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).......................    1.2292
2. Middle Atlantic (PA, NJ, NY)...............................    1.2224
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)........    1.3375
4. East North Central (IL, IN, MI, OH, WI)....................    1.2450
5. East South Central (AL, KY, MS, TN)........................    1.2911
6. West North Central (IA, KS, MN, MO, NE, ND, SD)............    1.2178
7. West South Central (AR, LA, OK, TX)........................    1.3080
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)..................    1.3284
9. Pacific (AK, CA, HI, OR, WA)...............................    1.3333
------------------------------------------------------------------------

    The above numbers will be revised in the final rule to the extent 
required to reflect the updated MedPAR file, which will contain data 
from additional bills received for discharges through September 30, 
1995.
    For the benefit of hospitals seeking to qualify as referral centers 
or those wishing to know how their case-mix index value compares to the 
criteria, we are publishing each hospital's FY 1995 case-mix index 
value in Table 3C in section V of the Addendum to this proposed rule. 
In keeping with our policy on discharges, these case-mix index values 
are computed based on all Medicare patient discharges subject to DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that HCFA will set forth the 
national and regional numbers of discharges in each year's annual 
notice of prospective payment rates for purposes of determining 
referral center status. As specified in section 1886(d)(5)(C)(ii) of 
the Act, the national standard is set at 5,000 discharges. However, we 
are proposing to update the regional standards. The proposed regional 
standards are based on discharges for urban hospitals' cost reporting 
periods that began during FY 1994 (that is, October 1, 1993 through 
September 30, 1994). That is the latest year for which we have complete 
discharge data available.
    Therefore, in addition to meeting other criteria, we are proposing 
that to qualify for initial rural referral center status or to meet the 
triennial review standards for cost reporting periods beginning on or 
after October 1, 1996, the number of discharges a hospital must have 
for its cost reporting period that began during FY 1995 would have to 
be at least--
    <bullet> 5,000; or
    <bullet> Equal to the median number of discharges for urban 
hospitals in the census region in which the hospital is located, as 
indicated in the table below.

------------------------------------------------------------------------
                                                              Number of 
                           Region                            discharges.
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)....................        6812 
2. Middle Atlantic (PA, NJ, NY)............................        9067 
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....        6972 
4. East North Central (IL, IN, MI, OH, WI).................        6958 
5. East South Central (AL, KY, MS, TN).....................        5007 
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........        4216 
7. West South Central (AR, LA, OK, TX).....................        4002 
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............        6992 
9. Pacific (AK, CA, HI, OR, WA)............................        5669 
------------------------------------------------------------------------

    We reiterate that, to qualify for rural referral center status for 
cost reporting periods beginning on or after October 1, 1996, an 
osteopathic hospital's number of discharges for its cost reporting 
period that began during FY 1995 would have to be at least 3,000.
3. Retention of Referral Center Status
    Section 412.96(f) states that each hospital receiving the referral 
center adjustment is reviewed every 3 years to

[[Page 27473]]

determine if the hospital continues to meet the criteria for referral 
center status. To retain status as a referral center, a hospital must 
meet the criteria for classification as a referral center specified in 
Sec. 412.96 (b)(1) or (b)(2) or (c) for 2 of the last 3 years, or for 
the current year. A hospital may meet any one of the three sets of 
criteria for individual years during the 3-year period or the current 
year. For example, a hospital may meet the two mandatory requirements 
in Sec. 412.96(c)(1) (case-mix index) and (c)(2) (number of discharges) 
and the optional criterion in paragraph (c)(3) (medical staff) during 
the first year. During the second or third year, the hospital may meet 
the criteria under Sec. 412.96(b)(1) (rural location and appropriate 
bed size).
    A hospital must meet all of the criteria within any one of these 
three sections of the regulations in order to meet the retention 
requirement for a given year. That is, it will have to meet all of the 
criteria of Sec. 412.96(b)(1) or Sec. 412.96(b)(2) or Sec. 412.96(c). 
For example, if a hospital meets the case-mix index standards in 
Sec. 412.96(c)(1) in years 1 and 3 and the number of discharge 
standards in Sec. 412.96(c)(2) in years 2 and 3, it will not meet the 
retention criteria. All of the standards would have to be met in the 
same year.
    In accordance with Sec. 412.96(f)(2), the review process is limited 
to the hospital's compliance during the last 3 years. Thus, if a 
hospital meets the criteria in effect for at least 2 of the last 3 
years or if it meets the criteria in effect for the current year (that 
is, the criteria for FY 1997 outlined above in this section of the 
preamble), it will retain its status for another 3 years. We have 
constructed the following chart and example to aid hospitals that 
qualify as referral centers under the criteria in Sec. 412.96(c) in 
projecting whether they will retain their status as a referral center.
    Under Sec. 412.96(f), to qualify for a 3-year extension effective 
with cost reporting periods beginning in FY 1997, a hospital must meet 
the criteria in Sec. 412.96(c) for FY 1997 or it must meet the criteria 
for 2 of the last 3 years as follows:

----------------------------------------------------------------------------------------------------------------
                                                            Use the discharges                                  
                                                            for the hospital's      Use numerical standards as  
   For the cost reporting period     Use hospital's case-     cost reporting         published in the Federal   
        beginning during FY            mix index for FY      period beginning              Register on          
                                                                 during FY                                      
----------------------------------------------------------------------------------------------------------------
1996..............................  1994.................  1994................  September 1, 1995.             
1995..............................  1993.................  1993................  September 1, 1994.             
1994..............................  1992.................  1992................  September 1, 1993.             
----------------------------------------------------------------------------------------------------------------

    Example: A hospital with a cost reporting period beginning July 
1 qualified as a referral center effective July 1, 1994. The 
hospital has fewer than 275 beds. Its 3-year status as a referral 
center is protected through June 30, 1997 (the end of its cost 
reporting period beginning July 1, 1996). To determine if the 
hospital should retain its status as a referral center for an 
additional 3-year period, we will review its compliance with the 
applicable criteria for its cost reporting periods beginning July 1, 
1994, July 1, 1995, and July 1, 1996. The hospital must meet the 
criteria in effect either for its cost reporting period beginning 
July 1, 1997, or for two out of the three past periods. For example, 
to be found to have met the criteria at Sec. 412.96(c) for its cost 
reporting period beginning July 1, 1995, the hospital's case-mix 
index value during FY 1993 must have equaled or exceeded the lower 
of the national or the appropriate regional standard as published in 
the September 1, 1994 final rule with comment period. The hospital's 
total number of discharges during its cost reporting year beginning 
July 1, 1993, must have equaled or exceeded 5,000 or the regional 
standard as published in the September 1, 1994 final rule with 
comment period.

    For those hospitals that seek to retain referral center status by 
meeting the criteria of Sec. 412.96(b)(1) (i) and (ii) (that is, rural 
location and at least 275 beds), we will look at the number of beds 
shown for indirect medical education purposes (as defined at 
Sec. 412.105(b)) on the hospital's cost report for the appropriate 
year. We will consider only full cost reporting periods when 
determining a hospital's status under Sec. 412.96(b)(1)(ii). This 
definition varies from the number of beds criterion used to determine a 
hospital's initial status as a referral center because we believe it is 
important for a hospital to demonstrate that it has maintained at least 
275 beds throughout its entire cost reporting period, not just for a 
particular portion of the year.

C. Disproportionate Share Adjustment (Sec. 412.106)

    Section 1886(d)(5)(F) of the Act provides for additional payments 
for hospitals that serve a disproportionate share of low income 
patients. The disproportionate share adjustment, which was added to the 
prospective payment system by section 9105 of the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (Public Law 99-272), was intended to 
address the higher Medicare costs associated with treating a large 
number of low-income patients. Under this provision, patients who are 
eligible for Medicaid and Supplemental Security Income (SSI) benefits 
were used as a proxy measure of the proportion of low-income patients.
    A hospital's disproportionate share adjustment is determined by 
calculating the sum of two patient percentages (Medicare Part A/
Supplemental Security Income (SSI) covered days to total Medicare Part 
A covered days, and Medicaid but not Medicare Part A covered days to 
total inpatient hospital days). Based on the location and size of the 
hospital, a formula determines if the hospital's patient percentage 
qualifies the hospital for an adjustment and how much that adjustment 
will be.
    With respect to the Medicare-SSI calculation, hospitals have 
expressed dissatisfaction with these proxy measures, and have 
challenged HCFA's implementation of them in recent litigation. Since 
SSI beneficiary information is confidential, hospitals do not have 
access to lists of patients who are eligible for both Medicare Part A 
and SSI benefits. Hospitals are increasingly frustrated by their 
inability to monitor these data.
    With respect to the Medicaid fraction, hospitals have complained 
that, because of Medicaid coverage restrictions, Medicaid covered days 
may not be a consistent measure of indigent care across States. 
Medicaid reforms under consideration by the President and Congress may 
further interfere with the utility of Medicaid covered days as a 
measure of the proportion of low-income patients.
    Because of these concerns, we have been examining alternative 
measures of indigent care. Some of the measures we have explored using 
are estimates of patient income in a hospital's service area, hospital 
levels of bad debt, and proportion of emergency room admissions in a 
hospital. Because of data and other limitations, however, we have yet 
to find an alternative that appears promising as a replacement to

[[Page 27474]]

the present measure. We are, therefore, soliciting comments from the 
industry on better and more direct measures of indigent care than the 
present measure that relies on SSI and Medicaid data. Our preference 
would be to use data that are already available. We would, however, be 
open to considering measures that require new data collection if we 
were convinced that the result would be beneficial to hospitals and 
HCFA. We note that since HCFA is bound by the current statutory 
provisions, we cannot revise the disproportionate share adjustment 
without legislative action.
    We note that ProPAC is also concerned with these issues. In its 
March 1, 1996 report, ProPAC recommended that the structure of the 
disproportionate share adjustment be reviewed to make certain that 
available funds are distributed equitably among the hospitals most in 
need of assistance. (Recommendation 18.) The Commission believes that 
Medicaid utilization has never been an optimal measure of service to 
low-income patients and is also concerned with the impact of possible 
reform in the structure of Medicaid. Thus, ProPAC recommends that a 
comprehensive review of the disproportionate share adjustment be 
undertaken, including assessment of the objectives of this payment and 
defining the population and scope of care to be covered. Alternative 
measures of low-income patient care could then be considered, including 
any data collection necessary. As discussed above, we agree with ProPAC 
that new measures should be explored. We believe that this is a first 
step in reforming the payment formula for the disproportionate share 
adjustment. We also recognize that the development of a better measure 
of the services hospitals provide to indigent patients may require the 
collection of new data.
    In addition, ProPAC is concerned about the potential impact of 
reductions in the disproportionate share payments. (Recommendation 17.) 
The Commission believes that hospitals that treat a large number of the 
uninsured could be particularly vulnerable because of recent changes in 
the health care environment. ProPAC cautions against large reductions 
in disproportionate share payments that would threaten the continued 
ability of many hospitals to serve populations who depend on them for 
access to care. We note that the President's FY 1997 budget does not 
include any reduction in payment for disproportionate share hospitals.

D. Direct Graduate Medical Education (Sec. 413.86)

1. Initial Residency Period Limitations
    We are updating the Initial Residency Period Limitations for direct 
graduate medical education (GME), originally published in the Federal 
Register on September 29, 1989 (54 FR 40286). The regulations in 
Sec. 413.86(g)(1) state that, ``[e]ffective July 1, 1995, an initial 
residency period is defined as the minimum number of years required for 
board eligibility.''
    The update reflects the following:
    <bullet> Effective July 1, 1995, section 1886(h)(5)(F) of the Act, 
as amended by Public Law 103-66, defines an initial residency period as 
the minimum number of years required for initial board eligibility. 
Previously, this period had been defined as minimum number of years 
``plus one.'' The prior listing had included the additional year, not 
to exceed five years.
    <bullet> Changes in curriculum requirements regarding the number of 
years needed for board eligibility for previously approved programs.
    <bullet> Addition of newly approved graduate medical education 
programs.

                  Initial Residency Period Limitations                  
------------------------------------------------------------------------
                                                              Initial   
                                                             Residency  
                     Residency type                           Period    
                                                            Limitation  
                                                          (No. of years)
------------------------------------------------------------------------
Allopathy                                                               
ANESTHESIOLOGY..........................................               4
    Critical Care Medicine..............................               4
    Pain Management.....................................               4
COLON AND RECTAL SURGERY................................               5
DERMATOLOGY.............................................               4
    Dermatopathology....................................               4
    Clinical & Laboratory Dermatological Immunology.....               4
EMERGENCY MEDICINE......................................             3/4
    Sports Medicine.....................................               3
FAMILY PRACTICE.........................................               3
    Geriatric Medicine..................................               5
    Sports Medicine.....................................               3
INTERNAL MEDICINE.......................................               3
    Adolescent Medicine.................................               3
    Cardiovascular Disease..............................               3
    Clinical Cardiac Electrophysiology..................               3
    Clinic & Laboratory Immunology......................               3
    Critical Care Medicine..............................               3
    Endocrinology, Diabetes, and Metabolism.............               3
    Gastroenterology....................................               3
    Geriatric Medicine..................................               5
    Hematology..........................................               3
    Hematology and Oncology.............................               3
    Infectious Disease..................................               3
    Medical Oncology....................................               3
    Nephrology..........................................               3
    Pulmonary Disease...................................               3
    Pulmonary Disease and Critical Care Medicine........               3
    Rheumatology........................................               3
    Sports Medicine.....................................               3
MEDICAL GENETICS........................................               4

[[Page 27475]]

                                                                        
NEUROLOGICAL SURGERY....................................               5
    Pediatric Neurological Surgery......................               5
NEUROLOGY...............................................               4
    Child Neurology.....................................               4
    Clinical Neurophysiology............................               4
NUCLEAR MEDICINE........................................               3
OBSTETRICS AND GYNECOLOGY...............................               4
    Critical Care Medicine..............................               4
    Gynecological Oncology..............................               4
    Maternal and Fetal Medicine.........................               4
    Reproductive Endocrinology..........................               4
OPHTHALMOLOGY...........................................               4
ORTHOPAEDIC SURGERY.....................................               5
    Adult Reconstructive Orthopaedics...................               5
    Foot and Ankle Orthopaedics.........................               5
    Hand Surgery........................................               5
    Musculoskeletal Oncology............................               5
    Pediatric Orthopaedics..............................               5
    Spinal Cord Injury..................................               5
    Sports Medicine.....................................               5
OTOLARYNGOLOGY..........................................               5
    Neurotology/Otolaryngology..........................               5
    Pediatric Otolaryngology............................               5
PATHOLOGY, ANATOMIC AND CLINICAL........................               4
    Blood Banking/Transfusion Medicine..................               4
    Chemical Pathology..................................               4
    Cytopathology.......................................               4
    Dermatopathology....................................               4
    Forensic Pathology..................................               4
    Hematology..........................................               4
    Immunopathology.....................................               4
    Medical Microbiology................................               4
    Neuropathology......................................               4
    Pediatric Pathology.................................               4
PEDIATRICS..............................................               3
    Adolescent Medicine.................................               3
    Clinical and Laboratory Immunology..................               3
    Neonatal-Perinatal Medicine.........................               3
    Pediatric Cardiology................................               3
    Pediatric Critical Care Medicine....................               3
    Pediatric Emergency Medicine........................               3
    Pediatric Endocrinology.............................               3
    Pediatric Gastroenterology..........................               3
    Pediatric Hematology/Oncology.......................               3
    Pediatric Infectious Disease........................               3
    Pediatric Nephrology................................               3
    Pediatric Opthamology...............................               3
    Pediatric Pulmonology...............................               3
    Pediatric Rheumatology..............................               3
    Pediatric Sports Medicine...........................               3
PHYSICAL MEDICINE AND REHABILITATION....................               4
PLASTIC SURGERY.........................................               5
    Hand Surgery........................................               5
PREVENTIVE MEDICINE.....................................               3
    Aerospace Medicine..................................               3
    Medical Toxicology..................................               3
    Occupational Medicine...............................               3
    Public Health & General Preventive Medicine.........               3
PSYCHIATRY..............................................               4
    Addiction Medicine..................................               4
    Child & Adolescent Psychiatry.......................               4
    Forensic Psychiatry.................................               4
    Geriatric Psychiatry................................               4
RADIOLOGY, DIAGNOSTIC...................................               4
    Neuroradiology......................................               4
    Nuclear Radiology...................................               4
    Pediatric Radiology.................................               4
    Vascular and Interventional Radiology...............               4
    Radiation Oncology..................................               4

[[Page 27476]]

                                                                        
SURGERY, GENERAL........................................               5
    Critical Care Medicine..............................               5
    Hand Surgery........................................               5
    Pediatric Surgery...................................               5
    Thoracic Surgery....................................               5
    Vascular Surgery....................................               5
UROLOGY.................................................               5
    Pediatric Urology...................................               5
Osteopathy                                                              
ANESTHESIOLOGY..........................................               4
    Critical Care Medicine..............................               4
DERMATOLOGY.............................................               4
    Dermatopathology....................................               4
    MOHS Micrographic Surgery...........................               4
EMERGENCY MEDICINE......................................               4
    Sports Medicine.....................................               4
FAMILY PRACTICE.........................................               3
    Adolescent and Young Adult Medicine.................               3
    Geriatrics..........................................               5
    Sports Medicine.....................................               3
INTERNAL MEDICINE.......................................               4
    Clinical Allergy and Immunology.....................               4
    Cardiology..........................................               4
    Endocrinology.......................................               4
    Gastroenterology....................................               4
    Hematology..........................................               4
    Infectious Diseases.................................               4
    Nephrology..........................................               4
    Oncology............................................               4
    Pulmonary Diseases..................................               4
    Rheumatology........................................               4
    Clinical Cardiac Electrophysiology..................               4
    Critical Care Medicine..............................               4
    Geriatrics..........................................               6
    Sports Medicine.....................................               4
NUCLEAR MEDICINE........................................               4
    In-Vivo and In-Vitro Nuclear Medicine...............               4
    Nuclear Cardiology..................................               4
    Nuclear Imaging and Therapy.........................               4
NEUROLOGY...............................................               4
    Child Neurology.....................................               4
PSYCHIATRY..............................................               4
    Child Psychiatry....................................               4
OBSTETRICS/GYNECOLOGY...................................               5
    Maternal and Fetal Medicine.........................               5
    Gynecological Oncology..............................               5
    Reproductive Endocrinology..........................               5
FACIAL PLASTIC SURGERY..................................               5
OPHTHALMOLOGY...........................................               4
OTORHINO/FACIAL PLASTIC SURGERY.........................               5
OTORHINOLARYNGOLOGY.....................................               5
ORTHOPEDIC SURGERY......................................               5
PATHOLOGY, ANATOMIC.....................................               4
PATHOLOGY, ANATOMIC/LABORATORY MEDICINE.................               5
PATHOLOGY, LABORATORY MEDICINE..........................               4
    Forensic Pathology..................................               5
    Blood Banking/Transfusion Medicine..................               5
    Chemical Pathology..................................               5
    Cytopathology.......................................               5
    Dermatopathology....................................               5
    Hematology..........................................               5
    Immunopathology.....................................               5
    Medical Microbiology................................               5
    Neuropathology......................................               5
PEDIATRICS..............................................               3
    Adolescent and Young Adult Medicine.................               3
    Neonatal Medicine...................................               3
    Pediatric Allergy/Immunology........................               3
    Pediatric Cardiology................................               3

[[Page 27477]]

                                                                        
    Pediatric Hematology/Oncology.......................               3
    Pediatric Infectious Diseases.......................               3
    Pediatric Intensive Care............................               3
    Pediatric Nephrology................................               3
    Pediatric Pulmonology...............................               3
    Pediatric Sports Medicine...........................               3
PREVENTATIVE MEDICINE...................................               4
PROCTOLOGY..............................................               3
RADIATION ONCOLOGY......................................               4
RADIOLOGY, DIAGNOSTIC...................................               5
    Angiography and Interventional Radiology............               5
    Diagnostic Ultrasound...............................               5
    Neuroradiology......................................               5
    Nuclear Radiology...................................               5
    Radiological Imaging................................               5
    Pediatric Radiology.................................               5
REHABILITATION MEDICINE.................................               4
    Sports Medicine.....................................               4
GENERAL SURGERY.........................................               5
NEUROSURGERY............................................               5
PLASTIC AND RECONSTRUCTIVE SURGERY......................               5
THORACIC CARDIOVASCULAR SURGERY.........................               5
UROLOGICAL SURGERY......................................               5
GENERAL VASCULAR SURGERY................................               5
CRITICAL CARE SURGERY...................................               5
OSTEOPATHIC MANIPULATIVE MEDICINE.......................               3
Podiatry                                                                
ROTATING PODIATRIC RESIDENCY (PRIMARY CARE).............               2
PODIATRIC ORTHOPEDIC RESIDENCY..........................               2
PODIATRIC SURGICAL RESIDENCY............................               2
Dentistry                                                               
DENTAL PUBLIC HEALTH....................................               1
ENDODONTICS.............................................               2
ORAL PATHOLOGY..........................................               3
ORAL AND MAXILLOFACIAL SURGERY..........................               4
ORTHODONTICS............................................               2
PEDIATRIC DENTISTRY.....................................               2
PERIODONTICS............................................               3
PROSTHODONTICS..........................................               3
PROSTHODONTICS/MAXILLOFACIAL............................               3
GENERAL DENTISTRY.......................................               1
ADVANCED GENERAL DENTISTRY..............................               2
Allopathy Combined Programs *                                           
FAMILY PRACTICE(3) AND PSYCHIATRY(4)....................               4
INTERNAL MEDICINE(3) & EMERGENCY MEDICINE(3)............               3
INTERNAL MEDICINE(3) & FAMILY PRACTICE(3)...............               3
INTERNAL MEDICINE(3) & NEUROLOGY(4).....................               4
INTERNAL MEDICINE(3) & PEDIATRICS(3)....................               3
INTERNAL MED(3) & PHYS MED & REHABILITATION(4)..........               4
INTERNAL MEDICINE(3) & PREVENTIVE MEDICINE(3)...........               3
INTERNAL MEDICINE(3) & PSYCHIATRY(4)....................               4
NEUROLOGY(4) & PHYS MEDICINE AND REHAB(4)...............               4
PEDIATRICS(3) & EMERGENCY MEDICINE(3)...................               3
PEDIATRICS(3) & PHYSICAL MEDICINE AND REHAB(4)..........               4
PEDIATRICS(3)/PSYCHIATRY(4)/CHILD & ADOL PSYCH(4).......               4
PSYCHIATRY(4) AND NEUROLOGY(4)..........................              4 
------------------------------------------------------------------------
* For residents participating in combined programs, Medicare limits the 
  initial residency period to the time required for individual          
  certification in the longer of the two programs.                      


2. Combined Residency Programs
    While updating the listing of the Initial Residency Period 
Limitations for GME, we noted many new programs were combined specialty 
residency programs. The combined programs run concurrently for a period 
of time that is longer than the required time for certification in 
either specialty, but shorter than would be required if the programs 
were taken sequentially. Residents completing these programs are 
eligible for board certification in both specialties.
    We use the Internal Medicine and Pediatrics combined program as an 
example: Taken individually, Internal Medicine is a 3-year program and 
Pediatrics is also a 3-year program. However, taken as a combined 
program, Internal Medicine and Pediatrics is a 4-

[[Page 27478]]

year program, with certification in both specialties.
    Currently, we are aware of 13 combined programs, including Internal 
Medicine/Pediatrics, Pediatrics/Emergency Medicine, Family Practice/ 
Psychiatry, and Neurology/Physical Medicine and Rehabilitation.
    Due to the increasing prevalence of combined residency programs 
since our September 29, 1989 final rule, we propose to clarify how the 
definition of initial residency period applies in such cases. While the 
combined programs may have advantages from an educational standpoint, 
the statutory limitation on payment for GME still applies. In the 
initial legislation for a per resident payment to hospitals for GME, 
Congress limited Medicare's liability for those payments to residents 
in their initial residency period plus one year. The plus-one-year 
provision allowed for payment for an additional year as a full FTE for 
residents who continued on in a second approved program after 
completing their initial certification. However, regardless of the 
number of additional years the second program required for 
certification, at most only the first year could be paid as a full FTE. 
All subsequent years are paid at a 0.5 FTE rate. When Congress revised 
section 1886(h) of the Act to remove the plus-one-year provision, 
Congress further restricted payment to allow payment as a full FTE for 
the first residency program only. All years of a subsequent program are 
now limited to the 0.5 FTE rate. Congress clearly wanted to further 
limit Medicare's payment obligations. Accordingly, we believe that the 
initial residency period limitation is designed to allow full Medicare 
payment only for the period required to train in one specialty.
    For residents enrolled in combined programs, we are therefore 
proposing to define the initial residency period as the time required 
for individual certification in the longer of the two programs. 
Continuing to use Internal Medicine and Pediatrics as an example, we 
would define the initial residency for Internal Medicine and Pediatrics 
as 3 years. The remaining year of the combined program would be treated 
as 0.5 FTE, in accordance with the regulations at Sec. 413.86(g)(3).

E. Distribution of an ``Important Message from Medicare'' (Sec. 489.27)

    Under Sec. 489.27 of our provider agreement regulations, all 
hospitals that participate in Medicare (including those not paid under 
the prospective payment system) must agree to furnish each Medicare 
beneficiary with a notice, at or about the time of admission, that 
explains the patient's discharge rights. This statement, entitled ``An 
Important Message from Medicare,'' advises a beneficiary of his or her 
rights to be fully informed about decisions affecting Medicare coverage 
or payment and about his or her appeal rights in response to any 
hospital's notice to the effect that Medicare will no longer cover the 
patient's care. The ``Important Message'' also advises the patient of 
what to do when he or she receives such a hospital statement and how to 
elicit more information.
    In November 1993, the Medicare Technical Advisory Group (M-TAG) 
established the Beneficiary Protection and Documentation Issues Task 
Force. The task force consists of HCFA staff as well as representatives 
from health care industry organizations, beneficiary advocate groups, 
fiscal intermediaries, and peer review organizations (PROs). The task 
force was charged with reviewing various issues that impact 
beneficiaries and the health care community, including how to improve 
the effectiveness of ``An Important Message from Medicare.''
    We are proposing to adopt a recommendation of this task force that 
would respond to numerous requests for clarification on the timing of 
the written notice of discharge rights that must be given to hospital 
inpatients. As noted above, existing Sec. 489.27 specifies that a 
hospital must distribute the statement ``at or about the time of 
admission.'' We understand that for monitoring purposes some PROs have 
interpreted this requirement to mean ``within 24 hours preceding or 
following the admission.'' However, we agree with the task force's 
determination that the PRO's interpretation is unnecessarily narrow. We 
believe that during the first 24 hours of a patient's admission, the 
hospital is primarily concerned with ensuring appropriate treatment of 
the patient's illness or injury. Therefore, we are proposing to change 
Sec. 489.27 to specify that the hospital must provide timely notice 
during the course of the hospital stay.
    For purposes of this requirement, we would consider the course of 
the hospital stay to begin when the hospital provides the individual 
with a package of information regarding scheduled preadmission testing 
and registration for a planned hospital admission. This would give 
hospitals more flexibility in meeting the requirement, as well as 
encourage the distribution of the ``Important Message'' at a time when 
the beneficiary is better able to receive and more likely to understand 
its contents. In complying with the requirement to provide timely 
notice during the course of the patient's hospital stay, the hospital 
must give the patient the ``Important Message'' far enough in advance 
of the hospital's written notice regarding continued stay to provide 
the beneficiary time to appeal the hospital's decision. Finally, 
``timely notice'' would also include adherence to any State 
requirements on the provision of patient rights notices.
    The current version of the ``Important Message'' has been in use 
since 1988. As part of our effort to improve communication with 
Medicare beneficiaries, we will continue to evaluate the effectiveness 
of the ``Important Message'' and welcome suggestions for its 
improvement.

VI. Changes and Clarifications to the Prospective Payment System for 
Capital-Related Costs

A. Consistent Cost Finding During the Capital Transition Period (Sec.  
412.302(d))

    Section 412.302(d) of the regulations requires that, during the 
transition period to full prospective payment for capital-related 
costs, a hospital must follow consistent cost-finding methods for 
classifying and allocating capital-related costs. Specifically, the 
regulation requires that unless there is a change of ownership, a 
hospital must continue the same cost-finding methods for old capital 
costs, including its practices for direct assignment of costs and its 
cost-allocation bases, that were in effect in the hospital's last cost-
reporting period before becoming subject to payment under the capital 
prospective payment transition system. A hospital may request a change 
in its cost-finding methods for new capital, provided that the request 
is made in a timely fashion as provided in the regulation, the hospital 
provides justification for the change, and the intermediary determines 
that the justification is reasonable.
    It is important to note that, while the regulation does permit 
changes in cost-finding methods for new capital, such changes are only 
permitted where they do not involve any changes in cost-finding for old 
capital. In practice, this means that if a hospital claims any old 
capital, the intermediary cannot permit a change in any of the 
allocation bases on Worksheet B-1 of the cost report from the bases 
used in the last cost reporting period prior to the capital prospective 
payment system transition period. Otherwise, the consistency rule 
governing old capital cost-finding would be violated.
    As we discussed in the preamble to the August 30, 1991 final rule 
for the capital prospective payment system (56

[[Page 27479]]

FR 43396), our primary reason for establishing this consistency rule 
was to prevent hospitals from using changes in cost-finding 
methodologies to shift costs to areas where payment continues to be 
made on a reasonable cost basis. Allowing changes in cost-finding 
methodologies to accomplish such cost-shifting would obviously defeat 
the purpose of adopting a prospective payment system.
    In response to concerns expressed by the hospital industry about 
the costs of the recordkeeping required under the cost-reporting rules, 
HCFA has developed new cost reporting instructions, which will be 
released later this year, that permit hospitals to voluntarily adopt a 
simplified cost allocation methodology. This methodology reduces the 
number of statistical bases that a hospital is required to maintain. 
Under the new instructions for HCFA Form 2552-96 (the cost report 
instructions for FY 1996 cost reporting periods), hospitals may request 
the simplified cost allocation methodology. However, hospitals that 
elect this methodology must employ a prescribed list of statistical 
bases with no deviations. Hospitals may not pick and choose among the 
prescribed statistics for the combination that is most advantageous. 
Furthermore, a hospital that elects the simplified methodology must 
continue to use it for at least 3 years, unless a change of ownership 
occurs. We expect that, while election of the simplified method will 
always result in reduced recordkeeping costs for the hospital, it will 
also result frequently in reduced Medicare payment for the hospital. In 
fact, the instructions for HCFA Form 2552-96 will caution hospitals to 
compare the reduced costs of program compliance with the reduced costs 
of the simplified recordkeeping before electing the simplified method.
    We believe this proposal to permit election of the simplified cost 
allocation methodology, as provided in the instructions for HCFA Form 
2552-96, reasonably reconciles concerns about recordkeeping costs with 
the requirement of consistent cost-finding during the transition. 
Specifically, we propose to add a new paragraph (d)(4) to Sec. 412.302, 
to provide that, hospitals may elect to adopt the simplified cost 
allocation methodology, as will be provided in the instructions for 
HCFA Form 2552-96.

B. Possible Adjustments to the Capital Prospective Payment System 
Federal Rate and Hospital-Specific Rates (Secs. 412.308(b) and 412.328)

    In the proposed and final rules for FY 1996 (60 FR 29238-29239 and 
60 FR 45830-45831), we discussed the effects of the expiration of the 
statutory budget neutrality provision on rates and aggregate payments 
under the capital prospective payment system. Under the budget 
neutrality provision, we set the capital-prospective payment system 
rates during FY 1992 through FY 1995 so that payments were projected to 
equal 90 percent of Medicare payments that would have been made on a 
reasonable cost basis for each fiscal year. As a result of the 
provision's expiration in FY 1996, the capital-prospective payment 
system rates and payments under the transition system increased 
significantly. The FY 1996 Federal rate is 22.59 percent higher than 
the FY 1995 Federal rate. We now estimate that aggregate capital 
payments will increase 27.7 percent in FY 1996 relative to FY 1995, and 
that payments will exceed capital costs by 9.6 percent in FY 1996. 
Under current law and regulations, we estimate that aggregate payments 
will further increase by 7.3 percent in FY 1997, for an increase of 
37.0 percent over 2 years. We do not believe that such large increases 
in capital payments are necessary or warranted.
    During the FY 1996 rulemaking process, we solicited comments on 
possible revisions to the capital prospective payment rates that would 
have moderated these substantial increases in payments. At that time, 
we noted that section 1886(g) of the Act gives the Secretary broad 
discretion in the determination of the appropriate level of rates and 
payments. However, we decided not to implement any reduction to the 
capital rates at that time, in the expectation that Congress would be 
considering revisions to rates and payments under the capital 
prospective payment system within more comprehensive legislation 
dealing with Medicare and the Federal budget.
    In its March 1, 1996 Report to Congress, the Prospective Payment 
Assessment Commission (ProPAC) observed that the base capital rate was 
reduced during the first 4 years of the transition to full prospective 
payment for capital to meet the statutory budget neutrality 
requirement. In the light of the large increase in rates and payments 
as a result of that provision's expiration in FY 1996, ProPAC 
recommends (Recommendation 11) that the capital payment rates should be 
set by developing an appropriate base payment rate and applying an 
annual update. The Commission notes that there are several ways to 
determine an appropriate base capital payment rate.
    We agree with ProPAC that the large increase in rates and payments 
caused by the expiration of the statutory budget neutrality provision 
raises an issue concerning the proper level for future rates and 
payments. We also agree that there are several possible approaches to 
establishing an appropriate level for the rates. We considered a range 
of options in developing this proposed rule. For example, we considered 
proposing to freeze the inflation updates for the rates in FY 1997, on 
the grounds that such an update was unnecessary and unwarranted in 
light of the large increase in the rates for FY 1996. Alternatively, we 
considered proposing actual reductions in the base rates. For example, 
we considered proposing to implement the provision contained in the 
Administration's budget plan. The Administration's FY 1997 budget 
includes a provision to reduce the base Federal and hospital-specific 
rates by 15.7 percent. Such a reduction would build the budget 
neutrality adjustment for FY 1995 (0.8432, or -15.68 percent) 
permanently into the base rates, effectively using the FY 1995 base 
payment rate as the base for future years. The actual payment rates for 
future years would then be determined by applying the analytical update 
framework that we adopted in the final rule for FY 1996 (60 FR 45815-
45829). We also considered proposing to implement a part of the 
Administration's proposal, that is, to reduce the standard Federal rate 
by 7.38 percent and the hospital-specific rates by 9.48 percent. The 
rationale for each of these options to reduce the base rate derives 
from an analysis of current data compared to data on which the rate was 
originally based.
    Under Sec. 412.308, HCFA determined the standard Federal rate, 
which is used to determine the Federal rate for each fiscal year, on 
the basis of an estimate of the FY 1992 national average Medicare 
capital cost per discharge. The FY 1992 national average Medicare 
capital cost per discharge was estimated by updating the FY 1989 
national average Medicare capital cost per discharge by the estimated 
increase in Medicare inpatient capital cost per discharge. As we 
discussed in the preamble to the August 30, 1991 capital prospective 
payment system final rule (56 FR 43366-43384), HCFA used the July 1991 
update of HCRIS data to estimate an FY 1989 national average Medicare 
cost per case of $527.22.

[[Page 27480]]

HCFA then updated that amount to FY 1992 by using an actuarial 
projection of a 31.3 percent increase in Medicare capital cost per 
discharge from FY 1989 to FY 1992. The standard Federal rate was thus 
based on an estimated FY 1992 national average Medicare capital cost 
per discharge of $692.24 (before the application of a transfer 
adjustment and a payment parameter adjustment).
    Section 13501(a)(3) of Public Law 103-66 amended section 
1886(g)(1)(A) of the Social Security Act to require that, for 
discharges occurring after September 30, 1993, the unadjusted standard 
Federal rate be reduced by 7.4 percent. As we discussed in the 
September 1, 1993 final rule for FY 1994 (58 FR 46316ff.), the purpose 
of that reduction was to reflect revised inflation estimates, as of May 
1993, for the increases in Medicare capital costs per discharge during 
FY 1989 through FY 1992. By that time, the estimate of increases in 
Medicare inpatient capital costs per discharge from FY 1989 through FY 
1992 had declined from 31.3 percent to 21.57 percent. The 7.4 percent 
reduction to the Federal rate was calculated to account for these 
revised estimates (1.2157/1.313=0.926, a 7.4 percent decrease). That 
provision of Public Law 103-66 also required that, for cost reporting 
periods beginning on or after October 1, 1993, the Secretary 
redetermine which hospital payment methodology should be applied under 
the capital prospective payment system transition rules to take into 
account the 7.4 percent reduction to the Federal rate.
    As a result of the reduction required by Public Law 103-66, the 
standard Federal rate is now based on an estimated FY 1992 Medicare 
inpatient capital cost per case of $641.01 ($692.24 x 0.926). At the 
time of the Public Law 103-66 reduction to the Federal rate, actual 
cost report data on the FY 1992 Medicare capital cost per discharge 
were not yet available. The reduction was based on cost report data for 
FY 1990 and FY 1991, and a revised projection of the rate of increase 
in Medicare capital costs per discharge during FY 1992. We now have 
extensive cost report data for FY 1992. The March 1996 update of HCRIS 
data shows an audit-adjusted FY 1992 Medicare inpatient capital cost 
per discharge of $593.72, or an additional 7.38 percent lower than the 
estimate on which the Federal rate is currently based.
    Under Sec. 412.328, HCFA determined the FY 1992 hospital-specific 
rate by using a process similar to the process for determining the FY 
1992 Federal rate. The intermediary determined each hospital's 
allowable Medicare inpatient capital cost per discharge for the 
hospital's latest cost reporting period ending on or before December 
31, 1990. The intermediary then updated each hospital's FY 1990 
allowable Medicare capital cost per discharge to FY 1992 based on the 
estimated increase in Medicare inpatient capital cost per case. As with 
the Federal rate updates, current data demonstrate that the estimates 
used to update the hospital specific rates from FY 1990 to FY 1992 were 
overstated. Specifically, the hospital-specific rates are 9.48 percent 
higher than they would have been if the rates of increase had reflected 
actual data. Thus, revising the Federal and the hospital-specific rates 
only for the known overestimations in the actual costs on which rates 
were based would call for reductions of 7.38 percent and 9.48 percent, 
respectively.
    The proposal in the Administration's budget to reduce the rates 
15.7 percent reflects the preceding factors, as well as analysis of 
capital cost increases before the implementation of the prospective 
payment system for capital-related costs. That analysis suggests that 
the Federal and hospital-specific rates may reflect levels of cost in 
excess of what can be accounted for by the rate of inflation in capital 
input prices, quality enhancing intensity increases, and real case mix 
growth. Economic theory suggests that an industry with a guaranteed 
return on capital (such as the hospital industry prior to prospective 
payment for capital-related costs) would have a tendency to be overly 
capitalized relative to more competitive industries. This is because 
the incentive for firms in such an industry is to compete on the basis 
of more capital-intensive production processes than firms in other 
industries. As a result, capital costs per case, and therefore base 
year prospective capital rates, may be higher than would have been 
consistent with capital acquisition policy in more efficiency-oriented 
markets.
    To examine this issue, in our June 2, 1995 proposed rule (60 FR 
29237) we analyzed the change in actual Medicare capital cost per case 
for FY 1986 through FY 1992 in relation to the change in the capital 
input price index (which accounts for change in the input prices for 
capital-related costs), and the other adjustment factors that we were 
then proposing to include in the framework. (The other adjustment 
factors are the increase in real case mix and the increase in intensity 
due to quality-enhancing technological change and within-DRG 
complexity.) We found rates of increase in actual spending per case 
that exceeded the rate of increase attributable to inflation in capital 
input prices, quality-enhancing intensity increases, and real case-mix 
growth. Our last analysis (60 FR 45826-45829) suggested that the FY 
1992 capital costs used to set the Federal and hospital-specific 
capital rates exceeded by approximately 28 percent the level that could 
be accounted for by known factors.
    We seriously considered proposing one of these options--reducing 
the standard (base) Federal rate either 7.38 percent to address 
overstated inflation estimates or 15.7 percent, as reflected in the 
Administration's budget proposal--in this proposed rule. We believe 
that either of these options is well justified on the basis of current 
data and analysis. As ProPAC has observed, hospitals do not seem to 
have been adversely affected by the level of the rates during the years 
in which the statutory budget neutrality provision was in effect. 
However, we still believe that Congress and the Administration may be 
able to reach an agreement on budget issues, including Medicare 
savings, in the near future. Therefore, as discussed in section III of 
the Addendum to this proposed rule, at this time we are proposing to 
update the capital rates in accordance with the capital update 
framework, without implementing any of the reductions discussed above. 
Our hope is that the legislative process will produce an appropriate 
adjustment to the rate level in time for implementation in the final 
rule. In the event that no such agreement is reached before the final 
rule for FY 1997, we may implement one of the above-described options 
at that time. We invite public comment on the merits of these options, 
and on the advisability of implementing one or the other in the final 
rule, in the absence of legislative action. We will reconsider all the 
options in the light of public comments.

C. Possible Adjustment to Capital Prospective Payment System Minimum 
Payment Levels

    Section 412.348(b) of the regulations provides that, during the 
capital prospective payment system transition period, any hospital may 
receive an additional payment under an exceptions process if its total 
inpatient capital-related payments under its payment methodology (i.e., 
fully prospective or hold-harmless) are less than a minimum percentage 
of its allowable Medicare inpatient capital-related costs. The minimum 
payment levels are established by class of hospitals under 
Sec. 412.348(c). The minimum payment

[[Page 27481]]

levels for portions of cost reporting periods occurring in FY 1996 are:
    <bullet> Sole community hospitals (located in either an urban or 
rural area), 90 percent;
    <bullet> Urban hospitals with at least 100 beds and a 
disproportionate share patient percentage of at least 20.2 percent and 
urban hospitals with at least 100 beds that qualify for 
disproportionate share payments under Sec. 412.106(c)(2), 80 percent; 
and,
    <bullet> All other hospitals, 70 percent.
    Under Sec. 412.348(d), the amount of the exceptions payment is 
determined by comparing the cumulative payments made to the hospital 
under the capital prospective payment system to the cumulative minimum 
payment levels applicable to the hospital for each cost reporting 
period subject to that system. Any amount by which the hospital's 
cumulative payments for previous cost reporting periods exceed its 
cumulative minimum payment is deducted from the additional payment that 
would otherwise be payable for a cost reporting period.
    Section 412.348(h) further provides that total estimated exceptions 
payments under the exceptions process may not exceed 10 percent of the 
total estimated capital prospective payments (exclusive of hold-
harmless payments for old capital) for the same fiscal year. In the 
final rule implementing the prospective payment system for capital-
related costs we stated that the minimum payment levels in subsequent 
transition years would be revised, if necessary, to keep the projected 
percentage of payments under the exceptions process at no more than 10 
percent of capital prospective payments.
    In section III of the Addendum to this proposed rule, we discuss 
the factors and adjustments used to develop the FY 1997 Federal and 
hospital-specific rates. In particular, we discuss the FY 1997 
exceptions payment reduction factor. This factor adjusts the annual 
payment rates for the estimated amount of additional payments for 
exceptions in FY 1997. In this proposed rule, we estimate that 
exceptions will equal 6.07 percent of aggregate payments based on the 
Federal rate and the hospital-specific rate. We will develop a new 
estimate of the level of exceptions payments in FY 1997, and revise the 
exceptions payment adjustment factor accordingly, on the basis of the 
data that becomes available to us in time for developing the final rule 
for FY 1997. While it is not necessary at this time to propose 
reductions in the minimum payment levels, it is possible that it will 
be necessary to implement adjustments to the minimum payment levels in 
the final rule. Our current projections show that it will almost 
certainly be necessary to adjust the minimum payment levels for FY 
1998. We are therefore providing public notification that adjustments 
to the minimum payment levels are possible in the final rule, and 
almost certain for FY 1998.
    When it does become necessary to adjust the minimum payment levels 
in accordance with Sec. 412.348(h), our current intent is to adjust 
each of the existing levels (i.e., 90 percent for sole community 
hospitals, 80 percent for large urban DSH hospitals, and 70 percent for 
all other hospitals) by 5 percentage point increments until estimated 
exceptions payments are within the 10 percent limit. For example, we 
would set minimum payment levels at 85 percent for sole community 
hospitals, 75 percent for large urban DSH hospitals, and 65 percent for 
all other hospitals, provided that aggregate exceptions payments at 
those minimum payment levels were projected to be no more than 10 
percent of total rate-based payments. If aggregate exceptions payments 
at those minimum payment levels still exceeded 10 percent of total 
rate-based payments, we would continue to reduce the minimum payment 
levels by 5 percentage point increments each until the requirement of 
Sec. 412.348(h) was satisfied. We are providing notification of our 
current thinking on this issue in order to allow opportunity for public 
comment on the appropriate method for adjusting the minimum payment 
levels. We invite public comment on this matter, and will consider 
those comments fully whenever it becomes necessary to adjust the 
minimum payment levels in accordance with Sec. 412.348(h).

VII. Proposed Changes for Hospitals and Units Excluded From the 
Prospective Payment Systems

Application of Ceiling in Calculating Payment for Hospital Inpatient 
Operating Costs (Sec. 413.40 (d) and (g))

    Section 1886(b)(1)(B) of the Act provides for an additional payment 
to a hospital excluded from the prospective payment system when the 
hospital's reasonable operating costs exceed its target amount. The 
additional payment is based on the lesser of 50 percent of the amount 
by which the operating costs exceed the target amount, or 10 percent of 
the target amount. The Medicare statute further provides that this 
comparison is made ``after any exceptions or adjustments are made to 
such target amount for any cost reporting period.'' The regulations, at 
42 CFR Sec. 413.40(d)(3), state that the total payment to the hospital 
for inpatient operating costs (including the additional payment 
described above) is based on the lesser of the following: the 
``ceiling'' (target amount multiplied by the number of Medicare 
discharges) plus 50 percent of the allowable net inpatient operating 
costs in excess of the ceiling, or 110 percent of the ceiling. However, 
the regulations do not explicitly include the additional statutory 
requirement regarding the effect of exceptions or adjustments.
    It is our understanding that there are questions about the 
calculation of the additional payment under the regulations, which 
require comparison of two amounts: the ``ceiling'' plus 50 percent of 
the difference between allowable costs and the ceiling, and 110 percent 
of the ``ceiling.'' Specifically, where a hospital has received an 
adjustment to the target amount under Sec. 413.40(g), there has been 
confusion as to whether the ``ceiling'' used for purposes of 
calculating the additional payment under Sec. 413.40(d) is the 
unadjusted ceiling (the amount determined without consideration of any 
adjustments granted to the hospital) or the adjusted ceiling.
    We believe that the amount of the additional payment should be 
determined using the adjusted ceiling when hospitals receive 
adjustments to the ceiling. That is, the calculation of the amounts 
compared--50 percent of the allowable net inpatient operating costs in 
excess of the ceiling, or 10 percent of the ceiling--should reflect the 
adjusted target amount (and adjusted ceiling). To address any confusion 
about these issues, we propose to revise Sec. 413.40(d)(3) to 
specifically indicate that calculation of payments for hospital 
inpatient operating costs under that provision reflects the adjusted 
ceiling amount (the amount determined after an adjustment under 
Sec. 413.40(g)). This would apply to all adjustments, including 
adjustments based on a longer average length of stay in the hospital's 
rate year as compared to the base year and adjustments for increased 
routine services.
    We note that an adjusted ceiling is not used to adjust permanently 
the hospital's target amount or ceiling on the hospital's cost report. 
Instead, it is used only for purposes of calculating payments for the 
year the adjustment is granted. We also note that, depending on the 
specifics of the data in a particular case, use of an adjusted ceiling 
can result in either an increase or decrease in the additional payment 
to a hospital relative to use of an unadjusted ceiling. If the 
additional payment to a hospital is 50 percent of

[[Page 27482]]

the allowable net inpatient operating costs in excess of the ceiling, 
the additional payment would be lower using an adjusted ceiling (as 
under proposed Sec. 413.40(d)(3)) than an unadjusted ceiling. This 
would occur because an adjusted ceiling reduces the difference between 
the hospital's costs and the ceiling. However, if the additional 
payment to the hospital is 10 percent of the ceiling, the additional 
payment would be higher using an adjusted ceiling than an unadjusted 
ceiling.

VIII. ProPAC Recommendations

    We have reviewed the March 1, 1996 report submitted by ProPAC to 
Congress and have given its recommendations careful consideration in 
conjunction with the proposals set forth in this document. 
Recommendations 10 and 12, concerning the update factors for inpatient 
operating costs, and the update factor for hospitals excluded from the 
prospective payment system and distinct-part units, are discussed in 
Appendix F to this proposed rule. Recommendation 11, on the setting of 
capital payment rates, is discussed in section VI of this proposed 
rule. Recommendations 17 and 18, concerning disproportionate share 
hospitals, are discussed in section V of this proposed rule. The 
remaining recommendations are discussed below.

A. Slowing the Rise in Medicare Spending (Recommendation 1)

    Recommendation: The Commission supports the efforts of the Congress 
and the President to reduce the growth in Medicare expenditures. Over 
time, spending for services furnished to Medicare enrollees should 
increase at rates comparable to those in a cost- and quality-conscious 
private sector.
    Response: We agree with ProPAC about the importance of slowing the 
growth in Medicare spending. We support ProPAC's assertion that the 
experience in the private sector with market forces that encourage cost 
containment represents a useful factor in considering appropriate 
growth in Medicare. We also agree with those factors upon which ProPAC 
urges this comparison: spending growth on a per-person basis and 
recognizing the health care needs of an aged and disabled Medicare 
population. We caution, however, that while it may be appropriate to 
compare growth service by service, aggregate comparisons would not be 
meaningful due to differences in the mix of services.
    Medicare and private health insurance provide a different array of 
services. Medicare covers more long-term care services, such as home 
health visits and skilled nursing facility (SNF) stays, than private 
insurance. Although their share of total Medicare spending is small, 
SNF and home health services are growing more quickly than other 
services within Medicare, and therefore spending for these services has 
been growing at a much faster rate than for other services. Data from 
1992 and 1993 indicate that payments increased for SNF and home health 
services by 40.6 percent and 35.2 percent, respectively, whereas the 
growth in physician and hospital payments were only 4.5 percent and 8.3 
percent, respectively. In order for Medicare and private health 
insurance to grow, in aggregate, at the same rate, spending for 
hospital and physician services would have to be growing more slowly in 
Medicare than in private health insurance to offset differences in 
long-term care growth. Due to these differences in mix of services, 
meaningful comparisons between Medicare and the private sector can only 
be made on a service-by-service basis.

B. The Failsafe Budget Mechanism (Recommendation 2)

    Recommendation: Any failsafe budget mechanism should include a more 
effective risk adjustment factor to ensure payment equity between the 
Medicare capitation and traditional fee-for-service programs. In 
addition, changes in inflation that differ substantially from 
Congressional Budget Office (CBO) forecasts could require modifications 
to the Medicare benefit budget over time. Revisions to the proposed 
fee-for-service sector budget allocations could also be needed as 
medical practices change.
    Response: We believe that using a failsafe budget mechanism (that 
is, an arbitrary cap on spending) to achieve targeted spending levels 
would be bad public policy. A failsafe mechanism would fundamentally 
change the nature of the Medicare program by breaking the link between 
benefits and payments. To meet the cap, benefits might have to be 
reduced, beneficiaries might have to pay more, and payments to 
providers might have to be reduced, all of which would impede access. A 
failsafe mechanism would encourage cost shifting to beneficiaries and 
other payers in order to achieve the targeted goal in government 
spending.
    These arbitrary reductions in payments would make government an 
unreliable business partner. As Medicare moves toward a more market-
oriented approach to setting payments, arbitrary reductions imposed by 
the government, after providers have negotiated in good faith, would 
sour relations and threaten the market pricing process.
    The failsafe mechanism is a substitute for policy choices to 
achieve the desired level of spending. This arbitrary Medicare budget 
cap could potentially have adverse effects on the Medicare program.
    We note that, while ProPAC recommends using a more effective risk 
adjustment factor to ensure payment equity between Medicare capitated 
and fee-for-service programs, no adequate case-mix measure currently 
exists that could serve this purpose.

C. Expanding Medicare's Capitation Program (Recommendation 3)

    Recommendation: The Commission supports reforming the Medicare 
capitation program to control spending while expanding beneficiary 
choice.
    Response: HCFA agrees with this recommendation and has specifically 
developed legislation to allow for Preferred Provider Organizations 
(PPOs) and Provider Sponsored Organizations (PSOs) to contract with the 
Medicare program. Furthermore, in October 1995, HCFA issued guidelines 
that notified HMOS that they were permitted to develop Point of Service 
(POS) Programs, which allow beneficiaries to go out of network for 
services. HCFA is currently conducting the Choices Demonstration, 
through which it is soliciting applications for the above types of 
provider arrangements.

D. Setting and Updating the Capitation Rates (Recommendation 4)

    Recommendation: Geographic variation in the capitation rates and 
the volatility of the rates from year to year should be reduced. The 
Secretary should develop and test alternative payment methods that 
would allow the payment rates to reflect changes in local market 
conditions.
    Response: We agree that geographic variations in HCFA's payment 
rates should be reduced. Some of the current legislative proposals 
would reduce the degree of variation over time.
    We have been looking at ways to reduce these variations. Several 
demonstrations that should provide information needed to develop 
alternative payment methods are either currently being run or in the 
process of getting started. We have developed and are conducting 
several research and demonstration projects to review additional risk 
adjustors, which would modify current payment rates to reflect the 
health status of the members of managed care organizations. Another 
project would pay, from a separate pool of funds being shared by 
several

[[Page 27483]]

organizations in an area, for enrollees who have high Medicare costs. 
Also, HCFA is in the process of starting another project that would 
incorporate the payment principles associated with competitive bidding.

E. Improving Risk Adjustment Methods (Recommendation 5)

    Recommendation: The risk adjustment methods used to set Medicare 
capitation payments should better reflect variation in the likely use 
of services. Even as research on the development of new methods 
continues, the Secretary should implement interim improvements as soon 
as possible.
    Response: We plan to test health status risk adjusters, such as 
Diagnostic Cost Groups or Ambulatory Care Groups, as part of the 
Choices Demonstration. Furthermore, in this demonstration, we will test 
reinsurance and partial capitation arrangements. We are also 
considering demonstrations which use health status measures as part of 
the Adjusted Community Rate Determination, as well as part of the 
payment formula.

F. Medical Savings Accounts (MSAs) (Recommendation 6)

    Recommendation: The Congress' high deductible/MSA option would 
provide an additional choice for Medicare enrollees. However, ProPAC is 
concerned that the current Medicare risk adjustment method is not 
sufficient to protect the program from adverse selection and resulting 
excess spending. The likelihood that rates would better reflect risk 
would be enhanced if Medicare enrollees were required to remain in the 
MSA option at least for several years.
    Response: As ProPAC states, the Congressional Budget Office 
estimated that the MSA option would cost the Medicare program $4.6 
billion over 7 years, in part because of the current state-of-the-art 
in risk adjustment methods (discussed in recommendation 5, above). The 
CBO estimate of the cost of the MSA option is consistent with the cost 
estimates of other reputable organizations. We fail to see the 
rationale for including an option that provides no new benefits but is 
expected to result in increased costs, particularly at a time when the 
public and Congress are concerned about the long-term financial 
viability of the Medicare program.

G. The Medicare Plus Fee-for-Service Option (Recommendation 7)

    Recommendation: Enrollees choosing the fee-for-service option under 
the proposed Medicare Plus program could be responsible for 
substantially higher fees than what their plans would pay. The 
Secretary should monitor the impact of this option on beneficiary 
liability and on possible reductions in physician and other provider 
participation in traditional Medicare.
    Response: We agree with ProPAC that beneficiaries could be 
responsible for substantially higher fees. We also agree that, as 
suggested in this recommendation, allowing physicians and other 
providers to elect to serve Medicare beneficiaries through private fee-
for-service plans that place no limits on extra-billing amounts may 
well result in (1) increases in beneficiary liability and (2) 
reductions in physicians and other providers participating in 
traditional Medicare. Further, as the payment methods contained in 
pending legislation described in H.R. 2491 are structured, the payment 
increases for MedicarePlus plans, relative to those in fee-for-service 
Medicare, mean that MedicarePlus plans would be able to pay physicians 
and other providers more than fee-for-service Medicare. These higher 
payments would create additional incentives for physicians and other 
providers to cease participation in traditional Medicare. Finally, 
while managed care plans potentially provide value added because their 
organizational structure facilitates coordination of care, it is not 
clear what, if any, value is added by creating a private fee-for-
service plan option, under which the private plans receive higher 
payments relative to fee-for-service Medicare and physicians and 
providers are permitted to charge unlimited extra-billing amounts.

H. Information for Beneficiary Health Plan Choices (Recommendation 8)

    Recommendation: Medicare should make available to beneficiaries 
information about the performance of plans and local providers. The 
Secretary should identify the information beneficiaries need to make 
appropriate choices and develop innovative ways to improve access to 
it.
    Response: Current HCFA initiatives to improve beneficiary 
information about health insurance options, which are summarized below, 
are consistent with ProPAC's recommendation.

Development of Prototype Materials and Strategies

    We are currently engaged in two projects that will develop 
prototype beneficiary information strategies related to health 
insurance options.
    The first project, which focuses mostly on managed care issues, is 
examining through Medicare and Medicaid beneficiary focus groups, the 
types of information and dissemination media that beneficiaries would 
find most useful in selecting health insurance plans. Based on this 
information, and case studies, the project will produce and test a 
range of prototype beneficiary information materials, including 
beneficiary health plan comparison booklets and charts, and 
informational videos. Draft prototype materials (for Medicare, pre-
Medicare and Medicaid beneficiaries) are nearing completion and are 
scheduled for beneficiary testing in Spring 1996.
    The second project will design beneficiary information and 
education materials and dissemination strategies to support the 
Medicare Open Enrollment/Competitive Pricing demonstration. This 
project will develop printed materials that explain the experimental 
open enrollment process; printed general informational materials on 
Medicare health insurance options; and booklets outlining the specific 
Medicare fee-for-service and managed care options available to 
beneficiaries in their area. A plan comparison chart template, which 
would include information on specific benefits and premiums, will also 
be developed, as will other information and educational approaches 
(including educational seminars, public service announcements (PSAs), 
informational videos, and a toll-free counseling phone line, all 
sponsored by HCFA). In addition, a dissemination strategy for HCFA and 
its partners in the demonstration sites will be developed (for example, 
Insurance Counseling and Assistance (ICA) programs and beneficiary 
advocacy groups).
    Draft materials and strategies were tested on Medicare 
beneficiaries in April 1996. Final products should be available for 
adaptation to specific demonstration sites by Summer 1996.

Medicare Program Activities

    We have currently outlined a strategy to produce and disseminate a 
managed care plan comparison chart to Medicare beneficiaries, initially 
through the HCFA Regional Offices and HCFA-sponsored ICA programs. We 
will use comparison chart prototypes developed (under both of the 
projects discussed above) as models for the comparison chart. 
Prototypes will be available by Spring 1996. We plan to begin 
dissemination of the basic comparability charts in 1996.
    We may also choose to adapt some of the prototype materials for 
application to the Medicare program, depending on feedback and 
evaluations from

[[Page 27484]]

beneficiaries in the Open Enrollment Demonstration. These new materials 
could ultimately supplement or replace current materials, such as the 
Medicare Handbook. New prototype materials could also be provided and 
adapted individually by the State ICA programs. We have contributed 
recommendations during the development of these projects and will 
continue to do so.
    Many of the Regional Offices have developed area specific 
informational materials related to Medicare managed care. The Regional 
Offices typically use these materials to assist in their 
responsibilities as the local HCFA contact for beneficiaries.

Related Major Initiatives

    While current activities have centered on efforts to provide better 
information on health insurance options (such as focusing on 
comparisons of benefits, premiums, and locations), the next major steps 
in improving information and educational strategies will likely be in 
the area of quality or performance indicators.
    The prototypes discussed above will include templates for eventual 
dissemination of quality/performance indicators for health plans. In 
addition, strategies for introducing the concept of indicators to 
Medicare and Medicaid beneficiaries will be produced. One project, 
short Medicare and Medicaid focused video tapes describing quality 
indicators using a ``grocery shopping'' analogy, has already been 
completed.
    A final version of a set of Medicaid-specific National Committee on 
Quality Assurance (NCQA) Health Plan Employer Data and Information Set 
(HEDIS) quality indicators is nearly completed. We are currently 
sponsoring the revision (with NCQA) of HEDIS version 3.0 to include 
Medicare- specific measures. Once both Medicare- and Medicaid-specific 
measures are available, HCFA will have available the basic tools 
necessary to report comparative quality indicators to beneficiaries. A 
specific dissemination strategy will then be determined.
    We are currently in the developmental stages of a proposed plan-
specific Medicare beneficiary satisfaction survey. When completed, we 
would have comparative satisfaction information on all Medicare managed 
care plans, which could then be disseminated to beneficiaries as a 
companion to plan benefit/premium comparison charts.
    Based on these initiatives, HCFA should be well prepared to expand 
and improve both the level and types of health insurance information 
resources available to Medicare beneficiaries.

I. Health Plan Accountability (Recommendation 9)

    Recommendation: Medicare must hold health plans accountable for the 
appropriate use of Medicare funds. In addition, standards must be 
developed and enforced to ensure that Medicare beneficiaries will 
receive services of appropriate quality.
    Response: We agree with these recommendations and have several 
plans for implementing them. First, we are working with the National 
Committee for Quality Assurance to develop HEDIS 3.0 for the Medicare 
program. Second, we plan to conduct beneficiary satisfaction surveys 
for a significant sample of beneficiaries from each health plan 
participating in the Medicare HMO program. Third, we are working with 
the Foundation of Accountability to develop condition-specific outcome 
measures. Finally, we are working with Peer Review Organizations to 
develop several condition-specific outcome measures that will be risk 
adjusted.

J. Broadening Financial Support to Teaching Hospitals (Recommendation 
13)

    Recommendation: Explicit financial support for graduate medical 
education activities should not be limited to the Medicare program. 
Mechanisms to broaden financial support for teaching-related activities 
in hospitals and other locations should be developed.
    Response: The Commission is concerned that Medicare is the only 
payer that provides explicit financial support for teaching activities. 
Even though private payers provide implicit support through higher 
prices for patient care services, funding is unrelated to the amount of 
actual teaching activity.
    While we would agree that all payers should contribute their fair 
share toward physician training and particularly for the patient care 
services that are provided in the course of this training, we wish to 
emphasize that Medicare's support for graduate medical education is 
limited only to Medicare's share of the total cost of graduate medical 
education. That is, although we believe the current level of the 
indirect medical education adjustment is higher than necessary to 
compensate for the indirect costs associated with residents' 
involvement in patient care, it is set at a level that at one time was 
thought to equal those costs. Furthermore, because this adjustment is 
made only for Medicare prospective payment system discharges, it is 
inherently only associated with Medicare's share of the indirect costs 
of graduate medical education. In addition, the direct graduate medical 
education payment is calculated based on Medicare's inpatient 
utilization rate, thereby ensuring that it, too, reflects only 
Medicare's share of direct graduate medical education. In that vein, we 
would support a mechanism to broaden support for physician training 
that did not result in Medicare contributing more than its fair share, 
relative to the Medicare utilization rate.
    We note also that some Medicaid programs explicitly pay hospitals 
for the indirect and direct costs of graduate medical education similar 
to Medicare. In addition, some States (for example, New York, through 
its Prospective Hospital Reimbursement Methodology) provide explicit 
support for teaching hospitals through private payers. Nevertheless, we 
join ProPAC in calling for more uniform support across all payers.
    We would note that although the President's health care reform bill 
attempted to involve private insurers in directly supporting medical 
education, we do not currently have a proposal to broaden support for 
teaching hospitals beyond that currently provided by Medicare. We have, 
however, proposed to broaden financial support for teaching hospitals 
by changing the way Medicare funds medical education through its 
managed care programs. Currently, Medicare payments to HMOs are based 
on the average cost of providing services to Medicare patients in the 
fee for service part of Medicare. These payments to HMOs include 
Medicare's costs for medical education. The President's FY 1997 budget 
would revise Medicare's payments to HMOs so as not to include the 
portion associated with medical education and paying these funds 
directly to teaching hospitals and to managed care plans with teaching 
programs. This change would benefit teaching hospitals, as well as more 
appropriately target Medicare funds designated for medical education.

K. Medicare Payments for Graduate Medical Education Costs 
(Recommendation 14)

    Recommendation: ProPAC supports changes in Medicare teaching 
payments that would encourage an appropriate distribution of residents 
across specialties and discourage inappropriate growth in the total 
number of residents.
    Response: The Commission states that both the proposals of Congress 
and the President's budgets would move Medicare direct graduate medical 
education payments in the direction of

[[Page 27485]]

encouraging appropriate distribution of residents across specialties 
and discourage inappropriate growth in the total number of residents.
    The Administration is very concerned with the issue of Medicare 
payments to hospitals for graduate medical education. Consistent with 
numerous reports that the nation has an excess of specialty physicians, 
and that the growth of managed care is increasing the demand for 
primary care physicians relative to other specialties, the focus of the 
President's graduate medical education proposal is to encourage greater 
hospital participation in primary care residencies and less in 
specialty residencies. In addition, a significant amount of training of 
residents in primary care is more appropriately done in non-hospital 
settings. Accordingly, the President's budget includes a cap on the 
total number of residents and on the number of nonprimary care 
residents for whom Medicare will make graduate medical education 
payments. We would also encourage ambulatory training by including 
residents who rotate to non-hospital settings in the hospital's FTE 
count for IME purposes. We would further encourage ambulatory training 
by providing direct medical education payments to facilities that are 
not hospitals (for example, federally qualified health centers) for 
residents, when the residents' salaries are not paid by hospitals.
    The Administration has also proposed to create a Commission on 
Medical Education and Workforce Priorities within HHS to develop and 
recommend policies to address the preservation of academic health 
centers' research and educational capacity and the supply of the future 
health care workforce. This commission would also make recommendations 
regarding the most effective allocation of training resources to ensure 
that the numbers and competencies of health care professionals are 
responsive to national needs.

L. Medicare Indirect Medical Education Payments (Recommendation 15)

    Recommendation: The Medicare indirect medical education adjustment 
should be reduced from its current 7.7 percent level to 7.0 percent.
    Response: As we've said in response to similar ProPAC 
recommendations in previous years, we agree with ProPAC that the 
current level of payment for the indirect costs of medical education is 
too high. The President's FY 1997 budget would reduce the adjustment 
over 3 years to a final level of 6.0 percent effective for FY 1999. In 
addition, residents working in nonhospital settings could be counted in 
a hospital's resident count for indirect medical education purposes if 
the hospital incurs all, or substantially all, of the costs for the 
training program in that setting. Finally, the President's budget would 
cap the number of residents that could be included in the count, with 
an exception provided for primary care residents and those in the 
specialties of obstetrics or gynecology.
    The Commission also supported the provision in the President's FY 
1996 budget that would apply the direct graduate medical education 
resident count and weighting rules to the indirect medical education 
count. However, ProPAC recommended proceeding with caution as 
additional analysis would be needed to examine the effect of this 
policy on individual teaching hospitals. We note that this provision is 
not contained in the FY 1997 budget proposal. Therefore, residents 
would continue to be counted for IME as long as they are enrolled in an 
approved program.

M. Distributing Additional Teaching-Related Payments (Recommendation 
16)

    Recommendation: Funds that provide broader financial support for 
graduate medical education should be distributed in a way that 
corresponds to the additional costs incurred by teaching facilities. 
Providers that treat enrollees in capitation plans should receive 
teaching-related payments for those patients as well as for the other 
patients they serve.
    Response: This recommendation is related to Congress' proposal to 
create new trust funds to provide broader support for educational 
activities. Congress would create new trust funds that include accounts 
for general direct medical education, general indirect medical 
education, and a Medicare Plus Incentive Account financed by new 
appropriations. This funding would be in addition to payments currently 
being made by Medicare for direct and indirect medical education. The 
Commission is concerned that the new funding would be distributed based 
on previous Medicare payment levels even though general revenues will 
fund the newly established trust funds. With regard to the Medicare 
Plus Incentive Account, ProPAC is concerned that payments should give 
Medicare's managed care participants an incentive to use teaching 
hospitals and pay providers appropriately for serving patients in 
capitation plans.
    Like the Commission, we are concerned about appropriating general 
revenues to finance medical education, particularly given our concern 
that the indirect medical education adjustment already overcompensates 
hospitals and Medicare already pays its share of costs of direct 
medical education. The President's original proposal was to create an 
all payer fund to finance graduate medical education. However, this 
proposal was made in the context of overall health care reform. We 
continue to remain concerned that medical education should be supported 
to a greater extent by payers other than Medicare but have reservations 
about financing of medical education with additional Federal money.
    As we explained above in Recommendation 13, under the President's 
FY 1997 budget, we would revise payments made through our managed care 
programs to ensure that teaching programs are supported more 
appropriately by existing Medicare resources designated for medical 
education. Under the President's FY 1997 budget, payments for medical 
education would be eliminated from HMO rates and redistributed to 
teaching hospitals and managed care plans with teaching programs.

N. Discharges from Hospitals to Other Facilities (Recommendation 19)

    Recommendation: Medicare payments should be modified to account for 
the shift in services from acute to postacute settings. Broadening the 
definition of transfer cases, however, is not an appropriate approach.
    Response: In both the September 1, 1994 and September 1, 1995 final 
rules, we expressed our concern that the current trend of declining 
average lengths of stay as hospitals discharge Medicare patients into 
alternative health care settings (other than acute care prospective 
payment hospitals) in less time may result in a misalignment of 
payments and costs under our existing payment systems (59 FR 45362; 60 
FR 29221). In particular, we expressed concern over the potential for 
hospitals paid under the prospective payment system to shift costs (for 
which they are compensated through the DRG payments) to alternative 
settings, which are in turn paid on a cost basis. Although we solicited 
comments on possible solutions to this problem, we did not propose any 
change in policy.
    The President's FY 1997 budget includes a proposal to redefine 
discharges from acute care hospitals to excluded hospitals and units 
and skilled nursing facilities as transfers for payment purposes. 
Currently, for cases transferred from one acute care hospital paid 
under the prospective payment system to another like hospital, the 
sending hospital is paid a per diem rate

[[Page 27486]]

instead of the full DRG amount. For cases transferred to an excluded 
hospital or unit or to a skilled nursing facility (as well as cases 
discharged home or home with home health care), hospitals receive the 
full DRG payment amount, regardless of the length of stay in the 
hospital. Under the per diem transfer payment methodology, hospitals 
receive a per diem amount (doubled for the first day of the stay) until 
the full DRG amount is reached. Therefore, under the President's budget 
proposal, hospitals transferring patients to excluded facilities or 
skilled nursing facilities prior to the geometric mean length of stay 
for the DRG, minus one day (to account for the double per diem on the 
first day), would receive less than the full DRG amount for that case.
    The basis for ProPAC's opposition to this proposal is that it ``* * 
* thinks this policy would discourage the use of postacute providers. 
Moreover, it could result in longer inpatient stays, which may not be 
desirable or cost effective in the long run.'' We acknowledge that the 
change in the definition of a transfer is not the ultimate solution to 
this health care trend. In response to immediate concerns about 
overpaying hospitals for the reduced services they are providing and 
the rate of increase in expenditures for postacute care services, 
however, we believe this is an appropriate interim measure while we 
continue to explore long-term policy alternatives that will better 
integrate our payment systems for care provided to Medicare 
beneficiaries across the acute and postacute care settings.

O. Prospective Payment for PostAcute Care (Recommendation 20)

    Recommendation: Prospective payment systems should be implemented 
for all postacute services. The payment method for each service should 
be consistent across delivery sites. The Secretary should explore 
methods to control volume of postacute service use, such as bundling 
services for a single payment.
    Response: We agree that HCFA should develop prospective payment 
systems for all postacute services, and we have made significant 
progress in this area. As we discuss in our responses to 
Recommendations 22 and 23, we have developed detailed implementation 
plans for interim prospective payment systems for skilled nursing 
facilities (SNFs) and home health agencies (HHAs) that do not require 
patient classification systems. Execution of these plans will, of 
course, require legislative action.
    Beyond our interim plan, we have developed a strategy for 
developing a full-fledged prospective payment system for SNFs. In the 
absence of legislation, we have been pursuing data that could be used 
to support a case-mix prospective payment system through our Multi-
State Case Mix Demonstration Project. This demonstration project, now 
in its operational phase, is collecting data on patient case mix using 
a modified version of the minimum data set, the assessment tool SNFs 
use in developing patient care plans. Through the course of the 
demonstration, we hope to gather data on the full range of SNF 
resources needed for each resource utilization group. We are proceeding 
to require by regulation that all facilities provide resident 
assessment data. Consolidated billing of SNF services (that is, 
requiring SNFs to bill for all services furnished to their patients) 
and uniform coding of SNF services are also prerequisites for a SNF 
prospective payment system. Consolidated billing and uniform coding are 
needed to determine the appropriate payment for the ancillary services 
component of SNF services and to provide useful data on the range of 
services SNFs furnish.
    We have also been working on a strategy to develop a full-fledged 
prospective payment system for HHAs. We have funded a project to 
develop outcome measures for home care that can be used for an outcome-
based quality improvement system. These measures will be based largely 
on a core standard assessment data set that includes items measuring 
sociodemographic, environmental, support system, health status, 
functional status, and health service utilization characteristics of 
patients. Many of these data items included in the core standard 
assessment data set are not only essential for assessing patient 
outcomes but are also critical for designing an adequate case-mix 
system for payment purposes. To test and refine Medicare's approach to 
outcome based quality improvement for home health care, HCFA is 
currently sponsoring the Medicare Quality Assurance and Improvement 
Demonstration, which uses this instrument. We plan to publish 
regulations identifying the required data elements and addressing the 
collection of information from the core standard assessment data set. 
We also plan to sponsor additional research that would lead to an 
appropriate case-mix adjuster that can be used in a national 
prospective payment system.
    In addition to the developmental work underway on SNF and HHA 
prospective payment systems, we have begun work on the preliminary 
steps necessary for the development of a prospective payment system for 
hospital inpatient rehabilitation services. The biggest obstacle we 
have faced in this effort is the lack of appropriate patient 
classification systems for the types of patients treated by 
rehabilitation hospitals. We have recently contracted with the Rand 
Corporation to evaluate a rehabilitation coding system known as the 
Functional Impairment Measure (FIM), which is a scoring system that 
measures the degree of functional independence of rehabilitation 
patients. These researchers will also evaluate the patient 
classification system known as functional related groups (FRGs), which 
are based on FIM, as a possible basis for a Medicare prospective 
payment system for rehabilitation services. If the research confirms 
functional status measures can be used to develop an appropriate 
patient classification system, we will begin the additional work 
necessary to put a prospective payment system into place. This would 
require collecting patient assessment data from Medicare rehabilitation 
hospitals and units and developing all the necessary components of the 
new payment system. It will take at least 3 years to design and 
implement such a system. To facilitate implementation, we are 
considering initiating collection of patient assessment data in advance 
of legislation establishing a prospective payment system. We will be 
seeking public input on whether to proceed with a requirement for 
patient assessment data in the absence of legislation and what data 
elements should be included in a core data set that could be used not 
only as the basis for a patient classification system but also to 
assess outcomes.
    We recognize that there are advantages to a coordinated approach in 
developing prospective payment systems for postacute services and we 
will be evaluating how to make them as consistent as possible. We also 
recognize that the demand for implementation of prospective payment 
systems for post-acute services is sufficiently immediate so that there 
may not be time for the broad study, data collection, and research 
needed to develop a ``unified'' system using similar resource grouping 
principles. Most of the current legislative proposals, including the 
Administration's proposals, would require implementation dates within 
the next several years. It may not be feasible to develop a ``unified'' 
system within the time frames contemplated by the current legislative 
proposals. Trade-offs may be required between continuation of the 
interim payment systems versus

[[Page 27487]]

the full-blown prospective payment systems on one hand, and the 
separate versus ``unified'' prospective payment systems on the other 
hand.

P. Case-Mix Measures for PostAcute Services (Recommendation 21)

    Recommendation: Reliable case-mix measurement is important in 
prospective payment systems to account for resource use and to analyze 
treatment patterns and costs across sites. The Secretary should 
coordinate case-mix research across postacute care settings, using 
consistent methods for measuring patient acuity and resource use.
    Response: We are attempting to coordinate our work on case-mix 
adjustment for home health care, long-term and SNF care, and 
rehabilitative services. To develop a case-mix adjustment system for 
SNF care, time studies were conducted in order to measure resource 
utilization. Similarly, as noted above in response to Recommendation 
20, we plan to fund research to identify a home health case-mix 
adjuster.
    In addition, in the case-mix work to date for both home health care 
and SNF care, dependence in activities of daily living is the biggest 
predictor of resource utilization. Some of the other predictors differ 
across SNF care and home health care due to differences in the 
treatment settings and the availability of information for a 
classification system.
    As also noted above in the preceding response, researchers at the 
University of Pennsylvania have developed a classification system based 
on FIMs called Function Related Groups (FIM-FRGs). This system appears 
promising for use in a case-mix adjusted prospective payment system for 
rehabilitation and long-term care facilities, and we are working with 
the Rand Corporation on a research project to evaluate the suitability 
of FIM-FRGs for this purpose.
    We agree that a compatible cross-provider measure of resource use 
would be the best multiplier in any universal postacute system. We also 
believe that such measures do not now exist and to produce them would 
require the program to incur significant costs and impose significant 
data reporting and collection requirements on providers. We would 
prefer to obtain explicit legislative direction before we incur these 
costs and impose these burdens. Even so, we believe several years would 
be required to gather the data and develop the case-mix measures. For 
these reasons, we believe that interim prospective payment systems of 
the types contained in the President's FY 1997 budget should be put in 
place.

Q. Interim Fee-for-Service Payment Method for Skilled Nursing Facility 
Services (Recommendation 22)

    Recommendation: An interim payment method should be implemented to 
control the growth in Medicare payments for SNF services until a 
comprehensive prospective payment system is established. A system based 
on historical data and facility-specific limits, however, may not allow 
facilities to respond appropriately to changes in a dynamic 
environment.
    Response: We agree with ProPAC's recommendation that an interim 
payment system should be developed until a permanent system is 
established. Both the interim and permanent payment systems could 
better promote the goals of quality care, maximum access to care, and 
cost containment. A payment system that incorporates these goals is 
essential as the nursing home industry evolves toward a more eclectic 
mix of care levels and delivery models. In addition, the need exists 
for a payment system that is simpler to administer for both providers 
and HCFA. In order to maximize these goals, a permanent prospective 
payment system for SNFs should include payment for all costs (that is, 
routine operating, ancillary, and capital costs) and take into account 
actual facility case mix. However, thecase-mix and ancillary cost data 
necessary to accomplish this goal are not yet available.
    In the interim, based on current data resources, a prospective 
payment system could be implemented. It would apply solely to routine 
costs (including routine capital costs) and utilize facility-specific 
payment rates subject to cost limits. We are studying various cost 
limit designs, such as regional limits versus national limits, to 
account for geographical cost differences. In addition, methodologies 
to ease the transition from the current payment system would be 
incorporated into an interim prospective payment system.
    While there is agreement that a need exists to implement an interim 
prospective payment system for SNFs, the Commission believes that a 
system based on historical data and facility-specific limits may not 
allow facilities to respond appropriately to changes in a dynamic 
environment. However, we believe that a facility-specific interim 
prospective payment system would provide a number of advantages over 
the current system, and could be constructed to accommodate changes in 
a facility's case mix. The system would provide for greater cost 
containment and administrative simplicity, through predetermined 
pricing. In addition, the potential to earn a profit under the interim 
system, by holding down costs, would provide an incentive for nursing 
homes to participate in Medicare, or certify more beds if already 
participating. This would provide greater access for beneficiaries. 
This same incentive would produce greater efficiency in nursing home 
operations and would support the provision of quality care. When 
compared to a flat rate system, a facility-specific system would 
maintain an appropriate distribution of payments, since the basis of 
payments under the system is the nursing homes' own cost history. As a 
nursing home case-mix classification system is finalized and tested, 
and further analysis is completed on ancillary payment, these elements 
would be incorporated into the payment system.
    In addition, we are analyzing some features of an interim system 
that would result in savings for the Medicare program. Specifically, in 
developing providers' facility-specific payment rates for routine 
services, the system would incorporate one set of cost limits based on 
freestanding costs only. The current system provides for separate 
(higher) limits for hospital-based facilities. Consequently, savings 
would result from holding down payments to these hospital-based SNFs. 
In addition, savings would result through the elimination of routine 
cost limit exemptions granted to new providers of skilled nursing 
services. The current system of cost limit exceptions for ``atypical 
nursing services'' would be eliminated as well. Finally, the Medicare 
Part B carrier fee schedules could be utilized for Part A SNF services 
as a limit on the reasonable costs of certain ancillary services. 
Currently, there are no limits or reasonable cost guidelines for many 
of these services.
    We support the ProPAC view that a per-episode payment system be 
developed. We have noted above, however, that there are great obstacles 
to developing both (1) prospective payment systems that are consistent 
across provider types with respect to the method of measuring resource 
use, and (2) classifications systems for episodes of postacute care 
(either by provider type or in general) that account for a sufficient 
degree of the variability among different types of patients. Thus, our 
inclination would be to pursue our current plans for the prospective 
payment systems with the thought that

[[Page 27488]]

further refinements could be made when data are available.

R. Interim Fee-for-Service Payment Method for Home Health Care 
(Recommendation 23)

    Recommendation: Until a fully prospective payment system for home 
health care is developed, the Commission supports adopting episode-
based payment limits. In addition, beneficiary copayments, subject to 
an annual limit, should be introduced.
    Response: There is agreement between ProPAC and HCFA that an 
interim cost control mechanism should be established prior to 
implementing a prospective payment system for home health care. We 
would like to highlight significant differences between the prospective 
payment systems proposed by the Congress and the Administration.
    The congressional proposal would limit payment to 120 days of 
service with certain exceptions for up to 165 days of care. This 
provision has the potential of serious financial impact on some 
agencies, as well as reduced access to services for some patients with 
the greatest needs. The proposal also assumes the availability of data 
and systems to categorize and assign patients to one of the 18 ``case-
mix categories'' established in Phase II of HCFA's HHA prospective 
payment system demonstration. Neither the data nor the systems are 
currently in existence, and the implementation of such a system would 
entail a major increase in the reporting burden on agencies. Were we 
able to implement such a system, we estimate that the system would be 
able to explain less than 10 percent of the variation in cost per 
episode, at best.
    The Administration's interim proposal entails no increased 
reporting burden, as it uses data currently reported by agencies. 
Although that budget proposal does not provide for per-episode 
payments, its aggregate payment caps effectively create a per-episode 
cap on costs. Given the uncertainty about the resource composition of 
individual types of episodes, the use of an aggregate cap gives 
agencies an incentive to provide services in a cost effective manner by 
sharing savings with agencies whose costs are below their per 
beneficiary limitation. We note that ProPAC was also concerned that the 
interim proposal utilizes regional cost experience, which the 
Commission feels may not be appropriate. The President's FY 1997 budget 
includes a provision to use average national or regional cost 
experience in constructing the per beneficiary limitation. We agree 
with ProPAC that, should we find unjustified differences in regional 
cost experience, we would support a move to national cost experience as 
the basis for the per beneficiary limit.
    It may be necessary to use regional rates to move individual HHAs 
toward a national norm over time. This would avoid major displacements. 
We are considering both regional and national blending.
    We do not agree with the ProPAC recommendation that beneficiary 
copayments be introduced. Our proposed interim system of limits should 
adequately control the growth in service use. We do not agree with 
shifting costs to beneficiaries, however limited, as a method of 
controlling the growth in utilization.
    As HCFA moves forward in designing a prospective payment system for 
home health care, we will consider ProPAC's recommendations to look at 
more uniformly defined units of services.

S. Update to the Composite Rate for Dialysis Services (Recommendation 
24)

    Recommendation: The Secretary should develop methods to control 
total Medicare per capita expenditures for end stage renal disease 
(ESRD) beneficiaries. In the meantime, the composite rate should be 
updated by 2.7 percent for hospital-based dialysis facilities and by 
2.0 percent for freestanding facilities for fiscal year 1997. The 
Secretary should also develop reliable measures of patient severity and 
outcomes to analyze the relationships among treatment processes, 
patient outcomes, and costs. These factors should be considered in 
evaluating the need for and the level of future payment updates.
    Response: One of ProPAC's suggestions is that HCFA consider opening 
enrollment for ESRD beneficiaries to participate in Medicare risk 
programs. The reason for this recommendation is the rapid growth in 
total Medicare spending for ESRD beneficiaries. A large part of this 
increase is attributable to the expanding ESRD population, especially 
older patients who require more services. These beneficiaries are using 
more acute inpatient, skilled nursing and other dialysis-related 
services than ever before. ProPAC suggests that to control these 
expenditures, Medicare examine the possibility of adopting a capitation 
payment system for ESRD services, since capitation rates have been 
successful in controlling expenditure growth for other populations. At 
a minimum, they are recommending that utilization review or other 
managed care techniques be used to control the total volume of services 
provided to ESRD beneficiaries across all sites of care.
    Section 1876(d) of the Act currently prevents an individual with 
ESRD from enrolling in an HMO or a competitive medical plan. However, 
an individual who is enrolled in a prepaid health plan when he or she 
is determined to have ESRD may continue enrollment in that plan. A 
prepaid health plan may only disenroll a beneficiary as provided by 
regulations at 417.460.
    Congress addressed the issue of paying for ESRD services in a 
capitation setting in legislation. Section 13567(b) of the Omnibus 
Budget Reconciliation Act of 1993 (Public Law 103-66) (August 10, 1993) 
amended section 2355 of Public Law 98-369 by requiring the Secretary to 
include the integration of acute and chronic care management for 
patients with ESRD through expanded community care case management 
services in a social health maintenance organization (SHMO). Initial 
legislation required the Secretary to grant demonstration waivers for 
SHMOs that provide for the integration of health and social services at 
a fixed annual prepaid capitation rate. In the January 26, 1996 Federal 
Register, we published a notice informing interested parties of the 
opportunity to apply for funds for a cooperative agreement to operate 
an ESRD Managed Care Demonstration (61 FR 2516). Two of the 
demonstration's purposes would be to test whether ESRD beneficiaries 
can and should be given access to HMOs during open enrollment and 
whether the statewide capitation rate can and should be adjusted. The 
demonstration would adjust rates for treatment status (such as 
dialysis, transplant, or a functioning graft), age groups and the cause 
of renal failure (for example, diabetes). As the legislation requires, 
rates would be based on 100 percent of the adjusted average per capita 
costs (AAPCC); additional non-Medicare-covered benefits would be 
offered by the provider to justify the additional 5 percent beyond the 
95 percent of the AAPCC paid to Medicare risk-contracting HMOs on 
behalf of ESRD enrollees. Based on the results of this demonstration, 
we would make recommendations to Congress concerning the 
appropriateness of paying for dialysis services in a capitation 
setting.
    To improve the quality of care ESRD patients are receiving, we are 
in the process of developing proposed rules for ESRD conditions for 
coverage. The essence of the regulation is patient-centered and 
outcome-oriented. The proposed conditions for coverage will focus on 
facilities achieving an optimal

[[Page 27489]]

level of health and well-being for all dialysis patients. The proposed 
rules will be published in Spring 1996 with expected implementation in 
late fiscal year 1997.
    While we share ProPAC's concern that payment rates be sufficient to 
assure quality care for ESRD patients, we do not believe there is 
sufficient evidence at this point to conclude that more money is needed 
to provide appropriate care. Currently, the University of Michigan, as 
part of a National Institute of Health grant, is examining the 
relationship between facilities' costs and the level of KT/V. Also the 
National Institute of Diabetes and Digestive and Kidney Diseases is 
sponsoring a study on the impact of increasing dialysis as measured by 
KT/V and the use of high-flux-dialysis on ESRD patients. The results of 
these studies should help us analyze the relationship between patient 
outcomes and costs, and thus provide us with a basis for recommending 
an appropriate payment rate increase.
    While we acknowledge that an increase in the composite rate may be 
appropriate in the next few years, we believe that any rate increase 
should be linked to implementation of the revised conditions for 
coverage. Moreover, any ESRD rate increase must be considered within 
the context of Medicare budgetary concerns and should have a direct 
link to improved patient outcomes. We will continue to monitor ESRD 
facility costs, and, if appropriate, we may recommend an update to the 
ESRD composite rate for FY 1998.
    We note that ProPAC's recommendation provides for an across-the-
board rate increase for all renal facilities. However, data show that 
high volume independent facilities (over 6,000 treatments per year) 
account for about 85 percent of independent dialysis treatments. These 
high volume facilities report margins between Medicare payments and 
costs that are higher than average. Therefore, in proposing a future 
rate increase, we would want to examine the need to adjust payment 
increases for volume. In addition, we believe that any update to the 
composite rate should include an update to the wage index currently 
used to adjust the labor portion of the rate. We are currently using an 
outdated wage index which is a blend of 1980 Bureau of Labor Statistics 
(BLS) and 1984 prospective payment system wage data and does not 
reflect the MSA revisions resulting from the 1990 census.
    The Commission's final recommendation is that the Secretary closely 
monitor treatment patterns and patient outcomes to ensure that 
facilities use the payment increase to improve quality of care. The 
proposed ESRD conditions for coverage should address this issue. We 
expect the proposed rule to be published in the Federal Register before 
Summer 1996. Between the publication of the proposed and final rules, 
HCFA is planning to meet with the renal community to develop complete 
clinical data sets to monitor patient outcomes and medical conditions. 
These data will then be used to evaluate the quality of dialysis 
services furnished by individual facilities. Of course, this is a long-
term project. In the short term, we are exploring the possibility of 
collecting limited patient outcome data such as KT/V and URR.

T. Prospective Payment for Hospital Outpatient Services (Recommendation 
25)

    Recommendation: A comprehensive prospective payment system should 
be developed for hospital outpatient services. Such a system should 
include a strategy for controlling the volume of ambulatory services.
    Response: We agree with the need to implement a comprehensive 
prospective payment system for outpatient services. While we await 
legislative authority, we continue to develop and refine the Medicare-
specific factors of the Ambulatory Patient Group (APG) system that we 
recommend using. We plan to analyze the payments that would be made 
across sites, for example in Ambulatory Surgical Centers (ASCs) or 
physician radiology practices, to ensure that we have not created 
unwarranted incentives to perform procedures in a given setting for 
financial reasons.
    We are concerned as well about the potential for increases in the 
volume of services provided, both in outpatient departments and in 
other settings. We are examining approaches to volume measurement and 
control, including the level of packaging for ancillary services and 
monitoring of patterns of care. For example, we could track whether 
Medicare beneficiaries received more clinic visits per patient under 
APGs than they did under cost-based reimbursement. If so, we could take 
corrective action either systemically or on a hospital-specific basis. 
This issue clearly requires study. We welcome suggestions in this area.

U. Beneficiary Liability for Hospital Outpatient Services 
(Recommendation 26)

    Recommendation: The growing financial burden for Medicare enrollees 
who receive services in hospital outpatient departments should be 
alleviated immediately. Beneficiary coinsurance for these services 
should be limited to 20 percent of the Medicare-allowed payment, as it 
is in other settings. For services not paid on a prospective basis, the 
Secretary should establish a new method for determining beneficiary 
copayments based on estimated allowed payments since they cannot be 
calculated precisely when services are delivered.
    Response: We agree that the issue of beneficiary coinsurance should 
be addressed. In the context of the monies available to the Medicare 
program, we doubt that Congress would authorize that Medicare 
immediately assume the full cost of paying 80 percent of the cost of 
outpatient services. Among the approaches that could be used are: (1) 
Applying the savings achieved by eliminating the formula-driven 
overpayment to offset the beneficiaries' responsibility; (2) requiring 
copayments in other areas of the program, such as for home health 
services or laboratory services; and/or (3) moving gradually to reduce 
the ratio of copayments to total payments. One issue that must be 
considered at the same time is the rise in the Part B premium that 
would accompany any significant increase in program payments. This 
would have the effect of distributing costs over the entire range of 
beneficiaries, rather than having it focused only on those patients who 
actually use outpatient services, as it is now. We are eager to have 
this issue addressed and resolved, but know that it must be examined in 
light of broader budget decisions.

IX. Other Required Information

A. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 provides for notice and comment 
when a collection of information requirement is submitted to the Office 
of Management and Budget (OMB) for review and approval. In order to 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
    <bullet> Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    <bullet> The accuracy of the agency's estimate of the information 
collection burden;
    <bullet> The quality, utility, and clarity of the information to be 
collected; and
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

[[Page 27490]]

Therefore, we are soliciting public comment on each of these issues for 
the information collection requirement discussed below.
    The only information collection or paperwork burden item contained 
in this proposed rule involves the requirement under Sec. 489.27 that a 
hospital furnish each Medicare beneficiary with a notice of discharge 
rights supplied by HCFA, that is, `An Important Message from Medicare.'
    As discussed in section V.F of this preamble, we are revising the 
current requirement that a hospital must distribute the `Important 
Message' to each Medicare beneficiary at or about the time of 
admission. In order to permit hospitals more flexibility, but still 
ensure that benficiaries are aware of their discharge rights, we are 
proposing to revise Sec. 489.27 to specify that a hospital must provide 
the notice of discharge rights `during the course of the hospital 
stay.' We estimate that the paperwork burden associated with the 
requirement that hospital personnel distribute the `Important Message' 
to each Medicare beneficiary is approximately 1 minute per admission. 
Based on our most recent available data (1995 Data Compendium, HCFA 
Pub. No. 03364), there are roughly 11 million Medicare beneficiaries 
admitted to hospitals each year, resulting in an annual burden of 
approximately 183,000 hours.
    This paperwork burden is not effective until it has been approved 
by OMB. A notice will be published in the Federal Register when 
approval is obtained. Organizations and individuals desiring to comment 
on this paperwork burden requirement should submit comments by July 30, 
1996 to the Office of Management and Budget, Human Resources and 
Housing Branch, Room 10235, New Executive Office Building, Washington, 
D.C., 20503, Attention: Allison Herron Eydt, HCFA Desk Officer.

B. Requests for Data from the Public

    In order to respond promptly to public requests for data related to 
the prospective payment system, we have set up a process under which 
commenters can gain access to the raw data on an expedited basis. 
Generally, the data are available in computer tape format or 
cartridges; however, some files are available on diskette, and on the 
internet at HTTP://WWW.HCFA.GOV/STATS/PUBFILES.HTML. Data files are 
listed below with the cost of each. Anyone wishing to purchase data 
tapes, cartridges, or diskettes should submit a written request along 
with a company check or money order (payable to HCFA-PUF) to cover the 
cost, to the following address: Health Care Financing Administration, 
Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, 
Maryland 21207-0520, (410) 786-3691. Files on the internet may be 
downloaded without charge.
1. Expanded Modified MEDPAR-Hospital (National)
    The Medicare Provider Analysis and Review (MEDPAR) file contains 
records for 100 percent of Medicare beneficiaries using hospital 
inpatient services in the United States. (The file is a Federal fiscal 
year file which means discharges occurring October 1 through September 
30.)The records are stripped of most data elements that will permit 
identification of beneficiaries. The hospital is identified by the 6-
position Medicare billing number. The file is available to persons 
qualifying under the terms of the Notice of Proposed New Routine Uses 
for an Existing System of Records published in the Federal Register on 
December 24, 1984 (49 FR 49941), and amended by the July 2, 1985 notice 
(50 FR 27361). The national file consists of approximately 11 million 
records. Under the requirements of these notices, a data release 
agreement must be signed by the purchaser before release of these data. 
For all files requiring a signed data release agreement, please write 
or call to obtain a blank agreement form before placing an order. Two 
versions of this file are created each year. They support the 
following:
    <bullet> Notice of Proposed Rulemaking (NPRM) published in the 
Federal Register, usually available by the end of May. This file is 
derived from the MedPAR file with a cutoff of 3 months after the end of 
the fiscal year (December file).
    <bullet> Final Rule published in the Federal Register, usually 
available by the first week of September. This file is derived from the 
MedPAR file with a cutoff of 9 months after the end of the fiscal year 
(June file).

Media: Tape/Cartridge
File Cost: $3,415.00 per fiscal year
Periods Available: FY 1988 through FY 1995
2. Expanded Modified MedPAR-Hospital (State)
    The State MedPAR file contains records for 100 percent of Medicare 
beneficiaries using hospital inpatient services in a particular State. 
The records are stripped of most data elements that will permit 
identification of beneficiaries. The hospital is identified by the 6-
position Medicare billing number. The file is available to persons 
qualifying under the terms of the Notice of Proposed New Routine Uses 
for an Existing System of Records published in the December 24, 1984 
Federal Register notice, and amended by the July 2, 1985 notice. This 
file is a subset of the Expanded Modified MedPAR-Hospital (National) as 
described above. Under the requirements of these notices, a data 
release must be signed by the purchaser before release of these data. 
Two versions of this file are created each year. They support the 
following:
    <bullet> NPRM published in the Federal Register, usually available 
by the end of May. This file is derived from the MedPAR file with a 
cutoff of 3 months after the end of the fiscal year (December file).
    <bullet> Final Rule published in the Federal Register, usually 
available by the first week of September. This file is derived from the 
MedPAR file with a cutoff of 9 months after the end of the fiscal year 
(June file).

Media: Tape/Cartridge
File Cost: $1,050.00 per State per year
Periods Available: FY 1988 through FY 1995
3. HCFA Hospital Wage Index Data File
    This file is composed of four separate diskettes. Included are: (1) 
The hospital hours and salaries for FY 1993 used to create the proposed 
FY 1997 prospective payment system wage indexes; (2) a history of all 
wage indexes used since October 1, 1983; (3) a list of State and county 
codes used by SSA and FIPS (Federal Information Processing Standards), 
county name, and Metropolitan Statistical Area (MSA); and (4) a file of 
hospitals that were reclassified for the purpose of the FY 1997 wage 
index. Two versions of these files are created each year. They support 
the following:
    <bullet> NPRM published in the Federal Register, usually by the end 
of May.
    <bullet> Final Rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette/Internet
 File Cost: $500.00
 Periods Available: FY 1997 PPS Update

    We note that the files also are available individually as indicated 
below.
    (1) HCFA Hospital Wage Index Survey Only (usually available by the 
end of March for the NPRM and the middle of August for the final rule.)
    (2) Urban and Rural Wage Indices Only
    (3) PPS SSA/FIPS MSA State and County Crosswalk Only (usually 
available by the end of March)

[[Page 27491]]

    (4) Reclassified Hospitals by Provider Only
Media: Diskette/Internet
File cost: $145.00 per file
4. PPS-IV to PPS-XII Minimum Data Sets
    The Minimum Data Set contains cost, statistical, financial, and 
other information from the Medicare hospital cost report. The data set 
includes only the most current cost report (as submitted, final settled 
or reopened) submitted for a Medicare participating hospital by the 
Medicare Fiscal Intermediary to HCFA. This data set is updated at the 
end of each calendar quarter and is available on the last day of the 
following month.

Media: Tape/Cartridge


------------------------------------------------------------------------
                                              Periods                   
                                           beginning on     and before  
                                             or after                   
------------------------------------------------------------------------
PPS IV..................................        10/01/86        10/01/87
PPS V...................................        10/01/87        10/01/88
PPS VI..................................        10/01/88        10/01/89
PPS VII.................................        10/01/89        10/01/90
PPS VIII................................        10/01/90        10/01/91
PPS IX..................................        10/01/91        10/01/92
PPS X...................................        10/01/92        10/01/93
PPS XI..................................        10/01/93        10/01/94
PPS XII.................................        10/01/94        10/01/95
------------------------------------------------------------------------
(Note: The PPS XII Minimum Data Set covering 1995 will not be available 
  until July 31, 1996.)                                                 

File Cost: $715.00 per year
5. PPS-IX to PPS-XII Capital Data Set
    The Capital Data Set contains selected data for capital-related 
costs, interest expense and related information and complete balance 
sheet data from the Medicare hospital cost report. The data set 
includes only the most current cost report (as submitted, final settled 
or reopened) submitted for a Medicare certified hospital by the 
Medicare fiscal intermediary to HCFA. This data set is updated at the 
end of each calendar quarter and is available on the last day of the 
following month.

Media: Tape/Cartridge


------------------------------------------------------------------------
                                              Periods                   
                                           beginning on     and before  
                                             or after                   
------------------------------------------------------------------------
PPS IX..................................        10/01/91        10/01/92
PPS X...................................        10/01/92        10/01/93
PPS XI..................................        10/01/93        10/01/94
PPS XII.................................        10/01/94        10/01/95
------------------------------------------------------------------------
(Note: The PPS XII Capital Data Set covering 1994 will not be available 
  until July 31, 1996.)                                                 

File Cost: $715.00 per year
6. Provider-Specific File
    This file is a component of the PRICER program used in the fiscal 
intermediary's system to compute DRG payments for individual bills. The 
file contains records for all prospective payment system eligible 
hospitals, including hospitals in waiver States, and data elements used 
in the prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements.

Media: Tape/Cartridge
File Cost: $500.00 per file
Periods Available: FY 1987 through FY 1996 (December updates)

Media: Diskette/Internet
File Cost: $265.00
Periods Available: FY 1996 PPS Update
7. HCFA Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
as published in each year's update of the Medicare hospital inpatient 
prospective payment system. The case-mix index is a measure of the 
costliness of cases treated by a hospital relative to the cost of the 
national average of all Medicare hospital cases, using DRG weights as a 
measure of relative costliness of cases. Two versions of this file are 
created each year. They support the following:
    <bullet> NPRM published in the Federal Register, usually by the end 
of May.
    <bullet> Final rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette/Internet
Price: $145.00 per year
Periods Available: FY 1985 through FY 1995 (Internet--FY 1995)
8. Table 5 DRG File
    This file contains a listing of DRGs, DRG narrative description, 
relative weight, geometric mean, length of stay, and day outlier trim 
points as published in the Federal Register. The hardcopy image has 
been copied to diskette. There are two versions of this file as 
published in the Federal Register:
    a. NPRM, usually published by the end of May.
    b. Final rule, usually published by the first week of September.

Media: Diskette/Internet
File Cost: $145.00
Periods Available: FY 1997 PPS Update
9. PPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, Minimum Data Sets, and prior 
impact files. The data set is abstracted from an internal file used for 
the impact analysis of the changes to the prospective payment systems 
published in the Federal Register. This file is available for release 1 
month after the proposed and final rules are published in the Federal 
Register.

Media: Diskette/Internet
File Cost: $145.00
Periods Available: FY 1997 PPS Update
10. AOR/BOR Tables
    This file contains data used to develop the DRG relative weights. 
It contains mean, maximum, minimum, standard deviation and coefficient 
of variation statistics by DRG for length of stay and standardized 
charges. The BOR tables are ``Before Outliers Removed'' and the AOR is 
``After Outliers Removed.'' (Outliers refers to statistical outliers, 
not payment outliers.) Two versions of this file are created each year. 
They support the following:
    <bullet> NPRM published in the Federal Register, usually by the end 
of May.
    <bullet> Final rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette/Internet
File Cost: $145.00
Periods Available: FY 1997 PPS Update

11. HCFA FY 1992 Capital-Related Tax File
    This file contains data used to develop a special property tax 
adjustment to the capital prospective payment system for capital-
related costs. The data set includes a preliminary hospital-specific 
add-on amount for all PPS hospitals. The data set also contains the 
information used to propose an adjustment to the Federal rate so that 
the tax add-on is budget neutral. The proposed property tax adjustment 
provides special treatment to qualified hospitals who pay capital-
related property taxes. The add-on was 10. determined using base year 
tax costs per discharge attributable to Medicare. The data are taken 
from the FY 1992 Medicare hospital cost report and a special request 
for validation by the fiscal intermediaries.

Media: Diskette
File cost: $145.00
Period available: FY 1992
    For further information concerning these data tapes, contact Mary 
R. White at (410) 786-0168.
    Commenters interested in obtaining or discussing any other data 
used in constructing this rule should contact Stephen Phillips at (410) 
786-4548.

[[Page 27492]]

C. Public Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments concerning the provisions of this proposed rule 
that we receive by the date and time specified in the ``Dates'' section 
of this preamble and respond to those comments in the preamble to that 
rule. We emphasize that, given the statutory requirement under section 
1886(e)(5) of the Act that our final rule for FY 1997 be published by 
September 1, 1996, we will consider only those comments that deal 
specifically with the matters discussed in this proposed rule.

List of Subjects

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 489

    Health facilities, Medicare.

    42 CFR chapter IV would be amended as set forth below:
    A. Part 412 would be amended as follows:

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).

Subpart D--Basic Methodology for Determining Prospective Payment 
Federal Rates for Inpatient Operating Costs

    2. In Sec. 412.63(s)(1), a new sentence is added at the end to read 
as follows:


Sec. 412.63   Federal rates for inpatient operating costs for fiscal 
years after Federal fiscal year 1984.

* * * * *
    (s) * * *
    (1) * * * The wage index is updated annually.
* * * * *

Subpart L--The Medicare Geographic Classification Review Board

    3. In 412.246, paragraph (b) is revised to read as follows:


Sec. 412.246   MGCRB members.

* * * * *
    (b) Term of office. The term of office for an MGCRB member may not 
exceed 3 years. A member may serve more than one term. The Secretary 
may terminate a member's tenure prior to its full term.

Subpart M--Prospective Payment System for Inpatient Hospital 
Capital Costs

    4. In Sec. 412.302, a new paragraph (d)(4) is added to read as 
follows:


Sec. 412.302   Introduction to capital costs.

* * * * *
    (d) * * *
    (4) Hospitals may elect the simplified cost allocation methodology 
under the terms and conditions provided in the instructions for HCFA 
Form 2552.
    B. Part 413 would be amended as follows:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

    1. The authority citation for part 413 continues to read as 
follows:

    Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Subpart C--Limits on Cost Reimbursement

    2. In Sec. 413.40, paragraph (d)(3) is revised to read as follows:


Sec. 413.40   Ceiling on the rate of increase in hospital inpatient 
costs.

* * * * *
    (d) * * *
    (3) Net inpatient operating costs are greater than the ceiling. For 
cost reporting periods beginning on or after October 1, 1991, if a 
hospital's allowable net inpatient operating costs exceed the 
hospital's ceiling (or the adjusted ceiling, if applicable), payment 
will be based on the lower of the--
    (i) Ceiling (or the adjusted ceiling, if applicable) plus 50 
percent of the allowable net inpatient operating costs in excess of the 
ceiling (or the adjusted ceiling, if applicable); or
    (ii) One hundred-ten percent of the ceiling (or the adjusted 
ceiling, if applicable).
* * * * *

Subpart F--Specific Categories of Costs

    3. In Sec. 413.86, a new sentence is added at the end of paragraph 
(g)(1) introductory text to read as follows:


Sec. 413.86   Direct graduate medical education payments.

* * * * *
    (g) * * *
    (1) * * * For combined residency programs, an inital residency 
period is defined as the time required for individual certification in 
the longer of the two programs.
* * * * *
    C. Part 489 would be amended as follows:

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

    1. The authority citation for part 489 continues to read as 
follows:

    Authority: Secs. 1102, and 1871 of the Social Security Act (42 
U.S.C. 1302, and 1395hh).

Subpart B--Essentials of Provider Agreements

    2. Section 489.27 is revised to read as follows:


Sec. 489.27   Beneficiary notice of discharge rights.

    A hospital that participates in the Medicare program must furnish 
each Medicare beneficiary, or an individual acting on his or her 
behalf, the notice of discharge rights HCFA supplies to the hospital to 
implement section 1886(a)(1)(M) of the Act. The hospital must provide 
timely notice during the course of the hospital stay. For purposes of 
this paragraph, the course of the hospital stay may begin with the 
provision of a package of information regarding scheduled preadmission 
testing and registration for a planned hospital admission. The hospital 
must be able to demonstrate compliance with this requirement.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)


[[Page 27493]]


    Dated: May 13, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: May 24, 1996.
Donna E. Shalala,
Secretary.
    [Editorial Note: The following addendum and appendixes will not 
appear in the Code of Federal Regulations.]

Addendum--Proposed Schedule of Standardized Amounts Effective With 
Discharges on or After October 1, 1996 and Update Factors and Rate-
of-Increase Percentages Effective With Cost Reporting Periods 
Beginning on or After October 1, 1996

I. Summary and Background

    In this addendum, we are setting forth the proposed amounts and 
factors for determining prospective payment rates for Medicare 
inpatient operating costs and Medicare inpatient capital-related costs. 
We are also setting forth proposed rate-of-increase percentages for 
updating the target amounts for hospitals and hospital units excluded 
from the prospective payment system.
    For discharges occurring on or after October 1, 1996, except for 
sole community hospitals and hospitals located in Puerto Rico, each 
hospital's payment per discharge under the prospective payment system 
will be based on 100 percent of the Federal national rate.
    Sole community hospitals are paid based on whichever of the 
following rates yields the greatest aggregate payment: the Federal 
national rate, the updated hospital-specific rate based on FY 1982 cost 
per discharge, or the updated hospital-specific rate based on FY 1987 
cost per discharge. For hospitals in Puerto Rico, the payment per 
discharge is based on the sum of 75 percent of a Puerto Rico rate and 
25 percent of a national rate (section 1886(d)(9)(A) of the Act).
    As discussed below in section II, we are proposing to make changes 
in the determination of the prospective payment rates for Medicare 
inpatient operating costs. The changes, to be applied prospectively, 
would affect the calculation of the Federal rates. In section III, we 
discuss our proposed changes for determining the prospective payment 
rates for Medicare inpatient capital-related costs. Section IV sets 
forth our proposed changes for determining the rate-of-increase limits 
for hospitals excluded from the prospective payment system. The tables 
to which we refer in the preamble to the proposed rule are presented at 
the end of this addendum in section V.

II. Proposed Changes to Prospective Payment rates For Inpatient 
Operating Costs for FY 1997

    The basic methodology for determining prospective payment rates for 
inpatient operating costs is set forth at Sec. 412.63 for hospitals 
located outside of Puerto Rico. The basic methodology for determining 
the prospective payment rates for inpatient operating costs for 
hospitals located in Puerto Rico is set forth at Secs. 412.210 and 
412.212. Below, we discuss the manner in which we are changing some of 
the factors used for determining the prospective payment rates. The 
Federal and Puerto Rico rate changes, once issued as final, will be 
effective with discharges occurring on or after October 1, 1996. As 
required by section 1886(d)(4)(C) of the Act, we must also adjust the 
DRG classifications and weighting factors for discharges in FY 1997.
    In summary, the proposed standardized amounts set forth in Tables 
1a and 1c of section V of this addendum reflect--
    <bullet> Updates of 2.2 percent for all areas (that is, the market 
basket percentage increase of 2.7 percent minus 0.5 percentage points);
    <bullet> An adjustment to ensure budget neutrality as provided for 
in sections 1886 (d)(4)(C)(iii) and (d)(3)(E) of the Act by applying 
new budget neutrality adjustment factors to the large urban and other 
standardized amounts;
    <bullet> An adjustment to ensure budget neutrality as provided for 
in section 1886(d)(8)(D) of the Act by removing the FY 1996 budget 
neutrality factor and applying a revised factor; and
    <bullet> An adjustment to apply the revised outlier offset by 
removing the FY 1996 outlier offsets and applying a new offset.

A. Calculation of Adjusted Standardized Amounts

1. Standardization of Base-Year Costs or Target Amounts
    Section 1886(d)(2)(A) of the Act required the establishment of 
base-year cost data containing allowable operating costs per discharge 
of inpatient hospital services for each hospital. The preamble to the 
September 1, 1983 interim final rule (48 FR 39763) contains a detailed 
explanation of how base-year cost data were established in the initial 
development of standardized amounts for the prospective payment system 
and how they are used in computing the Federal rates.
    Section 1886(d)(9)(B)(i) of the Act required that Medicare target 
amounts be determined for each hospital located in Puerto Rico for its 
cost reporting period beginning in FY 1987. The September 1, 1987 final 
rule contains a detailed explanation of how the target amounts were 
determined and how they are used in computing the Puerto Rico rates (52 
FR 33043, 33066).
    The standardized amounts are based on per discharge averages of 
adjusted hospital costs from a base period or, for Puerto Rico, 
adjusted target amounts from a base period, updated and otherwise 
adjusted in accordance with the provisions of section 1886(d) of the 
Act. Sections 1886 (d)(2)(C) and (d)(9)(B)(ii) of the Act required that 
the updated base-year per discharge costs and, for Puerto Rico, the 
updated target amounts, respectively, be standardized in order to 
remove from the cost data the effects of certain sources of variation 
in cost among hospitals. These include case mix, differences in area 
wage levels, cost of living adjustments for Alaska and Hawaii, indirect 
medical education costs, and payments to hospitals serving a 
disproportionate share of low-income patients.
    Since the standardized amounts have already been adjusted for 
differences in case mix, wages, cost-of-living, indirect medical 
education costs, and payments to hospitals serving a disproportionate 
share of low-income patients, no additional adjustments for these 
factors for FY 1997 were made. That is, the standardization adjustments 
reflected in the FY 1997 standardized amounts are the same as those 
reflected in the FY 1996 standardized amounts.
    Under sections 1886 (d)(2)(H) and (d)(3)(E) of the Act, in making 
payments under the prospective payment system, the Secretary estimates 
from time to time the proportion of costs that are wages and wage-
related costs. Since October 1, 1990, when the market basket was last 
rebased, we have considered 71.4 percent of costs to be labor-related 
for purposes of the prospective payment system. As discussed in section 
IV of the preamble, we are proposing to use a rebased market basket 
effective for FY 1997. Based on the proposed rebased market basket, we 
are revising the labor and nonlabor proportions of the standardized 
amounts. Effective with discharges occurring on or after October 1, 
1996, we are proposing a labor-related proportion of 71.2 percent and a 
nonlabor-related proportion of 28.8 percent. The standardized amounts 
in Table 1a of section V of this addendum have been recomputed to 
reflect the revised labor-related and nonlabor-related proportions. (We 
are revising the Puerto Rico standardized amounts by the average labor 
share in Puerto Rico of 82.8 percent. We are revising the discharged-
weighted national

[[Page 27494]]

standardized amount to reflect the proportion of discharges in large 
urban and other areas from the FY 1995 MedPAR file.)
2. Computing Large Urban and Other Averages Within Geographic Areas
    Section 1886(d)(3) of the Act requires the Secretary to compute two 
average standardized amounts for discharges occurring in a fiscal year: 
one for hospitals located in large urban areas and one for hospitals 
located in other areas. In addition, under sections 1886(d)(9) (B)(iii) 
and (C)(i) of the Act, the average standardized amount per discharge 
must be determined for hospitals located in urban and other areas in 
Puerto Rico. Hospitals in Puerto Rico are paid a blend of 75 percent of 
the applicable Puerto Rico standardized amount and 25 percent of a 
national standardized payment amount.
    Section 1886(d)(2)(D) of the Act defines ``urban areas'' as those 
areas within a Metropolitan Statistical Area (MSA). A ``large urban 
area'' is defined as an urban area with a population of more than 
1,000,000. In addition, section 4009(i) of Public Law 100-203 provides 
that a New England County Metropolitan Area (NECMA) with a population 
of more than 970,000 is classified as a large urban area. As required 
by section 1886(d)(2)(D) of the Act, population size is determined by 
the Secretary based on the latest population data published by the 
Bureau of the Census. Urban areas that do not meet the definition of a 
``large urban area'' are referred to as ``other urban areas.'' Areas 
that are not included in MSAs are considered ``rural areas'' under 
section 1886(d)(2)(D). Payment for discharges from hospitals located in 
large urban areas will be based on the large urban standardized amount. 
Payment for discharges from hospitals located in other urban and rural 
areas will be based on the other standardized amount.
    Based on 1995 population estimates published by the Bureau of the 
Census, 56 areas meet the criteria to be defined as large urban areas 
for FY 1997. These areas are identified by an asterisk in Table 4a.
    Table 1a contains the two national standardized amounts that we are 
proposing be applicable to all hospitals, except for sole community 
hospitals and hospitals in Puerto Rico. For a number of years, Table 1b 
had been used to set forth the 18 regional standardized amounts 
applicable for hospitals located in census areas subject to the 
regional floor. However, as provided in section 1886(d)(1)(A)(iii)(II) 
of the Act, the regional floor expires effective with discharges 
occurring on or after October 1, 1996. Therefore, all hospitals (except 
sole community hospitals and hospitals in Puerto Rico) will be paid 
solely on the basis of the national standardized amounts. Under section 
1886(d)(9)(A)(ii) of the Act, the national standardized payment amount 
applicable to hospitals in Puerto Rico consists of the discharge-
weighted average of the national large urban standardized amount and 
the national other standardized amount (as set forth in Table 1a). The 
national average standardized amount for Puerto Rico is now set forth 
in Table 1b. This table also includes the two standardized amounts that 
would be applicable to most hospitals in Puerto Rico.
3. Updating the Average Standardized Amounts
    In accordance with section 1886(d)(3)(A)(iv) of the Act, we are 
proposing to update the large urban and the other areas average 
standardized amounts for FY 1997 using the applicable percentage 
increases specified in section 1886(b)(3)(B)(i) of the Act. Section 
1886(b)(3)(B)(i)(XII) of the Act specifies that, for hospitals in all 
areas, the update factor for the standardized amounts for FY 1997 is 
the market basket percentage increase minus 0.5 percentage points.
    The percentage change in the market basket reflects the average 
change in the price of goods and services purchased by hospitals to 
furnish inpatient care. The most recent forecast of the proposed 
rebased hospital market basket increase for FY 1997 is 2.7 percent. For 
FY 1997, this yields an update to the average standardized amounts of 
2.2 percent (2.7 percent minus 0.5 percent). (See section IV of this 
preamble of this proposed rule for a discussion of the market basket 
rebasing.)
    As in the past, we are adjusting the FY 1996 standardized amounts 
to remove the effects of the FY 1996 geographic reclassifications and 
outlier payments before applying the FY 1997 updates. That is, we are 
increasing the standardized amounts to restore the reductions that were 
made for the effects of geographic reclassification and outliers. After 
including offsets to the standardized amounts for outliers and 
geographic reclassification, we estimate that there will be an actual 
increase of 2.3 percent to the large urban and other area standardized 
amounts.
    Although the update factor for FY 1997 is set by law, we are 
required by section 1886(e)(3)(B) of the Act to report to Congress on 
our initial recommendation of update factors for FY 1997 for both 
prospective payment hospitals and hospitals excluded from the 
prospective payment system. For general information purposes, we have 
included the report to Congress as Appendix D to this proposed rule. 
Our proposed recommendation on the update factors (which is required by 
sections 1886 (e)(4)(A) and (e)(5)(A) of the Act), as well as our 
responses to ProPAC's recommendation concerning the update factor, are 
set forth as Appendix E to this proposed rule.
4. Other Adjustments to the Average Standardized Amounts
    a. Recalibration of DRG Weights and Updated Wage Index--Budget 
Neutrality Adjustment. Section 1886(d)(4)(C)(iii) of the Act specifies 
that beginning in FY 1991, the annual DRG reclassification and 
recalibration of the relative weights must be made in a manner that 
ensures that aggregate payments to hospitals are not affected. As 
discussed in section II of the preamble, we normalized the recalibrated 
DRG weights by an adjustment factor, so that the average case weight 
after recalibration is equal to the average case weight prior to 
recalibration.
    Section 1886(d)(3)(E) of the Act specifies that the hospital wage 
index must be updated on an annual basis beginning October 1, 1993. 
This provision also requires that any updates or adjustments to the 
wage index must be made in a manner that ensures that aggregate 
payments to hospitals are not affected by the change in the wage index.
    To comply with the requirement of section 1886(d)(4)(C)(iii) of the 
Act that DRG reclassification and recalibration of the relative weights 
be budget neutral, and the requirement in section 1886(d)(3)(E) of the 
Act that the updated wage index be budget neutral, we compared 
aggregate payments using the FY 1996 relative weights and wage index to 
aggregate payments using the proposed FY 1997 relative weights and wage 
index. The same methodology was used for the FY 1996 budget neutrality 
adjustment. (See the discussion in the September 1, 1992 final rule (57 
FR 39832).) Based on this comparison, we computed a budget neutrality 
adjustment factor equal to 0.998509. This budget neutrality adjustment 
factor is applied to the standardized amounts without removing the 
effects of the FY 1996 budget neutrality adjustment. We do not remove 
the prior budget neutrality adjustment because estimated aggregate 
payments after the changes in the DRG relative weights and wage index 
should equal estimated aggregate payments prior to the changes. If we

[[Page 27495]]

removed the prior year adjustment, we would not satisfy this condition.
    In addition, we are proposing to continue to apply the same FY 1997 
adjustment factor to the hospital-specific rates that are effective for 
cost reporting periods beginning on or after October 1, 1996, in order 
to ensure that we meet the statutory requirement that aggregate 
payments neither increase nor decrease as a result of the 
implementation of the FY 1997 DRG weights and updated wage index. (See 
the discussion in the September 4, 1990 final rule (55 FR 36073).)
    b. Reclassified Hospitals--Budget Neutrality Adjustment. Section 
1886(d)(8)(B) of the Act provides that certain rural hospitals are 
deemed urban effective with discharges occurring on or after October 1, 
1988. In addition, section 1886(d)(10) of the Act provides for the 
reclassification of hospitals based on determinations by the Medicare 
Geographic Classification Review Board (MGCRB). Under section 
1886(d)(10) of the Act, a hospital may be reclassified for purposes of 
the standardized amount or the wage index, or both.
    Under section 1886(d)(8)(D) of the Act, the Secretary is required 
to adjust the standardized amounts so as to ensure that total aggregate 
payments under the prospective payment system after implementation of 
the provisions of sections 1886(d)(8) (B) and (C) and 1886(d)(10) of 
the Act are equal to the aggregate prospective payments that would have 
been made absent these provisions. To calculate this budget neutrality 
factor, we used historical discharge data to simulate payments, and 
compared total prospective payments (including IME and DSH payments) 
prior to any reclassifications to total prospective payments after 
reclassifications. We are applying an adjustment factor of 0.994059 to 
ensure that the effects of reclassification are budget neutral.
    The adjustment factor is applied to the standardized amounts after 
removing the effects of the FY 1996 budget neutrality adjustment 
factor. We note that the proposed FY 1997 adjustment reflects wage 
index and standardized amount reclassifications approved by the MGCRB 
or the Administrator as of March 14, 1996. The effects of any 
additional reclassification changes resulting from appeals and reviews 
of the MGCRB decisions for FY 1997 or from a hospital's request for the 
withdrawal of a reclassification request will be reflected in the final 
budget neutrality adjustment required under section 1886(d)(8)(D) of 
the Act and published in the final rule for FY 1997.
    c. Outliers. Section 1886(d)(5)(A) of the Act provides for payments 
in addition to the basic prospective payments for ``outlier'' cases, 
cases involving extraordinarily high costs (cost outliers) or long 
lengths of stay (day outliers). Section 1886(d)(3)(B) of the Act 
requires the Secretary to adjust both the large urban and other area 
national standardized amounts by the same factor to account for the 
estimated proportion of total DRG payments made to outlier cases. 
Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary 
to adjust the large urban and other standardized amounts applicable to 
hospitals in Puerto Rico by the same factor to account for the 
estimated proportion of total DRG payments made to outlier cases. 
Furthermore, under section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year must be projected to be not less than 5 percent 
nor more than 6 percent of total payments based on DRG prospective 
payment rates.
    Beginning with FY 1995, section 1886(d)(5)(A) of the Act requires 
the Secretary to phase out payments for day outliers (correspondingly, 
payments for cost outliers would increase). Under the requirements of 
section 1886(d)(5)(A)(v), the proportion of day outlier payments to 
total outlier payments is reduced from FY 1994 levels as follows: 75 
percent of FY 1994 levels in FY 1995, 50 percent of FY 1994 levels in 
FY 1996, and 25 percent of FY 1994 levels in FY 1997. We estimated the 
FY 1994 proportion of day outlier payments to total outlier payments at 
31.3 percent in our September 1, 1993 final rule (58 FR 46348). Thus, 
the proportion of day outlier payments to total outlier payments in FY 
1997 will be approximately 8 percent (25 percent of 31.3 percent). For 
discharges occurring after September 30, 1997, the Secretary will no 
longer pay for day outliers under the provisions of section 
1886(d)(5)(A)(i) of the Act.
    i. Proposed FY 1997 Outlier Payment Policies, Including Outlier 
Thresholds. For FY 1996, the day outlier threshold is the geometric 
mean length of stay for each DRG plus the lesser of 23 days or 3.0 
standard deviations. The marginal cost factor for day outliers (the 
percent of Medicare's average per diem payment paid for each outlier 
day) is 44 percent for FY 1996. The fixed loss cost outlier threshold 
is equal to the prospective payment for the DRG plus $15,150 ($13,800 
for hospitals that have not yet entered the prospective payment system 
for capital-related costs). The marginal cost factor for cost outliers 
(the percent of costs paid after costs for the case exceed the 
threshold) is 80 percent. We applied an outlier adjustment to the FY 
1996 standardized amounts of 0.949054 for the large urban and other 
areas rates and 0.9526 for the capital Federal rate.
    For FY 1997, we propose to set the day outlier threshold at the 
geometric mean length of stay for each DRG plus the lesser of 24 days 
or 3.0 standard deviations. Section 1886(d)(5)(A)(iii) of the Act, as 
amended by section 13501(c)(3) of Public Law 103-66, provides that 
additional payments for day outlier cases may be reduced below the 
marginal cost of care to meet the requirements of section 
1886(d)(5)(A)(v) of the Act. We are proposing to reduce the marginal 
cost factor for each outlier day from 44 percent to 35 percent in FY 
1997. We estimate that our proposed policies will reduce the proportion 
of outlier payments paid as day outliers in FY 1997 to approximately 8 
percent, in accordance with section 1886(d)(5)(A) of the Act.
    We are also proposing a fixed loss cost outlier threshold in FY 
1997 equal to the prospective payment rate for the DRG plus $11,050 
($10,075 for hospitals that have not yet entered the prospective 
payment system for capital-related costs). In addition, we are 
proposing to maintain the marginal cost factor for cost outliers at 80 
percent.
    In accordance with section 1886(d)(5)(A)(iv) of the Act, we 
calculated proposed outlier thresholds so that outlier payments are 
projected to equal 5.1 percent of total payments based on DRG 
prospective payment rates. In accordance with section 1886(d)(3)(E), we 
reduced the proposed FY 1997 standardized amounts by the same 
percentage to account for the projected proportion of payments paid to 
outliers.
    As stated in the September 1, 1993 final rule (58 FR 46348), we 
establish outlier thresholds that are applicable to both inpatient 
operating costs and inpatient capital-related costs. When we modeled 
the combined operating and capital outlier payments, we found that 
using a common set of thresholds resulted in a higher percentage of 
outlier payments for capital-related costs than for operating costs. We 
project that the proposed thresholds for FY 1997 will result in outlier 
payments equal to 5.1 percent of operating DRG payments and 5.2 percent 
of capital payments based on the Federal rate.
    Thus, the proposed outlier adjustment factors applied to the 
standardized amounts and the capital Federal rate for FY 1997 are as 
follows:

[[Page 27496]]



------------------------------------------------------------------------
                                                                Capital 
                Operating Standardized Amounts                  Federal 
                                                                  Rate  
------------------------------------------------------------------------
0.948968.....................................................     0.9476
------------------------------------------------------------------------

    We would apply the proposed outlier adjustment factors after 
removing the effects of the FY 1996 outlier adjustment factors on the 
standardized amounts and the capital Federal rate.
    ii. Other Changes Concerning Outliers. Table 5 of section V of this 
addendum contains the DRG relative weights, geometric and arithmetic 
mean lengths of stay, as well as the day outlier threshold for each 
DRG. When we recalibrate DRG weights, we set a threshold of 10 cases as 
the minimum number of cases required to compute a reasonable weight and 
geometric mean length of stay. DRGs that do not have at least 10 cases 
are considered to be low volume DRGs. For the low volume DRGs, we use 
the original geometric mean lengths of stay, because no arithmetic mean 
length of stay was calculated based on the original data.
    Table 8a in section V of this addendum contains the updated 
Statewide average operating cost-to-charge ratios for urban hospitals 
and for rural hospitals to be used in calculating cost outlier payments 
for those hospitals for which the intermediary is unable to compute a 
reasonable hospital-specific cost-to-charge ratio. These Statewide 
average ratios would replace the ratios published in the September 1, 
1995 final rule (60 FR 45922), effective October 1, 1996. Table 8b 
contains comparable Statewide average capital cost-to-charge ratios. 
These average ratios would be used to calculate cost outlier payments 
for those hospitals for which the intermediary computes operating cost-
to-charge ratios lower than 0.24345 or greater than 1.30392 and capital 
cost-to-charge ratios lower than 0.013297 or greater than 0.19968. This 
range represents 3.0 standard deviations (plus or minus) from the mean 
of the log distribution of cost-to-charge ratios for all hospitals. We 
note that the cost-to-charge ratios in Tables 8a and 8b would be used 
for all cost reports settled during FY 1997 (regardless of the actual 
cost reporting period) when hospital-specific cost-to-charge ratios are 
either not available or outside the three standard deviations range.
    iii. FY 1995 and FY 1996 Outlier Payments. In the September 1, 1995 
final rule (59 FR 45408), we stated that, based on available data, we 
estimated that actual FY 1995 outlier payments would be approximately 
4.0 percent of actual total DRG payments. This percentage was computed 
by simulating payments using actual FY 1994 bill data available at the 
time. That is, the estimate of actual outlier payments did not reflect 
actual FY 1995 bills but instead reflected the application of FY 1995 
rates and policies to available FY 1994 bills. Our current estimate, 
using available FY 1995 bills, is that actual outlier payments for FY 
1995 were approximately 3.7 percent of actual total DRG payments (lower 
than the 5.1 percent we projected in setting outlier policies for FY 
1995). We note that the MedPAR file for FY 1995 discharges continues to 
be updated.
    We currently estimate that actual outlier payments for FY 1996 will 
be approximately 4.2 percent of actual total DRG payments (lower than 
the 5.1 percent we projected in setting outlier policies for FY 1996). 
This estimate is based on simulations using the December 1995 update of 
the provider-specific file and the December 1995 update of the FY 1995 
MedPAR file (discharge data for FY 1995 bills). We used these data to 
calculate an estimate of the actual outlier percentage for FY 1996 by 
applying FY 1996 rates and policies to available FY 1995 bills.
    The following discussion addresses the methodology we use to set 
outlier thresholds for an upcoming fiscal year and also addresses 
possible explanations for the difference between projected and actual 
outlier payment percentages in recent years.
    iv. Methodology for Setting Outlier Thresholds. In previous 
rulemaking documents, we have discussed the methodology for setting 
outlier thresholds as well as our periodic refinements to that 
methodology. In this document, we once again describe our methodology 
and analyze it to suggest some possible explanations for the recent 
differences between projected and actual outlier percentages. We invite 
comments and suggestions for further refinements to the methodology.
    In General. In accordance with section 1886(d)(5)(A)(iv) of the 
Act, we set outlier thresholds so that outlier payments are expected 
(projected) to equal 5.1 percent of total payments based on DRG 
prospective payment rates. The databases used to calculate thresholds 
for an upcoming fiscal year include data on discharges from a previous 
fiscal year as well as hospital-specific data. We update the data every 
year. In setting the proposed FY 1997 outlier thresholds, we used the 
December 1995 update of the FY 1995 MedPAR file, which contains data on 
FY 1995 hospital inpatient discharges, and the December 1995 update of 
the provider-specific file, which contains information on hospital-
specific payment parameters (such as cost-to-charge ratios).
    The methodology for setting outlier thresholds for an upcoming 
fiscal year involves analyzing the set of hospital inpatient cases in 
the MedPAR file and simulating payments for those cases by using the 
payment rates and policies that would apply in the upcoming fiscal 
year. For example, in calculating the proposed thresholds for FY 1997, 
we used the proposed payment rates and policies for FY 1997 and 
simulated payments for the set of cases in the FY 1995 MedPAR file.
    The computer simulation calculates ``payments''--outlier payments 
and total payments--for all discharges for a given set of outlier 
thresholds. In order to achieve established objectives (for example, 
the projected percentage of outlier payments relative to total DRG 
payments is 5.1 percent, and the projected percentage of outlier 
payments attributable to day outliers is 8 percent for FY 1997), the 
methodology involves an iterative process, that is, numerous successive 
simulations using alternative sets of outlier thresholds. In short, 
then, the outlier estimation methodology involves analyzing historical 
discharge data, simulating payments for the discharges in the database 
by using the payment rates that would apply in the upcoming fiscal 
year, and testing alternative sets of outlier thresholds until the 
simulations are consistent with established objectives.
    Cost Inflation Factors. In setting outlier thresholds for an 
upcoming fiscal year, we need to calculate the ``costs'' for each case 
in our database. In the payment simulations, this ``cost'' for each 
case is used to determine, for a given cost outlier threshold, whether 
a case qualifies for additional outlier payments and the amount of any 
such payments. (As explained above, we test alternative sets of 
thresholds.)
    The MedPAR file includes data on billed charges, and as part of the 
estimation methodology, we make adjustments to convert the charges to 
costs, including adjusting the data for inflation. In setting the 
proposed outlier thresholds for FY 1997, we analyzed data for FY 1995 
discharges.
    As we explained in the September 1, 1993 final rule (58 FR 46347), 
prior to FY 1994, we used a charge inflation factor to adjust charges 
to costs; for example, in setting outlier thresholds for FY 1993, we 
adjusted the FY 1991 MedPAR file charge data by a charge inflation 
factor for 2 years in order to estimate FY 1993 charges and then 
applied the applicable cost-to-charge

[[Page 27497]]

ratio. Beginning with FY 1994, we have used a cost inflation factor to 
estimate ``costs''; that is, we adjust the charges by the cost-to-
charge ratio and then adjust the resulting costs for 2 years of cost 
inflation. This adjustment automatically accounts for any changes in 
the cost-to-charge ratios that may occur, since the relevant variable 
is the estimated ``costs'' for a given case.
    In setting the final outlier thresholds for recent years 
immediately prior to FY 1995, we determined cost inflation factors by 
analyzing cost report information to calculate moving averages of cost 
inflation for prior periods. (For example, in setting the FY 1994 
outlier thresholds, we analyzed cost reports for cost reporting periods 
beginning in FY 1988 through FY 1991 to calculate a cost inflation 
factor, that is, the average annual increase in cost per case, of 8.3 
percent.) In doing so, we made an audit adjustment for any cost report 
that had not been settled, based on the average ratio of submitted to 
final cost report data. In setting the final outlier thresholds for FYs 
1995 and 1996, we determined cost inflation factors by analyzing cost 
report information and calculating the change in cost per case for one 
year, rather than the average change in cost per case over more than 
one year.
    In setting the proposed FY 1997 outlier thresholds, we used a cost 
inflation factor of 0.0 percent, because it is unclear whether FY 1997 
``costs'' will be higher or lower than costs reflected in the FY 1995 
MedPAR file. Analysis of recent cost report information shows that cost 
per case increased slightly for cost reporting periods beginning in FY 
1993 relative to those beginning in FY 1992, but decreased slightly in 
the following year (that is, for cost reporting periods beginning in FY 
1994 relative to those beginning in FY 1993). We will reevaluate this 
factor when we develop the final rule for FY 1997. At that time, more 
recent data should be available for analysis, specifically, cost report 
data for cost reporting periods beginning in FY 1995.
    Differences Between Projected and Actual Outlier Percentages. As 
explained above, the cost inflation factor is an important aspect of 
the methodology for setting outlier thresholds, and we believe the cost 
inflation factor is a major reason that in recent years the actual 
outlier percentages (the proportion of actual outlier payments to 
actual total DRG payments) have been lower than projected.
    In determining the cost inflation factor, we analyze historical 
hospital cost report information, and there is necessarily a time lag 
of 2 to 3 years between the cost reporting period itself and the time 
when data for that cost reporting period become available. For example, 
in setting the FY 1994 outlier thresholds, we used a cost inflation 
factor of 8.3 percent, derived from cost reports for cost reporting 
periods beginning in FY 1988 through FY 1991. We adjusted the charges 
from the FY 1992 MedPAR bills by the cost-to-charge ratio and then 
adjusted the resulting FY 1992 costs for 2 years of cost inflation 
(costs multiplied by 1.083 multiplied by 1.083) to estimate ``FY 1994 
costs.''
    However, analysis of more recent cost report information shows that 
cost per case increased at a much lower rate of 0.97 percent in cost 
reporting periods between FY 1992 and FY 1993 and actually decreased 
1.77 percent in cost reporting periods between FY 1993 and FY 1994. In 
effect, we ``overestimated'' costs by approximately 15.4 percent. Since 
costs did not increase at nearly the rate we expected, actual costs in 
FY 1994 proved to be lower than those reflected in the simulations used 
to set the thresholds for FY 1994; accordingly, the proportion of 
outlier payments was lower than expected.
    Another aspect of the outlier methodology that may have contributed 
to the difference between projected and actual outlier percentages 
concerns the payment adjustments for indirect medical education (IME) 
and disproportionate share hospitals (DSH). As indicated in previous 
rulemaking documents, for purposes of determining outlier payments, we 
standardize a hospital's costs for IME and DSH adjustments; that is, we 
reduce the hospital's costs for a given discharge to account for IME 
and DSH payments. The ``standardized''<gr-thn-eq> cost for a discharge 
is calculated by taking total costs for the discharge and dividing it 
by the sum of one plus the hospital's DSH factor plus the hospital's 
IME factor. Therefore, the higher the IME and DSH factors, the more 
costs are reduced by standardization.
    The factors used for purposes of setting thresholds are taken from 
the most recent provider-specific file. In setting the proposed FY 1997 
outlier thresholds, we used information from the December 1995 update 
of the provider-specific file. We standardized the costs for each 
discharge in our database to account for IME and DSH adjustments. The 
proposed outlier thresholds reflect these standardized costs.
    While we use the latest, most up-to-date sources of information, 
the ``projected'' IME and DSH factors (the factors used to set 
thresholds for a fiscal year) may differ from the actual IME and DSH 
factors used to make payments in that fiscal year. If the ``projected'' 
factors used to standardize costs for a given discharge are ``too 
low,'' then standardization does not ``sufficiently'' reduce the costs 
for that discharge and the resulting standardized cost is ``too high.'' 
If the standardized costs for the discharges analyzed to set outlier 
thresholds are generally ``too high,'' then in turn the thresholds 
would be too high; consequently, this might result in a lower than 
expected proportion of outlier payments. Analysis shows that, for FY 
1994 for example, the ``projected'' IME and DSH factors were on average 
lower than the actual factors.
    Conclusion. As we have done since the inception of the prospective 
payment system, we determine outlier thresholds based on estimates 
before the beginning of each fiscal year. The methodology we use 
involves analysis of the best data available at the time thresholds are 
established; however, by their nature, projections are imprecise and 
may differ from actual payment data for any number of reasons. We 
discussed above some of the numerous factors that affect payment and 
why these particular factors may have contributed to the difference 
between projected and actual outlier payments in recent years. (See 
also, for example, the discussion in the September 1, 1995 final rule 
(60 FR 45855).) We note that any difference between projected and 
actual outlier payment percentages in a given year does not affect 
standardized amounts in future years.
    We continue to explore refinements to the methodology for setting 
outlier thresholds. We welcome comments and suggestions regarding these 
issues.

B. Adjustments for Area Wage Levels and Cost of Living

    The adjusted standardized amounts are divided into labor and 
nonlabor portions. Tables 1a and 1c, as set forth in this addendum, 
contain the actual labor-related and nonlabor-related shares that will 
be used to calculate the prospective payment rates for hospitals 
located in the 50 States, the District of Columbia, and Puerto Rico. 
This section addresses two types of adjustments to the standardized 
amounts that are made in determining the prospective payment rates as 
described in this addendum.
1. Adjustment for Area Wage Levels
    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that an adjustment be made to the labor-related portion of the 
prospective payment rates to account for area differences in hospital 
wage levels. This

[[Page 27498]]

adjustment is made by multiplying the labor-related portion of the 
adjusted standardized amounts by the appropriate wage index for the 
area in which the hospital is located. In section III of the preamble, 
we discuss certain revisions we are making to the wage index. This 
index is set forth in Tables 4a through 4e of this addendum.
2. Adjustment for Cost of Living in Alaska and Hawaii
    Section 1886(d)(5)(H) of the Act authorizes an adjustment to take 
into account the unique circumstances of hospitals in Alaska and 
Hawaii. Higher labor-related costs for these two States are taken into 
account in the adjustment for area wages described above. For FY 1997, 
we propose to adjust the payments for hospitals in Alaska and Hawaii by 
multiplying the nonlabor portion of the standardized amounts by the 
appropriate adjustment factor contained in the table below. If the 
Office of Personnel Management releases revised cost-of-living 
adjustment factors before August 1, 1996, we will publish them in the 
final rule and use them in determining FY 1997 payments.

 Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Alaska--All areas................................................  1.25 
Hawaii:                                                                 
  County of Honolulu.............................................  1.225
  County of Hawaii...............................................  1.15 
   County of Kauai...............................................  1.20 
  County of Maui.................................................  1.225
  County of Kalawao..............................................  1.225
------------------------------------------------------------------------
(The above factors are based on data obtained from the U.S. Office of   
  Personnel Management.)                                                

C. DRG Relative Weights

    As discussed in section II of the preamble, we have developed a 
classification system for all hospital discharges, assigning them into 
DRGs, and have developed relative weights for each DRG that reflect the 
resource utilization of cases in each DRG relative to Medicare cases in 
other DRGs. Table 5 of section V of this addendum contains the relative 
weights that we propose to use for discharges occurring in FY 1997. 
These factors have been recalibrated as explained in section II of the 
preamble.

D. Calculation of Prospective Payment Rates for FY 1997

General Formula for Calculation of Prospective Payment Rates for FY 
1997
    Prospective payment rate for all hospitals located outside Puerto 
Rico except sole community hospitals = Federal rate.
    Prospective payment rate for sole community hospitals = Whichever 
of the following rates yields the greatest aggregate payment: 100 
percent of the Federal rate, 100 percent of the updated FY 1982 
hospital-specific rate, or 100 percent of the updated FY 1987 hospital-
specific rate. Prospective payment rate for Puerto Rico = 75 percent of 
the Puerto Rico rate + 25 percent of a discharge-weighted average of 
the national large urban standardized amount and the national other 
standardized amount.
1. Federal Rate
    For discharges occurring on or after October 1, 1996 and before 
October 1, 1997, except for sole community hospitals and hospitals in 
Puerto Rico, the hospital's payment is based exclusively on the Federal 
national rate. Section 1866(d)(1)(A)(iii) of the Act provides that the 
Federal rate is comprised of 100 percent of the Federal national rate.
    The payment amount is determined as follows:
    Step 1--Select the appropriate national standardized amount 
considering the type of hospital and designation of the hospital as 
large urban or other (see Tables 1a, section V of this addendum).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the applicable wage index for the geographic area in which 
the hospital is located (see Tables 4a, 4b, and 4c, section V of this 
addendum).
    Step 3--For hospitals in Alaska and Hawaii, multiply the nonlabor-
related portion of the standardized amount by the appropriate cost-of-
living adjustment factor.
    Step 4--Add the amount from Step 2 and the nonlabor-related portion 
of the standardized amount (adjusted if appropriate under Step 3).
    Step 5--Multiply the final amount from Step 4 by the relative 
weight corresponding to the appropriate DRG (see Table 5, section V of 
this addendum).
2. Hospital-Specific Rate (Applicable Only to Sole Community Hospitals)
    Sections 1886(d)(5)(D)(i) and (b)(3)(C) of the Act provide that 
sole community hospitals are paid based on whichever of the following 
rates yields the greatest aggregate payment: the Federal rate, the 
updated hospital-specific rate based on FY 1982 cost per discharge, or 
the updated hospital-specific rate based on FY 1987 cost per discharge.
    Hospital-specific rates have been determined for each of these 
hospitals based on both the FY 1982 cost per discharge and the FY 1987 
cost per discharge. For a more detailed discussion of the calculation 
of the FY 1982 hospital-specific rate and the FY 1987 hospital-specific 
rate, we refer the reader to the September 1, 1983 interim final rule 
(48 FR 39772); the April 20, 1990 final rule with comment (55 FR 
15150); and the September 4, 1990 final rule (55 FR 35994).
    a. Updating the FY 1982 and FY 1987 Hospital-Specific Rates for FY 
1997. We are proposing to increase the hospital-specific rates by 2.2 
percent (the hospital market basket percentage increase minus 0.5 
percentage points) for sole community hospitals located in all areas in 
FY 1997. Section 1886(b)(3)(C)(ii) of the Act provides that the update 
factor applicable to the hospital-specific rates for sole community 
hospitals equals the update factor provided under section 
1886(b)(3)(B)(ii) of the Act, which, for FY 1997, is the market basket 
rate of increase minus 0.5 percentage points.
    b. Calculation of Hospital-Specific Rate. For sole community 
hospitals, the applicable FY 1997 hospital-specific rate would be 
calculated by multiplying a hospital's hospital-specific rate for the 
preceding fiscal year by the applicable update factor (2.2 percent), 
which is the same as the update for all prospective payment hospitals. 
In addition, the hospital-specific rate would be adjusted by the budget 
neutrality adjustment factor (that is, 0.998509) as discussed in 
section II.A.4.a of this Addendum. This resulting rate would be used in 
determining under which rate a sole community hospital is paid for its 
discharges beginning on or after October 1, 1996, based on the formula 
set forth above.
    3. General Formula for Calculation of Prospective Payment Rates for 
Hospitals Located in Puerto Rico Beginning On or After October 1, 1996 
and Before October 1, 1997.
    a. Puerto Rico Rate. The Puerto Rico prospective payment rate is 
determined as follows:
    Step 1--Select the appropriate adjusted average standardized amount 
considering the large urban or other designation of the hospital (see 
Table 1b, section V of the addendum).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the appropriate wage index (see Tables 4a and 4b, section V 
of the addendum).
    Step 3--Add the amount from Step 2 and the nonlabor-related portion 
of the standardized amount.
    Step 4--Multiply the result in Step 3 by 75 percent.
    Step 5--Multiply the amount from Step 4 by the appropriate DRG 
relative weight (see Table 5, section V of the addendum).

[[Page 27499]]

    b. National Rate. The national prospective payment rate is 
determined as follows:
    Step 1--Multiply the labor-related portion of the national average 
standardized amount (see Table 1b, section V of the addendum) by the 
appropriate wage index.
    Step 2--Add the amount from Step 1 and the nonlabor-related portion 
of the national average standardized amount.
    Step 3--Multiply the result in Step 2 by 25 percent.
    Step 4--Multiply the amount from Step 3 by the appropriate DRG 
relative weight (see Table 5, section V of the addendum).
    The sum of the Puerto Rico rate and the national rate computed 
above equals the prospective payment for a given discharge for a 
hospital located in Puerto Rico.

III. Proposed Changes to Payment Rates for Inpatient Capital-Related 
Costs for FY 1997

    The prospective payment system for hospital inpatient capital-
related costs was implemented for cost reporting periods beginning on 
or after October 1, 1991. Effective with that cost reporting period and 
during a 10-year transition period extending through FY 2001, hospital 
inpatient capital-related costs are paid on the basis of an increasing 
proportion of the capital prospective payment system Federal rate and a 
decreasing proportion of a hospital's historical costs for capital.
    The basic methodology for determining Federal capital prospective 
rates is set forth at Secs. 412.308 through 412.352. Below we discuss 
the factors that we used to determine the proposed Federal rate and the 
hospital-specific rates for FY 1997. The rates will be effective for 
discharges occurring on or after October 1, 1996.
    For FY 1992, we computed the standard Federal payment rate for 
capital-related costs under the prospective payment system by updating 
the FY 1989 Medicare inpatient capital cost per case by an actuarial 
estimate of the increase in Medicare inpatient capital costs per case. 
Each year after FY 1992 we update the standard Federal rate, as 
provided in Sec. 412.308(c)(1), to account for capital input price 
increases and other factors. Also, Sec. 412.308(c)(2) provides that the 
Federal rate is adjusted annually by a factor equal to the estimated 
proportion of outlier payments under the Federal rate to total capital 
payments under the Federal rate. Section 412.308(c)(3) further requires 
that the Federal rate be reduced by an adjustment factor equal to the 
estimated proportion of payments for exceptions under Sec. 412.348, and 
Sec. 412.308(c)(4)(ii) requires that the Federal rate be adjusted so 
that the annual DRG reclassification and the recalibration of DRG 
weights and changes in the geographic adjustment factor are budget 
neutral. For FY 1992 through FY 1995, Sec. 412.352 required that the 
Federal rate also be adjusted by a budget neutrality factor so that 
aggregate payments for inpatient hospital capital costs were projected 
to equal 90 percent of the payments that would have been made for 
capital-related costs on a reasonable cost basis during the fiscal 
year. That provision expired in FY 1996.
    The hospital-specific rate for each hospital was calculated by 
dividing the hospital's Medicare inpatient capital-related costs for a 
specified base year by its Medicare discharges (adjusted for 
transfers), and dividing the result by the hospital's case mix index 
(also adjusted for transfers). The resulting case-mix adjusted average 
cost per discharge was then updated to FY 1992 based on the national 
average increase in Medicare's inpatient capital cost per discharge and 
adjusted by the exceptions payment adjustment factor and the budget 
neutrality adjustment factor to yield the FY 1992 hospital-specific 
rate. The hospital-specific rate is updated each year after FY 1992 for 
inflation and for changes in the exceptions payment adjustment factor. 
For FY 1992 through FY 1995, the hospital-specific rate was also 
adjusted by a budget neutrality adjustment factor.
    To determine the appropriate budget neutrality adjustment factors 
and the exceptions payment adjustment factor, we developed a dynamic 
model of Medicare inpatient capital-related costs, that is, a model 
that projects changes in Medicare inpatient capital-related costs over 
time. With the expiration of the budget neutrality provision, the model 
is still used to estimate the exceptions payment adjustment and other 
factors. The model and its application are described more fully in 
Appendix B.
    In accordance with section 1886(d)(9)(A) of the Act, under the 
prospective payment system for inpatient operating costs, hospitals 
located in Puerto Rico are paid for operating costs under a special 
payment formula. These hospitals are paid a blended rate that is 
comprised of 75 percent of the applicable standardized amount specific 
to Puerto Rico hospitals and 25 percent of the applicable national 
average standardized amount. Section 412.374 provides for the use of 
this blended payment system for payments to Puerto Rico hospitals under 
the prospective payment system for inpatient capital-related costs. 
Accordingly, for capital-related costs we compute a separate payment 
rate specific to Puerto Rico hospitals using the same methodology used 
to compute the national Federal rate for capital. Hospitals in Puerto 
Rico are paid based on 75 percent of the Puerto Rico rate and 25 
percent of the Federal rate.

A. Determination of Federal Inpatient Capital-Related Prospective 
Payment Rate Update

    For FY 1996, the Federal rate is $461.96. With the changes we are 
proposing to the factors used to establish the Federal rate, the 
proposed FY 1997 Federal rate is $441.84.
    In the discussion that follows, we explain the factors that were 
used to determine the proposed FY 1997 Federal rate. In particular, we 
explain why the FY 1997 Federal rate has decreased 4.36 percent 
compared to the FY 1996 Federal rate. Nevertheless, as explained in 
section VII of Appendix A, capital payments per case are estimated to 
increase 4.45 percent. Taking into account the effects of increases in 
projected discharges, we also estimate that aggregate capital payments 
will increase 7.28 percent.
    The major factor contributing to the decrease in the proposed FY 
1997 rate in comparison to the FY 1996 rate is the change in the 
exceptions reduction factor. We have expected the number and amount of 
exceptions payments generally to increase throughout the transition 
period.
    Total payments to hospitals under the prospective payment system 
are relatively insensitive to changes in the capital prospective 
payments. Since capital payments constitute about 10 percent of 
hospital payments, a 1 percent change in the capital Federal rate 
yields only about 0.1 percent change in actual payments to hospitals. 
Aggregate payments under the capital prospective payment transition 
system are estimated to increase in FY 1997 compared to FY 1996. 
Specifically, we estimate that aggregate payments in FY 1997 will be 
7.28 percent higher than they were in FY 1996. Changes in aggregate 
payments include changes in capital payments per discharge and changes 
in the number of discharges. Under the prospective payment system for 
capital-related costs, payments per discharge (or case) are estimated 
to increase 4.45 percent in FY 1997 compared to FY 1996.
1. Standard Federal Rate Update
    Section 412.308(c)(1) has provided that the standard Federal rate 
is updated on the basis of an analytical framework

[[Page 27500]]

that takes into account changes in a capital input price index and 
other factors. The update framework consists of a capital input price 
index (CIPI) and several policy adjustment factors. Specifically, we 
have adjusted the projected CIPI rate of increase as appropriate each 
year for case-mix index related changes, for intensity, and for errors 
in previous CIPI forecasts. The proposed update factor for FY 1997 
under that framework is 1.0 percent. This proposal is based on a 
projected 1.0 percent increase in the CIPI, and on policy adjustment 
factors of zero. We explain the basis for the FY 1997 CIPI projection 
in section IV.B of the preamble to this proposed rule. Here we describe 
the policy adjustments that have been applied.
    The case-mix index (CMI) is the measure of the average DRG weight 
for cases paid under the prospective payment system. Because the DRG 
weight determines the prospective payment for each case, any percentage 
increase in the CMI corresponds to an equal percentage increase in 
hospital payments.
    The CMI can change for any of several reasons: because the average 
resource use of Medicare patients changes (``real'' case-mix change); 
because changes in hospital coding of patient records result in higher 
weight DRG assignments (``coding effects''); and because the annual DRG 
reclassification and recalibration changes may not be budget neutral 
(``reclassification effect''). We define real case-mix change as actual 
changes in the mix (and resource requirements) of Medicare patients as 
opposed to changes in coding behavior that result in assignment of 
cases to higher-weighted DRGs but do not reflect higher resource 
requirements. In the update framework for the prospective payment 
system for operating costs, we adjust the update upwards to allow for 
real case-mix change, but remove the effects of coding changes on the 
CMI. We also remove the effect on total payments of prior changes to 
the DRG classifications and relative weights, in order to retain budget 
neutrality for all CMI-related changes other than patient severity. 
(For example, we adjusted for the effects of the FY 1992 DRG 
reclassification and recalibration as part of our FY 1994 update 
recommendation.) The operating adjustment consists of a reduction for 
total observed case-mix change, an increase for the portion of case-mix 
change that we determine is due to real case-mix change rather than 
coding modifications, and an adjustment for the effect of prior DRG 
reclassification and recalibration changes. We have adopted this CMI 
adjustment in the capital update framework as well.
    For FY 1997, we are projecting a 1.6 percent increase in the case-
mix index. We estimate that real case-mix increase will equal projected 
case-mix increase in FY 1997. We do not anticipate any changes in 
coding behavior in our projected case-mix change. We explain the basis 
for this determination in Appendix D to this proposed rule. The 
proposed net adjustment for case-mix change in FY 1997 is therefore 0.0 
percentage points.
    We estimate that DRG reclassification and recalibration resulted in 
a 0.0 percent change in the case mix when compared with the case-mix 
index that would have resulted if we had not made the reclassification 
and recalibration changes to the DRGs.
    The current operating update framework contains an adjustment for 
forecast error. The input price index forecast is based on historical 
trends and relationships ascertainable at the time the update factor is 
established for the upcoming year. In any given year there may be 
unanticipated price fluctuations that may result in differences between 
the actual increase in prices faced by hospitals and the forecast used 
in calculating the update factors. In setting a prospective payment 
rate under the proposed framework, we make an adjustment for forecast 
error only if our estimate of the capital input price index rate of 
increase for any year is off by 0.25 percentage points or more. There 
is a 2-year lag between the forecast and the measurement of the 
forecast error. Thus, for example, we would adjust for a forecast error 
made in FY 1996 through an adjustment to the FY 1998 update. Because we 
only introduced this analytical framework in FY 1996, FY 1998 is the 
first year in which a forecast error adjustment could be required.
    Under the capital prospective payment system framework, we also 
make an adjustment for changes in intensity. We calculate this 
adjustment using the same methodology and data as in the framework for 
the operating prospective payment system. The intensity factor for the 
operating update framework reflects how hospital services are utilized 
to produce the final product, that is, the discharge. This component 
accounts for changes in the use of quality-enhancing services, changes 
in within-DRG severity, and expected modification of practice patterns 
to remove cost-ineffective services.
    We calculate case-mix constant intensity as the change in total 
charges per admission, adjusted for price level changes (the CPI 
hospital component) and changes in real case mix. The use of total 
charges in the calculation of the proposed intensity factor makes it a 
total intensity factor, that is, charges for capital services are 
already built into the calculation of the factor. We have therefore 
incorporated the intensity adjustment from the operating update 
framework into the capital update framework. In the absence of reliable 
estimates of the proportions of the overall annual intensity increases 
that are due, respectively, to ineffective practice patterns and to the 
combination of quality-enhancing new technologies and within-DRG 
complexity, we assume, as in the revised operating update framework, 
that one-half of the annual increase is due to each of these factors. 
The capital update framework thus provides an add-on to the input price 
index rate of increase of one-half of the estimated annual increase in 
intensity to allow for within-DRG severity increases and the adoption 
of quality-enhancing technology.
    For FY 1997, we have developed a Medicare-specific intensity 
measure based on a five-year average using FY 1991-1995. In determining 
case-mix constant intensity, we found that observed case-mix increase 
was 2.8 percent in FY 1991, 1.8 percent in FY 1992, 0.9 percent in FY 
1993, 0.8 percent in FY 1994, and 1.6 percent in FY 1995. For FY 1991 
and FY 1992, we estimate that real case-mix increase was 1.0 to 1.4 
percent each year. The estimate for those years is supported by past 
studies of case-mix change by the RAND Corporation. The most recent 
study was ``Has DRG Creep Crept Up? Decomposing the Case Mix Index 
Change Between 1987 and 1988'' by G.M. Carter, J.P. Newhouse, and D.A. 
Relles, R-4098-HCFA/ProPAC (1991). The study suggested that real case-
mix change was not dependent on total change, but was rather a fairly 
steady 1.0 to 1.5 percent per year. We use 1.4 percent as the upper 
bound because the RAND study did not take into account that hospitals 
may have induced doctors to document medical records more completely in 
order to improve payment. Following that study, we consider up to 1.4 
percent of observed case-mix change as real for FY 1991 through FY 
1994. As discussed above, we have determined that all of the observed 
case-mix increase for FY 1995 is real.
    Given estimates of real case-mix increase of 1.0 percent for FY 
1991 and FY 1992, 0.9 percent for FY 1993, 0.8 percent for FY 1994, and 
1.6 percent for FY 1995, we estimate that case-mix constant intensity 
declined by an

[[Page 27501]]

average 1.1 percent during FY 1991 through FY 1995, for a cumulative 
decrease of 5.6 percent. If we assume that real case-mix increase was 
1.4 percent for FY 1991 and FY 1992, 0.9 percent for FY 1993, 0.8 
percent for FY 1994, and 1.6 percent for FY 1995, we estimate that 
case-mix constant intensity declined by an average 1.2 percent during 
FY 1991 through FY 1995, for a cumulative decrease of 5.9 percent. 
Since we estimate that intensity has declined during that period, we 
are recommending a 0.0 percent intensity adjustment for FY 1997.
2. Outlier Payment Adjustment Factor
    Section 412.312(c) establishes a unified outlier methodology for 
inpatient operating and inpatient capital-related costs. A single set 
of thresholds is used to identify outlier cases for both inpatient 
operating and inpatient capital-related payments. Outlier payments are 
made only on the portion of the Federal rate that is used to calculate 
the hospital's inpatient capital-related payments (for example, 60 
percent for cost reporting periods beginning in FY 1997 for hospitals 
paid under the fully prospective methodology). Section 412.308(c)(2) 
provides that the standard Federal rate for inpatient capital-related 
costs be reduced by an adjustment factor equal to the estimated 
proportion of outlier payments under the Federal rate to total 
inpatient capital-related payments under the Federal rate. The outlier 
thresholds are set so that operating outlier payments are projected to 
be 5.1 percent of total operating DRG payments. The inpatient capital-
related outlier reduction factor reflects the inpatient capital-related 
outlier payments that would be made if all hospitals were paid 
according to 100 percent of the Federal rate. For purposes of 
calculating the outlier thresholds and the outlier reduction factor, we 
model all hospitals as if paid 100 percent of the Federal rate because, 
as explained above, outlier payments are made only on the portion of 
the Federal rate that is included in the hospital's inpatient capital-
related payments.
    In the September 1, 1995 final rule, we estimated that outlier 
payments for capital in FY 1996 would equal 4.64 percent of inpatient 
capital-related payments based on the Federal rate. Accordingly, we 
applied an outlier adjustment factor of 0.9536 to the Federal rate. 
Based on the thresholds as set forth in section II.A.4.d of this 
Addendum, we estimate that outlier payments for capital will equal 5.24 
percent of inpatient capital-related payments based on the Federal rate 
in FY 1997. We are, therefore, proposing an outlier adjustment factor 
of 0.9476 to the Federal rate. Thus, estimated capital outlier payments 
for FY 1997 represent a higher percentage of total capital standard 
payments than in FY 1996.
    The outlier reduction factors are not built permanently into the 
rates; that is, they are not applied cumulatively in determining the 
Federal rate. Therefore, the proposed net change in the outlier 
adjustment to the Federal rate for FY 1997 is 0.9937 (0.9476/0.9536). 
Thus, the outlier adjustment decreases the FY 1997 Federal rate by 0.63 
percent (0.9937 - 1) compared with the FY 1996 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the Geographic Adjustment Factor
    Section 412.308(c)(4)(ii) requires that the Federal rate be 
adjusted so that aggregate payments for the fiscal year based on the 
Federal rate after any changes resulting from the annual DRG 
reclassification and recalibration and changes in the geographic 
adjustment factor are projected to equal aggregate payments that would 
have been made on the basis of the Federal rate without such changes. 
We use the actuarial model described in Appendix B to estimate the 
aggregate payments that would have been made on the basis of the 
Federal rate without changes in the DRG classifications and weights and 
in the geographic adjustment factor. We also use the model to estimate 
aggregate payments that would be made on the basis of the Federal rate 
as a result of those changes. We then use these figures to compute the 
adjustment required to maintain budget neutrality for changes in DRG 
weights and in the geographic adjustment factor.
    For FY 1996, we calculated a GAF/DRG budget neutrality factor of 
0.9994. For FY 1997, we are proposing a GAF/DRG budget neutrality 
factor of 0.9992. The GAF/DRG budget neutrality factors are built 
permanently into the rates; that is, they are applied cumulatively in 
determining the Federal rate. This follows from the requirement that 
estimated aggregate payments each year be no more than they would have 
been in the absence of the annual DRG reclassification and 
recalibration and changes in the geographic adjustment factor. The 
proposed incremental change in the adjustment from FY 1996 to FY 1997 
is 0.9992. The proposed cumulative change in the rate due to this 
adjustment is 1.0017 (the product of the incremental factors for FY 
1993, FY 1994, FY 1995, FY 1996 and the proposed incremental factor for 
FY 1997: 0.9980 x 1.0053 x 0.9998 x 0.9994 x 0.9992 = 1.0017).
    This factor accounts for DRG reclassifications and recalibration 
and for changes in the geographic adjustment factor. It also 
incorporates the effects on the geographic adjustment factor of FY 1997 
geographic reclassification decisions made by the MGCRB compared to FY 
1996 decisions. However, it does not account for changes in payments 
due to changes in the disproportionate share and indirect medical 
education adjustment factors or in the large urban add-on.
4. Exceptions Payment Adjustment Factor
    Section 412.308(c)(3) requires that the standard Federal rate for 
inpatient capital-related costs be reduced by an adjustment factor 
equal to the estimated proportion of additional payments for exceptions 
under Sec. 412.348 relative to total payments under the hospital-
specific rate and Federal rate. We use the model originally developed 
for determining the budget neutrality adjustment factor to determine 
the exceptions payment adjustment factor. We describe that model in 
Appendix B to this proposed rule.
    For FY 1996, we estimated that exceptions payments would equal 1.51 
percent of aggregate payments based on the Federal rate and the 
hospital-specific rate. Therefore, we applied an exceptions reduction 
factor of 0.9849 (1-0.0151) in determining the Federal rate. For this 
proposed rule, we estimate that exceptions payments for FY 1997 will 
equal 6.07 percent of aggregate payments based on the Federal rate and 
the hospital-specific rate. We are, therefore, proposing an exceptions 
payment reduction factor of 0.9393 to the Federal rate for FY 1997.
    The proposed exceptions reduction factor for FY 1997 is thus 4.63 
percent lower than the factor for FY 1996. We have expected the number 
and amount of exceptions payments generally to increase throughout the 
transition period.
    The exceptions reduction factors are not built permanently into the 
rates; that is, the factors are not applied cumulatively in determining 
the Federal rate. Therefore, the proposed net adjustment to the FY 1997 
Federal rate is 0.9393/0.9849, or 0.9537.
5. Standard Capital Federal Rate for FY 1997
    For FY 1996, the capital Federal rate was $461.96. With the changes 
we are proposing to the factors used to establish the Federal rate, the 
FY 1997

[[Page 27502]]

Federal rate would be $441.84. The proposed Federal rate for FY 1997 
was calculated as follows:
    <bullet> The proposed FY 1997 update factor is 1.0100, that is, the 
proposed update is 1.00 percent.
    <bullet> The proposed FY 1997 budget neutrality adjustment factor 
that is applied to the standard Federal payment rate for changes in the 
DRG relative weights and in the geographic adjustment factor is 0.9992.
    <bullet> The proposed FY 1997 outlier adjustment factor is 0.9476.
    <bullet> The proposed FY 1997 exceptions payments adjustment factor 
is 0.9393.
    Since the Federal rate has already been adjusted for differences in 
case mix, wages, cost of living, indirect medical education costs, and 
payments to hospitals serving a disproportionate share of low-income 
patients, we propose to make no additional adjustments in the standard 
Federal rate for these factors other than the budget neutrality factor 
for changes in the DRG relative weights and the geographic adjustment 
factor.
    We are providing a chart that shows how each of the factors and 
adjustments for FY 1997 affected the computation of the proposed FY 
1997 Federal rate in comparison to the FY 1996 Federal rate. The 
proposed FY 1997 update factor has the effect of increasing the Federal 
rate by 1.00 percent compared to the rate in FY 1996, while the 
proposed geographic and DRG budget neutrality factor has the effect of 
decreasing the Federal rate by 0.08 percent. The proposed FY 1997 
outlier adjustment factor has the effect of decreasing the Federal rate 
by 0.63 percent compared to FY 1996. The proposed FY 1997 exceptions 
reduction factor has the effect of decreasing the Federal rate by 4.63 
percent compared to the exceptions reduction for FY 1996. The combined 
effect of all the proposed changes is to decrease the proposed Federal 
rate by 4.36 percent compared to the Federal rate for FY 1996.

          Comparison of Factors and Adjustments: FY 1996 Federal Rate and Proposed FY 1997 Federal Rate         
----------------------------------------------------------------------------------------------------------------
                                                                                                        Percent 
                                                                                              Change     change 
----------------------------------------------------------------------------------------------------------------
Update factor: \1\                                                                                              
    FY 1996....................................................................     1.0120  .........  .........
    Proposed FY 1997...........................................................     1.0100     1.0100       1.00
GAF/DRG adjustment factor \1\                                                    .........                      
    FY 1996....................................................................     0.9994  .........  .........
    Proposed FY 1997...........................................................     0.9992     0.9992      -0.08
Outlier adjustment factor: \2\                                                                                  
    FY 1996....................................................................     0.9536  .........  .........
    Proposed FY 1997...........................................................     0.9476     0.9937      -0.63
Exceptions adjustment factor: \2\                                                                               
    FY 1996....................................................................     0.9849  .........  .........
    Proposed FY 1997...........................................................     0.9393     0.9537      -4.63
Federal Rate:                                                                                                   
    FY 1996....................................................................    $461.96  .........  .........
    Proposed FY 1997...........................................................    $441.84     0.9564      -4.36
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality factors are built permanently into the rates. Thus, for 
  example, the incremental change from FY 1996 to FY 1997 resulting from the application of the 0.9992 GAF/DRG  
  budget neutrality factor for FY 1997 is 0.9992.                                                               
\2\ The outlier reduction factor and the exceptions reduction factor are not built permanently into the rates;  
  that is, these factors are not applied cumulatively in determining the rates. Thus, for example, the net      
  change resulting from the application of the FY 1997 exceptions reduction factor is 0.9393/0.9849, or 0.9537. 

6. Special Rate for Puerto Rico Hospitals
    For FY 1996, the special rate for Puerto Rico hospitals was 
$355.35. With the changes we are proposing to the factors used to 
determine the rate, the proposed FY 1997 special rate for Puerto Rico 
would be $339.87.

B. Determination of Hospital-Specific Rate Update

    Section 412.328(e) of the regulations provides that the hospital-
specific rate for FY 1997 be determined by adjusting the FY 1996 
hospital-specific rate by the following factors:
1. Hospital-Specific Rate Update Factor
    The hospital-specific rate is updated in accordance with the update 
factor for the standard Federal rate determined under 
Sec. 412.308(c)(1). For FY 1997, we are proposing that the hospital-
specific rate be updated by a factor of 1.0100.
2. Exceptions Payment Adjustment Factor
    For FY 1992 through FY 2001, the updated hospital-specific rate is 
multiplied by an adjustment factor to account for estimated exceptions 
payments for capital-related costs under Sec. 412.348, determined as a 
proportion of the total amount of payments under the hospital-specific 
rate and the Federal rate. For FY 1997, we estimate that exceptions 
payments will be 6.07 percent of aggregate payments based on the 
Federal rate and the hospital-specific rate. We therefore propose that 
the updated hospital-specific rate be reduced by a factor of 0.9393. 
The exceptions reduction factors are not built permanently into the 
rates; that is, the factors are not applied cumulatively in determining 
the hospital-specific rate. Therefore, the proposed net adjustment to 
the FY 1997 hospital-specific rate is 0.9393/0.9849, or 0.9537.
3. Net Change to Hospital-Specific Rate
    We are providing a chart to show the net change to the hospital-
specific rate. The chart shows the factors for FY 1996 and FY 1997 and 
the net adjustment for each factor. It also shows that the proposed 
cumulative net adjustment from FY 1996 to FY 1997 is 0.9632, which 
represents a proposed decrease of 3.68 percent to the hospital-specific 
rate. The proposed FY 1997 hospital-specific rate for each hospital is 
determined by multiplying the FY 1996 hospital-specific rate by the 
cumulative net adjustment of 0.9632.

[[Page 27503]]



                       Proposed FY 1997 Update and Adjustments to Hospital-Specific Rates                       
----------------------------------------------------------------------------------------------------------------
                                                                                               Net      Percent 
                                                                                           adjustment    change 
----------------------------------------------------------------------------------------------------------------
Update factor:                                                                                                  
    FY 1996...................................................................     1.0120  ..........  .........
    Proposed FY 1997..........................................................     1.0100      1.0100       1.00
Exceptions payment adjustment factor:                                                                           
    FY 1996...................................................................     0.9849  ..........  .........
    Proposed FY 1997..........................................................     0.9393      0.9537      -4.63
Cumulative adjustments:                                                                                         
    FY 1996...................................................................     0.9967  ..........  .........
    Proposed FY 1997..........................................................     0.9601      0.9632      -3.68
----------------------------------------------------------------------------------------------------------------
Note: The update factor for the hospital-specific rate is applied cumulatively in determining the rates. Thus,  
  the incremental increase in the update factor from FY 1996 to FY 1997 is 1.0100. In contrast, the exceptions  
  payment adjustment factor is not applied cumulatively. Thus, for example, the incremental increase in the     
  exceptions reduction factor from FY 1996 to FY 1997 is 0.9393/0.9849, or 0.9537.                              

C. Calculation of Inpatient Capital-Related Prospective Payments for FY 
1997

    During the capital prospective payment system transition period, a 
hospital is paid for the inpatient capital-related costs under one of 
two alternative payment methodologies: the fully prospective payment 
methodology or the hold-harmless methodology. The payment methodology 
applicable to a particular hospital is determined when a hospital comes 
under the prospective payment system for capital-related costs by 
comparing its hospital-specific rate to the Federal rate applicable to 
the hospital's first cost reporting period under the prospective 
payment system. The applicable Federal rate was determined by making 
adjustments as follows:
    <bullet> For outliers by dividing the standard Federal rate by the 
outlier reduction factor for that fiscal year; and,
    <bullet> For the payment adjustment factors applicable to the 
hospital (that is, the hospital's geographic adjustment factor, the 
disproportionate share adjustment factor, and the indirect medical 
education adjustment factor, when appropriate).
    If the hospital-specific rate is above the applicable Federal rate, 
the hospital is paid under the hold-harmless methodology. If the 
hospital-specific rate is below the applicable Federal rate, the 
hospital is paid under the fully prospective methodology.
    For purposes of calculating payments for each discharge under both 
the hold-harmless payment methodology and the fully prospective payment 
methodology, the standard Federal rate is adjusted as follows: 
(Standard Federal Rate) x (DRG weight) x (Geographic Adjustment 
Factor) x (Large Urban Add-on, if applicable) x (COLA adjustment for 
hospitals located in Alaska and Hawaii) x (1+Disproportionate Share 
Adjustment Factor+Indirect Medical Education Adjustment Factor, if 
applicable). The result is termed the adjusted Federal rate.
    Payments under the hold-harmless methodology are determined under 
one of two formulas. A hold-harmless hospital is paid the higher of:
    <bullet> 100 percent of the adjusted Federal rate for each 
discharge; or
    <bullet> An old capital payment equal to 85 percent (100 percent 
for sole community hospitals) of the hospital's allowable Medicare 
inpatient old capital costs per discharge for the cost reporting period 
plus a new capital payment based on a percentage of the adjusted 
Federal rate for each discharge. The percentage of the adjusted Federal 
rate equals the ratio of the hospital's allowable Medicare new capital 
costs to its total Medicare inpatient capital-related costs in the cost 
reporting period.
    Once a hospital receives payment based on 100 percent of the 
adjusted Federal rate in a cost reporting period beginning on or after 
October 1, 1994 (or the first cost reporting period after obligated 
capital that is recognized as old capital under Sec. 412.302(c) is put 
in use for patient care, if later), the hospital continues to receive 
capital prospective payment system payments on that basis for the 
remainder of the transition period.
    Payment for each discharge under the fully prospective methodology 
is the sum of:
    <bullet> The hospital-specific rate multiplied by the DRG relative 
weight for the discharge and by the applicable hospital-specific 
transition blend percentage for the cost reporting period; and
    <bullet> The adjusted Federal rate multiplied by the Federal 
transition blend percentage.
    The blend percentages for cost reporting periods beginning in FY 
1997 are 60 percent of the adjusted Federal rate and 40 percent of the 
hospital-specific rate.
    Hospitals may also receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. Section 
412.312(c) provides for a single set of thresholds to identify outlier 
cases for both inpatient operating and inpatient capital-related 
payments. Outlier payments are made only on that portion of the Federal 
rate that is used to calculate the hospital's inpatient capital-related 
payments. For fully prospective hospitals, that portion is 60 percent 
of the Federal rate for discharges occurring in cost reporting periods 
beginning during FY 1997. Thus, a fully prospective hospital will 
receive 60 percent of the capital-related outlier payment calculated 
for the case for discharges occurring in cost reporting periods 
beginning in FY 1997. For hold-harmless hospitals paid 85 percent of 
their reasonable costs for old inpatient capital, the portion of the 
Federal rate that is included in the hospital's outlier payments is 
based on the hospital's ratio of Medicare inpatient costs for new 
capital to total Medicare inpatient capital costs. For hold-harmless 
hospitals that are paid 100 percent of the Federal rate, 100 percent of 
the Federal rate is included in the hospital's outlier payments.
    The proposed outlier thresholds for FY 1997 are published in 
section II.A.4.c of this Addendum. For FY 1997, a case qualifies as a 
cost outlier if the cost for the case (after standardization for the 
indirect teaching adjustment and disproportionate share adjustment) is 
greater than the prospective payment rate for the DRG plus $11,050. A 
case qualifies as a day outlier for FY 1997 if the length of stay is 
greater than the geometric mean length of stay for the DRG plus the 
lesser of 24 days or three standard deviations of the length of stay.
    During the capital prospective payment system transition period, a 
hospital may also receive an additional payment under an exceptions 
process if its total inpatient capital-related

[[Page 27504]]

payments are less than a minimum percentage of its allowable Medicare 
inpatient capital-related costs. The minimum payment level is 
established by class of hospital under Sec. 412.348. The proposed 
minimum payment levels for portions of cost reporting periods occurring 
in FY 1997 are:
    <bullet> Sole community hospitals (located in either an urban or 
rural area), 90 percent;
    <bullet> Urban hospitals with at least 100 beds and a 
disproportionate share patient percentage of at least 20.2 percent and 
urban hospitals with at least 100 beds that qualify for 
disproportionate share payments under Sec. 412.106(c)(2), 80 percent; 
and,
    <bullet> All other hospitals, 70 percent.
    Under Sec. 412.348(d), the amount of the exceptions payment is 
determined by comparing the cumulative payments made to the hospital 
under the capital prospective payment system to the cumulative minimum 
payment levels applicable to the hospital for each cost reporting 
period subject to that system. Any amount by which the hospital's 
cumulative payments exceed its cumulative minimum payment is deducted 
from the additional payment that would otherwise be payable for a cost 
reporting period.
    New hospitals are exempted from the capital prospective payment 
system for their first 2 years of operation and are paid 85 percent of 
their reasonable costs during that period. A new hospital's old capital 
costs are its allowable costs for capital assets that were put in use 
for patient care on or before the later of December 31, 1990 or the 
last day of the hospital's base year cost reporting period, and are 
subject to the rules pertaining to old capital and obligated capital as 
of the applicable date. Effective with the third year of operation, we 
will pay the hospital under either the fully prospective methodology, 
using the appropriate transition blend in that Federal fiscal year, or 
the hold-harmless methodology. If the hold-harmless methodology is 
applicable, the hold-harmless payment for assets in use during the base 
period would extend for 8 years, even if the hold-harmless payments 
extend beyond the normal transition period.

V. Tables

    This section contains the tables referred to throughout the 
preamble to this proposed rule and in this Addendum. For purposes of 
this proposed rule, and to avoid confusion, we have retained the 
designations of Tables 1 through 5 that were first used in the 
September 1, 1983 initial prospective payment final rule (48 FR 39844). 
Tables 1a, 1c, 1d, 3C, 4a, 4b, 4c, 4d, 4e, 5, 6A, 6B, 6C, 6D, 6E, 6F, 
6G, 6H, 7A, 7B, 8A, and 8B are presented below. The tables presented 
below are as follows:

Table 1a--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor
Table 1c--Adjusted Operating Standardized Amounts for Puerto Rico, 
Labor/Nonlabor
Table 1d--Capital Standard Federal Payment Rate
Table 3C--Hospital Case Mix Indexes for Discharges Occurring in 
Federal Fiscal Year 1995 and Hospital Average Hourly Wage for 
Federal Fiscal Year 1997 Wage Index
Table 4a--Wage Index and Capital Geographic Adjustment Factor (GAF) 
for Urban Areas
Table 4b--Wage Index and Capital Geographic Adjustment Factor (GAF) 
for Rural Areas
Table 4c--Wage Index and Capital Geographic Adjustment Factor (GAF) 
for Hospitals That Are Reclassified
Table 4d--Average Hourly Wage for Urban Areas
Table 4e--Average Hourly Wage for Rural Areas
Table 5--List of Diagnosis Related Groups (DRGs), Relative Weighting 
Factors, Geometric Mean Length of Stay, and Length of Stay Outlier 
Cutoff Points Used in the Prospective Payment System
Table 6A--New Diagnosis Codes
Table 6B--New Procedure Codes
Table 6C--Invalid Diagnosis Codes
Table 6D--Invalid Procedure Codes
Table 6E--Revised Diagnosis Code Titles
Table 6F--Revised Procedure Code Titles
Table 6G--Additions to the CC Exclusions List
Table 6H--Deletions to the CC Exclusions List
Table 7A--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 95 MEDPAR Update 12/95 GROUPER V13.0
Table 7B--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 95 MEDPAR Update 12/95 GROUPER V14.0
Table 8A--Statewide Average Operating Cost-to-Charge Ratios for 
Urban and Rural Hospitals (Case Weighted) April 1996
Table 8B--Statewide Average Capital Cost-to-Charge Ratios (Case 
Weighted) April 1996

   Table 1a.--National Adjusted Operating Standardized Amounts, Labor/  
                                Nonlabor                                
------------------------------------------------------------------------
          Large urban areas                       Other areas           
------------------------------------------------------------------------
                       Non-labor                            Non-labor   
  Labor-related         related         Labor-related        related    
------------------------------------------------------------------------
2796.66..........        1131.23            2752.39           1113.33   
------------------------------------------------------------------------


               Table 1c.--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor               
----------------------------------------------------------------------------------------------------------------
                                                                  Large urban areas            Other areas      
                                                             ---------------------------------------------------
                                                                 Labor-     Non-labor      Labor-     Non-labor 
                                                                related      related      related      related  
----------------------------------------------------------------------------------------------------------------
National....................................................     $2772.89     $1121.62     $2772.89     $1121.62
Puerto Rico.................................................      2501.07       521.22      2461.47       512.97
----------------------------------------------------------------------------------------------------------------


            Table 1d.--Capital Standard Federal Payment Rate            
------------------------------------------------------------------------
                                                                  Rate  
------------------------------------------------------------------------
National.....................................................    $441.84
Puerto Rico..................................................     339.87
------------------------------------------------------------------------


[[Page 27505]]



                                                    Table 3c.--Hospital Case Mix Indexes for Discharges Occurring in Federal Fiscal Year 1995                                                   
                                                                                          Page 1 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
010001.......................   01.4400   14.82   010095..........   00.9230   11.25   030004.........   00.9824   13.49   040004.........   01.4485   14.83   040107.........   01.1923   14.95
010004.......................   00.9600   11.10   010097..........   00.9405   15.20   030006.........   01.5576   17.52   040005.........   01.0380   11.59   040109.........   01.1692   12.69
010005.......................   01.1609   15.40   010098..........   01.1941   11.02   030007.........   01.3158   16.41   040007.........   01.8761   18.12   040114.........   01.8513   16.64
010006.......................   01.4752   15.23   010099..........   01.1210   15.49   030008.........   02.1095   20.42   040008.........   01.0325   10.77   040116.........   01.3895   19.25
010007.......................   01.0986   13.12   010100..........   01.1688   14.77   030009.........   01.2993   15.58   040010.........   01.2298   13.78   040118.........   01.1313   14.29
010008.......................   01.1366   09.54   010101..........   01.1127   14.21   030010.........   01.4160   17.75   040011.........   00.9298   10.75   040119.........   01.0914   14.34
010009.......................   01.1377   14.82   010102..........   00.9529   13.63   030011.........   01.4747   17.66   040014.........   01.1929   16.07   040124.........   01.2238   14.30
010010.......................   01.1330   14.33   010103..........   01.7534   17.01   030012.........   01.2246   15.81   040015.........   01.1944   12.12   040126.........   00.9617   11.74
010011.......................   01.6185   18.94   010104..........   01.6892   17.87   030013.........   01.2459   18.99   040016.........   01.7330   16.43   050002.........   01.5554   25.91
010012.......................   01.2666   16.27   010108..........   01.1189   13.68   030014.........   01.4394   17.86   040017.........   01.2569   11.68   050006.........   01.3983   19.15
010015.......................   01.0512   15.63   010109..........   01.0527   11.48   030016.........   01.2462   17.09   040018.........   01.1686   16.66   050007.........   01.5848   25.29
010016.......................   01.2643   16.76   010110..........   01.0168   13.44   030017.........   01.4929   18.98   040019.........   01.1618   13.52   050008.........   01.4998   25.48
010018.......................   00.9017   16.19   010112..........   01.1253   14.09   030018.........   01.7989   19.57   040020.........   01.5987   14.08   050009.........   01.7211   31.63
010019.......................   01.2868   14.99   010113..........   01.6374   13.69   030019.........   01.1962   19.31   040021.........   01.2277   14.69   050013.........   01.8099   22.05
010021.......................   01.2388   12.20   010114..........   01.3174   15.37   030022.........   01.5055   17.41   040022.........   01.6951   14.73   050014.........   01.1741   22.55
010022.......................   01.0109   16.89   010115..........   00.8385   11.98   030023.........   01.2640   17.64   040024.........   01.1709   12.16   050015.........   01.3882   22.18
010023.......................   01.4760   14.71   010117..........   00.7880   13.54   030024.........   01.7809   21.04   040025.........   00.9214   11.81   050016.........   01.1598   18.51
010024.......................   01.4014   15.62   010118..........   01.2475   15.07   030025.........   01.1633   12.76   040026.........   01.5547   16.35   050017.........   02.0618   24.39
010025.......................   01.4390   13.16   010119..........   01.5429   16.36   030027.........   01.0875   14.69   040027.........   01.2889   12.56   050018.........   01.3434   18.49
010027.......................   00.8352   13.55   010120..........   00.9668   14.32   030030.........   01.6651   18.19   040028.........   01.0903   11.40   050021.........   01.4146   23.75
010029.......................   01.4957   14.84   010121..........   01.2269   12.92   030033.........   01.2475   16.40   040029.........   01.2557   14.12   050022.........   01.4601   22.63
010031.......................   01.1808   14.58   010123..........   01.2421   17.47   030034.........   01.0430   15.89   040030.........   00.8925   11.09   050024.........   01.3952   21.31
010032.......................   00.9478   12.45   010124..........   01.2927   16.15   030035.........   01.3403   20.77   040032.........   01.0056   11.18   050025.........   01.8000   22.00
010033.......................   01.9143   17.61   010125..........   01.0247   12.86   030036.........   01.1393   18.23   040035.........   01.0240   10.24   050026.........   01.4525   21.79
010034.......................   01.0751   13.48   010126..........   01.1770   13.13   030037.........   02.0161   19.60   040036.........   01.4976   16.45   050028.........   01.4395   15.33
010035.......................   01.2397   15.13   010127..........   01.2999   16.29   030038.........   01.6125   18.82   040037.........   01.1101   11.55   050029.........   01.3830   25.55
010036.......................   01.1252   15.34   010128..........   00.9565   12.34   030040.........   01.1885   15.88   040039.........   01.2411   12.23   050030.........   01.3324   19.24
010038.......................   01.3397   16.48   010129..........   01.0795   13.29   030041.........   00.9963   13.68   040040.........   00.9953   15.73   050032.........   01.2735   22.76
010039.......................   01.7029   16.14   010130..........   01.0352   15.28   030043.........   01.1937   18.25   040041.........   01.3946   13.95   050033.........   01.4136   25.47
010040.......................   01.5335   18.21   010131..........   01.3636   17.75   030044.........   01.0291   13.19   040042.........   01.2978   12.03   050036.........   01.6162   18.61
010043.......................   01.1036   10.35   010134..........   00.9206   13.36   030046.........   00.9134   16.38   040044.........   00.9622   10.04   050038.........   01.4553   29.05
010044.......................   01.0919   11.01   010137..........   01.2516   16.36   030047.........   00.9471   19.91   040045.........   01.0301   14.28   050039.........   01.6127   21.04
010045.......................   01.2121   10.79   010138..........   00.9485   09.85   030049.........   00.9741   17.30   040047.........   01.0939   14.78   050040.........   01.0842   22.92
010046.......................   01.5291   15.51   010139..........   01.6592   19.67   030054.........   00.8723   12.63   040048.........   01.2149   13.48   050041.........   02.8656   22.21
010047.......................   01.0243   10.05   010143..........   01.1921   15.83   030055.........   01.2014   16.85   040050.........   01.1013   11.66   050042.........   01.3081   20.20
010049.......................   01.1121   15.66   010144..........   01.3104   18.42   030059.........   01.2776   19.95   040051.........   01.0923   12.64   050043.........   01.5723   30.15
010050.......................   01.0635   13.48   010145..........   01.3376   14.59   030060.........   01.2095   13.90   040053.........   01.1093   11.67   050045.........   01.2649   17.11
010051.......................   00.8549   10.24   010146..........   01.1772   15.59   030061.........   01.6462   16.75   040054.........   01.0301   12.44   050046.........   01.1888   23.81
010052.......................   00.9858   12.78   010148..........   00.9969   12.83   030062.........   01.2267   15.56   040055.........   01.4506   14.51   050047.........   01.6388   29.15
010053.......................   01.0653   12.67   010149..........   01.3527   17.75   030064.........   01.6191   16.92   040058.........   01.0617   13.61   050051.........   01.1104   16.63
010054.......................   01.1726   16.17   010150..........   01.0473   16.29   030065.........   01.6407   18.87   040060.........   00.9896   09.85   050054.........   01.1961   20.55
010055.......................   01.4846   16.35   010152..........   01.4762   16.29   030067.........   01.0515   15.92   040062.........   01.6181   16.66   050055.........   01.3742   27.54
010056.......................   01.3970   17.99   010155..........   00.9996   09.42   030068.........   00.9514   14.04   040063.........   01.4673   15.67   050056.........   01.3374   25.23
010058.......................   01.0881   12.96   020001..........   01.4712   25.53   030069.........   01.3354   19.11   040064.........   01.0523   10.49   050057.........   01.4835   20.22
010059.......................   01.0165   14.17   020002..........   01.0281   24.16   030071.........   00.9488  .......  040066.........   01.1537   14.63   050058.........   01.4664   22.78
010061.......................   01.0127   14.70   020004..........   01.1028   25.46   030072.........   00.9090  .......  040067.........   01.0801   11.34   050060.........   01.5897   24.25
010062.......................   01.0042   13.45   020005..........   00.9029   28.36   030073.........   00.9752  .......  040069.........   01.1090   14.90   050061.........   01.4258   22.12
010064.......................   01.7890   17.85   020006..........   01.1418   23.19   030074.........   00.8587  .......  040070.........   00.9433   14.98   050063.........   01.4029   21.44
010065.......................   01.3668   14.30   020007..........   00.8909   21.82   030075.........   00.8660  .......  040071.........   01.5932   15.42   050065.........   01.6064   22.37
010066.......................   00.9789   10.87   020008..........   01.1006   26.45   030076.........   00.9802  .......  040072.........   01.0871   13.40   050066.........   01.2689   24.33
010068.......................   01.2370   18.82   020009..........   00.9255   21.29   030077.........   00.8761  .......  040074.........   01.2566   14.51   050067.........   01.3777   21.09
010069.......................   01.1589   13.06   020010..........   00.9141   22.13   030078.........   01.1027  .......  040075.........   01.0668   11.57   050068.........   01.0839   19.05
010072.......................   01.2161   12.72   020011..........   01.0488   22.27   030079.........   00.7787  .......  040076.........   01.0273   14.71   050069.........   01.6183   23.15
010073.......................   00.9701   09.66   020012..........   01.3062   23.99   030080.........   01.6564   20.82   040077.........   00.9196   10.72   050070.........   01.2901   30.80
010078.......................   01.1795   15.04   020013..........   01.0055   24.03   030083.........   01.3106   21.70   040078.........   01.4945   17.29   050071.........   01.3159   30.70
010079.......................   01.2807   12.53   020014..........   01.0769   24.52   030084.........   00.9358  .......  040080.........   01.0752   15.45   050072.........   01.3053   31.00
010080.......................   01.0389   12.99   020017..........   01.5181   26.83   030085.........   01.5045   20.21   040081.........   00.9285   09.91   050073.........   01.3239   31.41
010081.......................   01.9832   16.16   020018..........   00.8963  .......  030086.........   01.3209   18.76   040082.........   01.2156   13.69   050074.........   01.2314   32.96
010083.......................   01.0377   13.25   020019..........   00.8718  .......  030087.........   01.6153   18.77   040084.........   01.0963   14.83   050075.........   01.4037   30.72
010084.......................   01.4816   16.61   020020..........   00.8398  .......  030088.........   01.3513   19.90   040085.........   01.2493   15.18   050076.........   01.7756   29.65
010085.......................   01.3233   17.11   020021..........   00.8478  .......  030089.........   01.5736   18.66   040088.........   01.3091   13.73   050077.........   01.6152   22.83
010086.......................   01.0507   13.54   020024..........   01.0693   22.64   030092.........   01.5590   20.62   040090.........   00.8983   13.78   050078.........   01.3591   24.44
010087.......................   01.6243   16.88   020025..........   01.0046   24.44   030093.........   01.3791   18.08   040091.........   01.2930   18.25   050079.........   01.5938   28.30
010089.......................   01.1934   14.91   020026..........   01.3340  .......  030094.........   01.2494   18.57   040093.........   00.9598   10.98   050080.........   01.2183   22.05
010090.......................   01.5725   16.40   020027..........   00.9975  .......  030095.........   01.2183   13.09   040095.........   00.9069   10.56   050081.........   01.6564   24.01
010091.......................   00.9195   13.43   030001..........   01.3076   19.28   040001.........   01.1308   12.37   040100.........   01.2465   12.81   050082.........   01.4989   21.34
010092.......................   01.4209   15.17   030002..........   01.7918   20.25   040002.........   01.1644   13.07   040105.........   01.0068   11.90   050084.........   01.5611   22.33
010094.......................   01.1410   16.76   030003..........   01.8923   21.05   040003.........   01.0704   13.19   040106.........   01.2448   12.84   050088.........   01.1538   21.94
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27506]]



                                                                                          Page 2 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050089.......................   01.3485   19.92   050189..........   00.9777   21.50   050296.........   01.2071   22.69   050420.........   01.4424   25.15   050545.........   00.8420   20.39
050090.......................   01.2755   21.75   050191..........   01.5032   20.64   050298.........   01.3081   20.18   050421.........   01.4112   24.62   050546.........   00.7212   21.10
050091.......................   01.1984   24.42   050192..........   01.1071   18.74   050299.........   01.3607   22.49   050423.........   00.9821   19.25   050547.........   00.9602   20.65
050092.......................   00.8504   16.19   050193..........   01.3631   22.56   050300.........   01.3100   18.87   050424.........   01.8316   22.16   050549.........   01.7182   25.86
050093.......................   01.5917   22.35   050194..........   01.2409   25.03   050301.........   01.3825   21.54   050425.........   01.2719   30.41   050550.........   02.3168   23.34
050096.......................   01.1244   12.95   050195..........   01.5876   31.29   050302.........   01.4049   24.31   050426.........   01.3055   23.89   050551.........   01.3473   24.20
050097.......................   01.5025   18.40   050196..........   01.4205   16.40   050305.........   01.5824   29.82   050430.........   00.9919   15.94   050552.........   01.1633   22.44
050099.......................   01.4660   22.91   050197..........   01.8278   29.07   050307.........   01.4439   20.51   050431.........   01.0836   22.58   050557.........   01.4928   21.08
050100.......................   01.6910   29.38   050199..........   00.8980   19.48   050308.........   01.5797   29.77   050432.........   01.5774   23.69   050559.........   01.3672   24.18
050101.......................   01.3999   25.12   050204..........   01.4910   23.12   050309.........   01.3306   23.63   050433.........   01.0327   17.37   050560.........   01.1894  ......
050102.......................   01.4714   22.34   050205..........   01.3876   19.99   050310.........   01.2239   22.24   050434.........   01.1491   18.08   050561.........   01.2110   30.34
050103.......................   01.6097   26.74   050207..........   01.2860   20.58   050312.........   01.9820   23.66   050435.........   01.2411   18.98   050564.........   01.2109   24.02
050104.......................   01.3906   21.73   050208..........   00.9572   27.63   050313.........   01.1891   20.90   050436.........   01.0099   15.77   050565.........   01.1456   21.26
050107.......................   01.4355   22.92   050211..........   01.3142   29.60   050315.........   01.1826   20.75   050438.........   01.6261   23.33   050566.........   00.8791   19.75
050108.......................   01.5819   22.78   050213..........   01.3924   21.12   050317.........   01.3583   20.90   050440.........   01.4107   19.93   050567.........   01.6543   23.01
050109.......................   02.3436   24.68   050214..........   01.4409   21.76   050320.........   01.3185   27.27   050441.........   01.9214   28.10   050568.........   01.4314   18.28
050110.......................   01.2436   18.72   050215..........   01.5216   27.75   050324.........   01.8339   25.93   050443.........   00.9533   15.95   050569.........   01.3545   22.93
050111.......................   01.3786   18.81   050217..........   01.3730   18.44   050325.........   01.2554   20.87   050444.........   01.3479   22.19   050570.........   01.7026   24.91
050112.......................   01.5234   22.15   050219..........   01.3115   20.37   050327.........   01.5839   21.00   050446.........   00.8936   17.25   050571.........   01.4016   22.37
050113.......................   01.2749   28.23   050222..........   01.5916   24.56   050328.........   01.4584   32.92   050447.........   01.0883   18.59   050573.........   01.6412   23.66
050114.......................   01.3978   21.65   050224..........   01.5471   22.17   050329.........   01.3142   20.34   050448.........   01.1113   19.82   050575.........   01.2303  ......
050115.......................   01.6146   21.11   050225..........   01.3284   20.67   050331.........   01.4090   27.22   050449.........   01.3527   21.99   050577.........   01.3652   20.32
050116.......................   01.4542   22.73   050226..........   01.3349   22.58   050333.........   00.9767   18.66   050454.........   01.8309   26.10   050578.........   01.1731   23.70
050117.......................   01.2871   20.93   050228..........   01.3665   29.90   050334.........   01.7683   28.22   050455.........   01.9292   22.89   050579.........   01.5656   26.94
050118.......................   01.2840   23.24   050230..........   01.2972   26.22   050335.........   01.2505   19.62   050456.........   01.1314   20.24   050580.........   01.3595   23.47
050121.......................   01.4060   19.96   050231..........   01.6364   24.14   050336.........   01.3398   21.04   050457.........   01.9435   28.66   050581.........   01.4162   24.63
050122.......................   01.7066   22.90   050232..........   01.7628   24.17   050337.........   01.1726   23.87   050459.........   01.1929   28.20   050583.........   01.5880   23.08
050124.......................   01.2730   19.72   050233..........   01.2974   30.88   050342.........   01.3686   17.55   050464.........   01.8776   22.62   050584.........   01.2006   22.39
050125.......................   01.3140   25.98   050234..........   01.3251   22.00   050343.........   01.0325   18.56   050468.........   01.4046   16.26   050585.........   01.2357   23.70
050126.......................   01.4704   23.23   050235..........   01.5105   25.00   050348.........   01.6030   22.83   050469.........   01.0879   17.33   050586.........   01.3647   21.76
050127.......................   01.2952   22.89   050236..........   01.6626   24.28   050349.........   00.8988   14.28   050470.........   01.1148   21.29   050588.........   01.3703   26.55
050128.......................   01.5405   20.97   050238..........   01.4959   22.95   050350.........   01.3856   22.68   050471.........   01.7202   24.07   050589.........   01.3124   25.37
050129.......................   01.5583   22.11   050239..........   01.5085   21.24   050351.........   01.4774   24.81   050476.........   01.3437   19.12   050590.........   01.4086   23.00
050131.......................   01.2652   27.83   050240..........   01.3951   22.82   050352.........   01.2941   23.35   050477.........   01.5136   24.50   050591.........   01.2861   27.01
050132.......................   01.4397   24.55   050241..........   01.2374   25.78   050353.........   01.5622   21.45   050478.........   00.9225   21.73   050592.........   01.3408   20.34
050133.......................   01.3513   20.16   050242..........   01.4698   27.10   050355.........   00.9696   15.53   050481.........   01.4166   24.85   050593.........   01.5583   24.40
050135.......................   01.3794   26.86   050243..........   01.5323   21.58   050357.........   01.7247   23.17   050482.........   00.9451   14.55   050594.........   02.0151   23.81
050136.......................   01.3772   22.75   050245..........   01.3837   21.74   050359.........   01.2172   18.78   050483.........   01.1666   23.89   050597.........   01.2786   21.91
050137.......................   01.3802   31.46   050248..........   01.2124   24.50   050360.........   01.4656   30.15   050485.........   01.6275   22.34   050598.........   01.3940   26.87
050138.......................   01.8728   32.07   050251..........   01.0753   17.68   050366.........   01.3174   20.47   050486.........   01.4180   24.94   050599.........   01.6829   22.70
050139.......................   01.3396   31.14   050253..........   00.7232   18.87   050367.........   01.2881   27.02   050488.........   01.3879   30.41   050601.........   01.3075   29.03
050140.......................   01.4139   30.76   050254..........   01.1940   22.13   050369.........   01.3323   23.30   050489.........   00.9718   27.10   050603.........   01.4252   23.50
050144.......................   01.5835   26.03   050256..........   01.7700   19.70   050373.........   01.3964   23.83   050491.........   01.2797   23.76   050604.........   01.5933   29.56
050145.......................   01.3571   27.67   050257..........   01.0715   20.65   050376.........   01.3932   25.86   050492.........   01.2458   23.05   050607.........   01.3006   21.79
050146.......................   01.3245  .......  050260..........   01.0965   21.96   050377.........   00.9012   15.01   050494.........   01.1674   24.95   050608.........   01.3067   15.23
050147.......................   00.6896   20.55   050261..........   01.1927   17.91   050378.........   01.0814   22.45   050496.........   01.7959   31.60   050609.........   01.4365   31.39
050148.......................   01.1273   19.62   050262..........   01.9179   26.89   050379.........   01.0921   19.04   050497.........   00.7948  .......  050613.........   01.1496   22.70
050149.......................   01.4339   19.87   050263..........   01.2879   24.24   050380.........   01.6703   28.31   050498.........   01.2636   22.42   050615.........   01.6939   23.31
050150.......................   01.2565   23.23   050264..........   01.3732   26.01   050382.........   01.4511   20.97   050502.........   01.6551   23.61   050616.........   01.2953   20.68
050152.......................   01.4301   24.60   050267..........   01.5239   24.88   050385.........   01.3960   24.83   050503.........   01.2916   23.01   050618.........   01.0619   19.36
050153.......................   01.6384   30.53   050270..........   01.2432   23.60   050388.........   00.9028   14.19   050506.........   01.4122   25.57   050623.........   01.1349   24.40
050155.......................   01.1043   23.60   050272..........   01.3296   19.69   050390.........   01.2211   20.80   050510.........   01.3632   30.59   050624.........   01.3670   25.95
050158.......................   01.6805   27.88   050274..........   00.9624   18.36   050391.........   01.2785   21.61   050512.........   01.4686   31.38   050625.........   01.6096   24.00
050159.......................   01.2651   22.01   050276..........   01.2223   26.99   050392.........   00.9426   17.56   050515.........   01.3589   30.78   050630.........   01.3621   21.26
050167.......................   01.4551   21.67   050277..........   01.3817   21.30   050393.........   01.4157   21.56   050516.........   01.6670   24.33   050633.........   01.2959   21.76
050168.......................   01.6003   24.83   050278..........   01.5174   23.01   050394.........   01.5428   20.71   050517.........   01.2879   19.15   050635.........   01.4145   31.17
050169.......................   01.5891   24.53   050279..........   01.2461   20.58   050396.........   01.6157   21.89   050522.........   01.3128   30.40   050636.........   01.4311   20.28
050170.......................   01.5175   21.58   050280..........   01.6551   22.80   050397.........   01.0118   19.97   050523.........   01.2703   27.65   050638.........   01.1002   24.28
050172.......................   01.2609   19.96   050281..........   01.4519   22.74   050401.........   01.1174   19.09   050526.........   01.3687   24.28   050641.........   01.2473   12.26
050173.......................   01.2203   23.70   050282..........   01.3433   21.42   050404.........   01.1443   16.51   050528.........   01.3542   16.46   050643.........   00.7832  ......
050174.......................   01.6873   27.89   050283..........   01.1267   27.59   050406.........   01.1263   15.29   050531.........   01.3012   23.60   050644.........   00.9053   26.86
050175.......................   01.3926   21.97   050286..........   01.0350   17.99   050407.........   01.3254   27.06   050534.........   01.3853   23.83   050660.........   01.3428  ......
050177.......................   01.2994   18.76   050289..........   01.7845   27.38   050410.........   01.0706   17.45   050535.........   01.3827   22.46   050661.........   00.8831   20.21
050179.......................   01.2600   17.29   050290..........   01.6330   32.31   050411.........   01.4042   29.35   050537.........   01.2622   21.30   050662.........   00.8549   21.17
050180.......................   01.5539   30.12   050291..........   01.2553   24.46   050414.........   01.2846   24.32   050539.........   01.2184   21.90   050663.........   01.0604   23.51
050183.......................   01.1940   19.09   050292..........   01.0963   21.20   050417.........   01.3037   19.65   050541.........   01.5870   31.06   050666.........   00.7423   23.76
050186.......................   01.2694   24.12   050293..........   01.1312   19.93   050418.........   01.4191   24.24   050542.........   01.2270   13.79   050667.........   01.0672   24.88
050188.......................   01.3467   25.25   050295..........   01.4144   20.86   050419.........   01.3136   18.88   050543.........   00.9214   21.68   050668.........   01.1532   28.20
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27507]]



                                                                                          Page 3 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050670.......................   00.7582   20.12   060046..........   01.1205   16.56   080005.........   01.3363   16.82   100071.........   01.3024   16.98   100167.........   01.3944   20.55
050672.......................   00.6267   23.77   060047..........   00.9606   11.40   080006.........   01.3822   20.49   100072.........   01.2515   17.24   100168.........   01.3799   19.35
050674.......................   01.2111   29.18   060049..........   01.3511   17.47   080007.........   01.3620   17.99   100073.........   01.7938   20.61   100169.........   01.8590   18.29
050675.......................   01.7056   16.32   060050..........   01.1719   14.62   090001.........   01.4216   19.65   100075.........   01.6403   17.85   100170.........   01.4917   16.50
050676.......................   00.9864   13.83   060052..........   01.0999   18.38   090002.........   01.3022   20.51   100076.........   01.3869   17.15   100172.........   01.3694   13.38
050677.......................   01.4253   32.99   060053..........   00.9988   13.73   090003.........   01.3041   24.74   100077.........   01.3153   16.78   100173.........   01.6691   16.33
050678.......................   01.0713   24.07   060054..........   01.3361   16.74   090004.........   01.7168   23.49   100078.........   01.1683   15.14   100174.........   01.5295   18.20
050680.......................   01.2114   26.13   060056..........   00.9577   13.37   090005.........   01.3431   27.07   100079.........   01.7501   16.01   100175.........   01.2130   16.18
050682.......................   00.8558   14.98   060057..........   01.0356   21.11   090006.........   01.3749   19.52   100080.........   01.6306   19.40   100176.........   02.0431   21.95
050684.......................   01.2074   21.30   060058..........   00.9237   12.54   090007.........   01.3832   19.58   100081.........   01.1202   13.33   100177.........   01.3403   18.55
050685.......................   01.2219   26.94   060060..........   00.9651   12.21   090008.........   01.5276   24.06   100082.........   01.5459   17.93   100179.........   01.6520   19.03
050686.......................   01.3503   30.96   060062..........   00.9518   15.85   090010.........   01.0013   21.70   100083.........   01.3240   17.30   100180.........   01.4188   17.49
050688.......................   01.2730   27.89   060063..........   01.0264   11.12   090011.........   01.9804   24.77   100084.........   01.5314   16.53   100181.........   01.2846   17.59
050689.......................   01.3988   29.12   060064..........   01.4325   20.21   090015.........   01.3306  .......  100085.........   01.4349   19.50   100183.........   01.3710   19.18
050690.......................   01.4363   30.39   060065..........   01.3463   19.98   100001.........   01.5247   18.83   100086.........   01.3328   21.32   100186.........   01.4758   16.70
050693.......................   01.9152   28.80   060066..........   00.9950   13.10   100002.........   01.4789   19.71   100087.........   01.8071   20.71   100187.........   01.4501   18.35
050694.......................   01.3678   21.20   060068..........   01.2760   14.00   100004.........   01.0274   11.81   100088.........   01.6730   17.32   100189.........   01.3707   23.13
050695.......................   01.1808   24.30   060070..........   01.0357   14.99   100005.........   01.0178   16.26   100090.........   01.4256   16.07   100191.........   01.3315   19.19
050696.......................   02.0076   27.85   060071..........   01.2259   14.69   100006.........   01.5531   18.99   100092.........   01.4411   16.20   100199.........   01.4473   21.29
050697.......................   01.1093   17.93   060073..........   01.0017   14.32   100007.........   01.8477   19.61   100093.........   01.5156   14.28   100200.........   01.3972   21.35
050698.......................   01.1189   22.83   060075..........   01.3472   20.27   100008.........   01.7361   19.80   100098.........   01.1482   17.43   100203.........   01.2603   19.34
050699.......................   00.5855   23.13   060076..........   01.3675   15.97   100009.........   01.5641   17.89   100099.........   01.2518   13.09   100204.........   01.6232   19.95
050700.......................   01.4412   32.46   060085..........   00.9819   10.94   100010.........   01.5475   20.58   100102.........   01.1033   16.44   100206.........   01.3458   19.47
050701.......................   01.3170   27.13   060087..........   01.6558   18.67   100012.........   01.6776   16.91   100103.........   01.1730   14.46   100207.........   01.4710   19.86
050702.......................   00.8637   16.98   060088..........   01.0388   15.38   100014.........   01.4272   18.57   100105.........   01.4697   18.08   100208.........   01.6409   21.14
050704.......................   01.2140   20.48   060090..........   00.9518   14.23   100015.........   01.2444   17.60   100106.........   01.0395   15.46   100209.........   01.6671  ......
050706.......................   00.9234   16.16   060096..........   00.9724   21.69   100017.........   01.6489   17.18   100107.........   01.4676   18.26   100210.........   01.6647   16.51
050707.......................   01.2237   25.62   060100..........   01.4045   20.95   100018.........   01.2869   19.94   100108.........   01.1017   15.45   100211.........   01.3441   19.17
050708.......................   00.9493   15.13   060103..........   01.2269   21.10   100019.........   01.4930   18.81   100109.........   01.3522   16.81   100212.........   01.6646   18.54
050709.......................   01.3030  .......  060104..........   01.3213   20.32   100020.........   01.3365   18.31   100110.........   01.4128   18.91   100213.........   01.5438   20.00
050710.......................   01.4014  .......  070001..........   01.7582   24.78   100022.........   01.8009   23.05   100112.........   00.9738   10.84   100217.........   01.3055   17.06
050711.......................   02.3868  .......  070002..........   01.8728   24.78   100023.........   01.3489   15.88   100113.........   02.0848   18.19   100220.........   01.9563   19.66
050712.......................   02.1147  .......  070003..........   01.1239   24.50   100024.........   01.3583   19.54   100114.........   01.4930   17.73   100221.........   01.5644   20.68
060001.......................   01.5550   18.95   070004..........   01.1696   23.70   100025.........   01.8825   16.22   100117.........   01.3334   18.18   100222.........   01.3723   18.80
060003.......................   01.2961   15.85   070005..........   01.3792   25.45   100026.........   01.6477   15.52   100118.........   01.2737   16.03   100223.........   01.4892   18.53
060004.......................   01.2624   19.46   070006..........   01.3529   26.73   100027.........   00.9736   11.53   100121.........   01.3068   15.44   100224.........   01.4648   19.77
060006.......................   01.1955   16.19   070007..........   01.3475   24.08   100028.........   01.2678   16.38   100122.........   01.4565   16.39   100225.........   01.3368   19.52
060007.......................   01.1900   13.06   070008..........   01.3124   23.47   100029.........   01.4029   18.94   100124.........   01.3643   19.41   100226.........   01.3383   16.58
060008.......................   01.0198   14.31   070009..........   01.2830   25.01   100030.........   01.2690   18.25   100125.........   01.1630   17.77   100228.........   01.2947   21.09
060009.......................   01.4621   19.88   070010..........   01.5535   22.46   100032.........   01.9188   17.39   100126.........   01.4954   18.74   100229.........   01.3211   16.27
060010.......................   01.5276   21.10   070011..........   01.3259   22.80   100034.........   01.7338   18.34   100127.........   01.6870   17.42   100230.........   01.5471   18.97
060011.......................   01.3023   20.75   070012..........   01.2576   23.38   100035.........   01.6138   16.46   100128.........   02.2417   20.13   100231.........   01.6613   17.46
060012.......................   01.3852   15.79   070013..........   01.2822   24.01   100038.........   01.5951   21.18   100129.........   01.2509   17.45   100232.........   01.2675   17.64
060013.......................   01.2654   18.83   070015..........   01.3569   23.82   100039.........   01.7158   21.15   100130.........   01.2008   17.45   100234.........   01.5324   19.03
060014.......................   01.6915   20.52   070016..........   01.3194   25.46   100040.........   01.6731   16.31   100131.........   01.3922   18.44   100235.........   01.4827   17.51
060015.......................   01.5657   19.33   070017..........   01.3781   23.54   100043.........   01.4570   17.78   100132.........   01.4189   15.67   100236.........   01.4442   13.79
060016.......................   01.0954   11.42   070018..........   01.3719   27.83   100044.........   01.5045   19.01   100134.........   01.0741   14.50   100237.........   02.1446   22.65
060018.......................   01.2199   16.36   070019..........   01.2169   24.04   100045.........   01.4032   17.12   100135.........   01.5224   16.11   100238.........   01.4858   18.68
060020.......................   01.5176   16.73   070020..........   01.3709   24.32   100046.........   01.5110   18.53   100137.........   01.3279   18.42   100239.........   01.4622   19.34
060022.......................   01.6695   17.89   070021..........   01.2987   25.47   100047.........   01.9163   18.62   100138.........   00.9478   13.00   100240.........   00.8437   15.06
060023.......................   01.6463   16.65   070022..........   01.7641   24.30   100048.........   01.0025   11.69   100139.........   01.0496   14.54   100241.........   00.9433   12.47
060024.......................   01.8181   22.01   070024..........   01.3541   23.81   100049.........   01.3263   18.03   100140.........   01.2518   16.87   100242.........   01.4135   16.29
060026.......................   01.4223   19.44   070025..........   01.7842   24.06   100050.........   01.2227   15.06   100142.........   01.2004   16.68   100243.........   01.4119   18.82
060027.......................   01.6577   19.01   070026..........   01.2223   23.07   100051.........   01.1532   16.60   100144.........   01.1466   13.65   100244.........   01.4339   17.32
060028.......................   01.4947   21.29   070027..........   01.2599   24.31   100052.........   01.3772   15.60   100145.........   01.3481   14.87   100246.........   01.3465   20.92
060029.......................   00.9485   13.93   070028..........   01.4783   24.67   100053.........   01.2886   17.36   100146.........   01.2770   14.27   100248.........   01.6989   17.88
060030.......................   01.3165   20.36   070029..........   01.3524   21.65   100054.........   01.2923   17.44   100147.........   01.0996   13.43   100249.........   01.3543   18.87
060031.......................   01.6115   18.95   070030..........   01.2990   24.71   100055.........   01.3679   17.47   100150.........   01.3759   18.64   100252.........   01.2419   19.21
060032.......................   01.5777   19.35   070031..........   01.2706   22.24   100056.........   01.4655   19.83   100151.........   01.8572   18.63   100253.........   01.4755   20.60
060033.......................   01.1561   11.96   070033..........   01.2881   28.25   100057.........   01.3455   16.78   100154.........   01.5689   17.95   100254.........   01.5854   17.50
060034.......................   01.4958   16.90   070034..........   01.3752   24.74   100060.........   01.8491   17.71   100156.........   01.2204   18.65   100255.........   01.3322   19.00
060036.......................   01.1712   14.37   070035..........   01.3469   24.31   100061.........   01.5100   20.88   100157.........   01.6134   19.31   100256.........   01.8955   19.32
060037.......................   01.0382   13.22   070036..........   01.4320   26.98   100062.........   01.7185   16.94   100159.........   00.9856   12.76   100258.........   01.6509   21.12
060038.......................   01.0192   12.25   070039..........   00.9213  .......  100063.........   01.3423   16.12   100160.........   01.1059   18.07   100259.........   01.4493   16.36
060041.......................   00.9203   16.53   080001..........   01.6101   23.66   100067.........   01.4267   16.38   100161.........   01.5194   19.76   100260.........   01.4016   20.44
060042.......................   01.0532   18.49   080002..........   01.1904   17.32   100068.........   01.3880   17.42   100162.........   01.3924   14.53   100262.........   01.4109   19.32
060043.......................   00.9506   11.78   080003..........   01.3137   19.32   100069.........   01.3653   17.29   100165.........   01.2958   13.45   100263.........   01.3896   15.44
060044.......................   01.2631   17.32   080004..........   01.2871   17.59   100070.........   01.4420   17.56   100166.........   01.4618   20.31   100264.........   01.3958   18.24
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27508]]



                                                                                          Page 4 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
100265.......................   01.3686   17.47   110063..........   01.0768   11.44   110156.........   01.0003   12.68   130011.........   01.2386   16.74   140045.........   01.0555   14.21
100266.......................   01.2337   15.64   110064..........   01.2883   15.87   110161.........   01.3328   20.79   130012.........   01.0233   18.53   140046.........   01.3023   14.83
100267.......................   01.3092   16.39   110065..........   01.0143   12.00   110162.........   00.8588  .......  130013.........   01.2416   17.21   140047.........   01.1406   13.20
100268.......................   01.1990   22.00   110066..........   01.4374   16.30   110163.........   01.4549   18.52   130014.........   01.3094   16.43   140048.........   01.2744   21.50
100269.......................   01.3605   19.07   110069..........   01.1706   15.22   110164.........   01.4190   19.63   130015.........   00.8608   12.43   140049.........   01.5796   19.35
100270.......................   00.8185   12.95   110070..........   01.1733   11.37   110165.........   01.3107   17.47   130016.........   00.9300   16.18   140051.........   01.4912   19.14
100271.......................   01.6614   19.27   110071..........   01.0308   10.29   110166.........   01.4995   16.67   130017.........   01.3710   13.03   140052.........   01.3150   16.77
100273.......................   00.5356   19.72   110072..........   01.0243   11.53   110168.........   01.6538   19.22   130018.........   01.7015   17.60   140053.........   01.8914   17.88
100275.......................   01.4206   21.96   110073..........   01.2050   12.67   110169.........   00.7308   19.70   130019.........   01.1172   13.74   140054.........   01.3616   26.25
100276.......................   01.3027   21.94   110074..........   01.4803   18.11   110171.........   01.4451   21.21   130021.........   01.0324   11.96   140055.........   00.9382   13.00
100277.......................   01.0093   12.71   110075..........   01.2149   15.29   110172.........   01.3290   22.83   130022.........   01.1917   15.44   140058.........   01.2318   15.26
100279.......................   01.3786   18.35   110076..........   01.3902   18.01   110174.........   01.0473   17.57   130024.........   01.0580   15.25   140059.........   01.1334   13.52
100280.......................   01.3831   16.93   110078..........   01.6637   20.46   110176.........   01.1251   19.42   130025.........   01.1537   15.21   140061.........   01.0878   13.80
100281.......................   01.2517   20.85   110079..........   01.3869   21.08   110177.........   01.4857   19.21   130026.........   01.1747   17.89   140062.........   01.2451   23.10
100282.......................   01.0482   16.99   110080..........   01.1544   16.86   110178.........   01.3702   16.78   130027.........   00.9528   17.18   140063.........   01.3960   22.48
100283.......................   01.5478  .......  110082..........   02.0163   20.36   110179.........   01.2381   21.56   130028.........   01.2515   16.08   140064.........   01.2951   16.15
110001.......................   01.2914   17.40   110083..........   01.7255   20.66   110181.........   00.9860   12.59   130029.........   01.0268   17.07   140065.........   01.4926   23.68
110002.......................   01.2397   14.83   110086..........   01.2253   13.74   110183.........   01.3704   19.70   130030.........   01.0243   16.20   140066.........   01.3711   13.39
110003.......................   01.3129   15.41   110087..........   01.3386   19.17   110184.........   01.1715   17.58   130031.........   01.0201   13.26   140067.........   01.8194   18.24
110004.......................   01.3118   16.17   110088..........   00.9740   11.17   110185.........   01.0833   12.23   130034.........   01.0393   16.38   140068.........   01.3583   19.00
110005.......................   01.1872   21.40   110089..........   01.2146   15.37   110186.........   01.3060   15.97   130035.........   01.0736   15.37   140069.........   01.0029   14.23
110006.......................   01.3597   18.00   110091..........   01.3449   19.15   110187.........   01.2469   17.19   130036.........   01.2609   12.50   140070.........   01.2830   16.18
110007.......................   01.4425   15.69   110092..........   01.1821   12.55   110188.........   01.4186   18.00   130037.........   01.2616   14.58   140074.........   00.9704   14.60
110008.......................   01.2405   15.47   110093..........   01.0096   09.81   110189.........   01.1327   19.78   130043.........   00.9469   14.61   140075.........   01.4685   21.53
110009.......................   01.0377   15.71   110094..........   00.9542   12.06   110190.........   01.0859   14.41   130044.........   01.1660   12.37   140077.........   01.1503   17.05
110010.......................   02.1503   21.39   110095..........   01.2750   13.86   110191.........   01.3482   18.06   130045.........   01.0284   12.15   140079.........   01.2410   20.90
110011.......................   01.2868   16.01   110096..........   01.1414   14.30   110192.........   01.3977   22.17   130048.........   01.0663   11.90   140080.........   01.5779   19.60
110013.......................   01.1312   14.36   110097..........   01.0166   15.58   110193.........   01.2300   16.16   130049.........   01.2960   17.55   140081.........   01.0821   13.92
110014.......................   01.0340   14.48   110098..........   01.0881   11.76   110194.........   00.9644   11.77   130054.........   00.9683   17.12   140082.........   01.5059   22.10
110015.......................   01.3622   16.52   110100..........   01.0968   12.27   110195.........   01.0844   10.50   130056.........   00.8652   09.45   140083.........   01.2600   16.51
110016.......................   01.2991   14.21   110101..........   01.1035   09.24   110198.........   01.3316   22.58   130058.........   01.0150   12.87   140084.........   01.2248   17.94
110017.......................   00.8897   11.01   110103..........   00.9630   10.35   110200.........   01.9437   15.79   130060.........   01.1458   18.38   140086.........   01.1464   13.93
110018.......................   01.1357   17.20   110104..........   01.1073   13.28   110201.........   01.4531   16.13   130061.........   00.9513  .......  140087.........   01.3852   17.10
110020.......................   01.2352   17.30   110105..........   01.1304   15.17   110203.........   00.9692   14.94   140001.........   01.2958   14.63   140088.........   01.6480   23.33
110023.......................   01.2361   17.53   110107..........   01.8146   17.59   110204.........   00.7960   13.48   140002.........   01.2776   17.04   140089.........   01.2253   15.85
110024.......................   01.4802   18.74   110108..........   00.9720   11.27   110205.........   01.1080   11.84   140003.........   01.0184   13.14   140090.........   01.5101   23.62
110025.......................   01.4157   16.85   110109..........   01.1115   12.14   110207.........   01.1008   15.59   140004.........   01.0799   13.75   140091.........   01.8655   17.70
110026.......................   01.1891   13.87   110111..........   01.1934   14.70   110208.........   00.9734   14.94   140005.........   00.9511   09.98   140093.........   01.1961   17.17
110027.......................   01.1013   14.56   110112..........   01.1522   15.06   110209.........   00.8222  .......  140007.........   01.4675   20.56   140094.........   01.2905   18.81
110028.......................   01.5984   17.75   110113..........   01.1384   12.86   120001.........   01.7331   24.22   140008.........   01.4859   20.57   140095.........   01.3991  ......
110029.......................   01.3374   17.71   110114..........   01.0749   13.75   120002.........   01.1971   21.46   140010.........   01.3888   22.14   140097.........   00.9102   14.15
110030.......................   01.2807   16.60   110115..........   01.6188   21.82   120003.........   01.1450   21.82   140011.........   01.1465   15.31   140100.........   01.2229   17.62
110031.......................   01.3367   19.58   110118..........   01.0422   13.18   120004.........   01.2653   20.56   140012.........   01.2840   17.59   140101.........   01.2108   18.04
110032.......................   01.2298   15.31   110120..........   01.0800   13.35   120005.........   01.2656   18.34   140013.........   01.6579   16.49   140102.........   01.0422   14.09
110033.......................   01.5204   20.32   110121..........   01.1802   11.84   120006.........   01.2116   22.75   140014.........   01.0745   16.31   140103.........   01.3357   16.66
110034.......................   01.5019   16.64   110122..........   01.3550   16.03   120007.........   01.6278   20.27   140015.........   01.2937   13.45   140105.........   01.3085   18.25
110035.......................   01.3991   18.53   110124..........   01.0703   15.32   120009.........   01.0061   18.05   140016.........   00.9317   11.59   140107.........   01.0869   11.63
110036.......................   01.6840   22.81   110125..........   01.2217   15.97   120010.........   01.8369   22.11   140018.........   01.4564   18.85   140108.........   01.3663   20.00
110037.......................   01.0904   10.18   110127..........   00.9066   14.43   120011.........   01.2382   30.31   140019.........   00.9926   11.80   140109.........   01.1410   12.95
110038.......................   01.4674   15.04   110128..........   01.1920   17.54   120012.........   01.0209   20.30   140024.........   01.0178   13.59   140110.........   01.2359   14.51
110039.......................   01.3709   17.93   110129..........   01.6749   13.01   120014.........   01.3556   21.25   140025.........   01.0795   15.88   140112.........   01.0953   13.55
110040.......................   01.0270   16.26   110130..........   01.0721   10.57   120015.........   00.8375   21.01   140026.........   01.1409   15.58   140113.........   01.4647   19.21
110041.......................   01.2250   16.43   110132..........   01.1433   12.87   120016.........   00.8558   21.94   140027.........   01.3182   15.96   140114.........   01.3202   18.95
110042.......................   01.2103   14.63   110134..........   00.8944   11.65   120018.........   01.0071   21.16   140029.........   01.3782   19.62   140115.........   01.2339   19.32
110043.......................   01.7167   15.17   110135..........   01.1981   13.83   120019.........   01.1834   19.48   140030.........   01.6711   21.46   140116.........   01.2862   19.68
110044.......................   01.0960   14.31   110136..........   01.1213   13.57   120021.........   00.9888   19.68   140031.........   01.1749   13.02   140117.........   01.4895   17.63
110045.......................   01.2388   22.04   110140..........   00.8182   15.03   120022.........   01.7240   17.83   140032.........   01.2531   16.44   140118.........   01.6767   22.66
110046.......................   01.1993   15.07   110141..........   00.9067   11.65   120026.........   01.2802   22.30   140033.........   01.2640   19.10   140119.........   01.6872   19.58
110048.......................   01.3128   12.97   110142..........   00.9806   11.15   120027.........   01.5395   21.16   140034.........   01.1800   16.74   140120.........   01.5073   14.72
110049.......................   01.0704   13.71   110143..........   01.3994   20.07   130001.........   01.0424   17.21   140035.........   01.0305   10.70   140121.........   01.5215   10.91
110050.......................   01.0669   14.00   110144..........   01.1678   16.44   130002.........   01.3774   14.66   140036.........   01.2388   15.03   140122.........   01.5566   21.02
110051.......................   00.9865   16.35   110146..........   01.0299   09.43   130003.........   01.3112   18.11   140037.........   00.9794   12.24   140124.........   01.1139   23.06
110052.......................   00.9774   09.11   110149..........   01.1319   12.17   130005.........   01.4396   18.19   140038.........   01.1510   15.00   140125.........   01.3450   15.60
110054.......................   01.2816   16.57   110150..........   01.3658   16.56   130006.........   01.8983   18.19   140039.........   00.9224   11.51   140127.........   01.3522   16.83
110056.......................   00.9765   12.61   110152..........   01.1295   13.06   130007.........   01.6434   18.60   140040.........   01.3093   14.34   140128.........   01.0595   16.10
110059.......................   01.2900   14.39   110153..........   01.0212   15.33   130008.........   00.9857   10.28   140041.........   01.2320   15.01   140129.........   01.0555   13.18
110061.......................   01.0143   10.61   110154..........   00.8337   12.68   130009.........   00.9627   14.78   140042.........   01.0524   13.30   140130.........   01.2738   21.67
110062.......................   00.9181   09.73   110155..........   01.2376   12.27   130010.........   00.9403   15.04   140043.........   01.1790   16.37   140132.........   01.4146   18.58
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27509]]



                                                                                          Page 5 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
140133.......................   01.3730   19.77   140230..........   00.9439   15.48   150043.........   01.0625   16.58   150127.........   01.0419   14.34   160069.........   01.4042   16.05
140135.......................   01.3146   14.29   140231..........   01.6272   19.79   150044.........   01.2634   17.63   150128.........   01.2340   18.59   160070.........   01.0255   13.84
140137.......................   01.0354   13.61   140233..........   01.7471   16.57   150045.........   01.0913   15.00   150129.........   01.1915   20.35   160072.........   01.0688   12.08
140138.......................   00.9661   12.15   140234..........   01.1838   15.82   150046.........   01.5896   16.06   150130.........   01.1496   15.90   160073.........   01.0070   11.50
140139.......................   01.0792   13.46   140236..........   01.0311   12.82   150047.........   01.6212   17.74   150132.........   01.3365   19.17   160074.........   01.1069   12.89
140140.......................   01.1317   13.05   140239..........   01.5856   18.81   150048.........   01.1679   16.18   150133.........   01.2095   14.96   160075.........   01.1112   13.84
140141.......................   00.8984   13.30   140240..........   01.5048   20.90   150049.........   01.0776   13.72   150134.........   01.2828   16.61   160076.........   01.0692   16.28
140143.......................   01.0643   15.85   140242..........   01.5726   22.51   150050.........   01.1998   14.50   150136.........   00.9472   18.69   160077.........   01.1216   10.97
140144.......................   00.9856   16.57   140245..........   01.1273   13.55   150051.........   01.3841   16.82   150138.........   01.1623  .......  160079.........   01.4245   15.22
140145.......................   01.2030   14.31   140246..........   01.0570   12.03   150052.........   01.0743   12.93   150139.........   01.4806  .......  160080.........   01.2082   15.41
140146.......................   00.9666   14.85   140250..........   01.3165   21.35   150053.........   01.0618   16.69   150141.........   01.0859  .......  160081.........   01.0672   14.36
140147.......................   01.1866   13.37   140251..........   01.3066   18.25   150054.........   01.1376   12.39   150142.........   02.4300  .......  160082.........   01.7545   17.09
140148.......................   01.8018   16.51   140252..........   01.4201   21.25   150056.........   01.6228   21.59   150897.........   04.9892  .......  160083.........   01.5789   17.49
140150.......................   01.5561   26.00   140253..........   01.4456  .......  150057.........   02.3179   15.06   160001.........   01.2719   16.39   160085.........   01.0916   12.79
140151.......................   01.1119   17.61   140258..........   01.5345   21.07   150058.........   01.6930   18.64   160002.........   01.1888   13.13   160086.........   01.0283   12.56
140152.......................   01.0750   22.48   140271..........   01.0260   13.54   150059.........   01.3218   18.91   160003.........   01.0221   11.87   160088.........   01.0017   13.10
140155.......................   01.1854   16.91   140275..........   01.2294   18.20   150060.........   01.1281   12.79   160005.........   01.1072   12.93   160089.........   01.1591   14.12
140158.......................   01.2597   21.41   140276..........   01.9589   20.48   150061.........   01.2957   15.86   160007.........   01.0085   12.02   160090.........   01.0066   13.98
140160.......................   01.2326   15.34   140280..........   01.2769   16.16   150062.........   01.0670   15.20   160008.........   01.1043   13.93   160091.........   01.0987   10.56
140161.......................   01.1373   17.05   140281..........   01.6388   20.19   150063.........   01.0538   18.88   160009.........   01.1577   13.54   160092.........   00.9736   12.93
140162.......................   01.7778   18.38   140285..........   01.2063   14.75   150064.........   01.2100   16.48   160012.........   01.0588   14.05   160093.........   01.1351   15.20
140164.......................   01.2855   16.01   140286..........   01.1491   17.59   150065.........   01.1505   15.94   160013.........   01.2189   16.64   160094.........   01.2168   14.79
140165.......................   01.1085   13.06   140288..........   01.7781   22.47   150066.........   01.0021   13.75   160014.........   01.0459   12.72   160095.........   01.0266   12.30
140166.......................   01.2889   16.62   140289..........   01.3089   15.67   150067.........   01.1221   14.35   160016.........   01.2911   15.68   160097.........   01.0785   13.47
140167.......................   01.1636   14.64   140290..........   01.3385   19.21   150069.........   01.2347   16.53   160018.........   00.9429   13.19   160098.........   01.0760   13.90
140168.......................   01.1840   15.02   140291..........   01.2645   22.64   150070.........   01.0350   16.16   160020.........   01.0963   12.11   160099.........   00.9737   12.80
140170.......................   01.1280   12.39   140292..........   01.1678   19.04   150071.........   01.1562   12.69   160021.........   01.0439   13.85   160101.........   01.1220   17.71
140171.......................   00.9149   12.53   140294..........   01.1864   16.10   150072.........   01.1914   15.32   160023.........   01.1458   13.66   160102.........   01.3668   14.31
140172.......................   01.5065   18.29   140297..........   01.2589   21.42   150073.........   01.0044   15.49   160024.........   01.5710   17.39   160103.........   01.0113   12.95
140173.......................   00.9721   13.11   140300..........   01.6785   25.11   150074.........   01.5934   19.00   160026.........   01.0986   15.21   160104.........   01.2335   19.21
140174.......................   01.4333   18.89   150001..........   01.0846   16.95   150075.........   01.2247   13.82   160027.........   01.1671   13.22   160106.........   01.0829   14.18
140176.......................   01.2617   18.83   150002..........   01.4319   19.23   150076.........   01.1512   19.89   160028.........   01.3407   17.78   160107.........   01.1437   13.78
140177.......................   01.2945   16.44   150003..........   01.7075   18.32   150077.........   01.2659   16.21   160029.........   01.4962   17.46   160108.........   01.1602   14.09
140179.......................   01.3297   19.51   150004..........   01.4226   19.99   150078.........   01.0834   17.20   160030.........   01.2338   16.67   160109.........   01.1631   12.01
140180.......................   01.5189   20.22   150005..........   01.1932   17.16   150079.........   01.1390   13.01   160031.........   01.1797   13.26   160110.........   01.4994   17.76
140181.......................   01.3046   18.82   150006..........   01.2074   16.72   150082.........   01.4965   18.33   160032.........   01.1573   14.66   160111.........   01.1019   10.75
140182.......................   01.3248   19.11   150007..........   01.2302   17.95   150084.........   01.8737   21.80   160033.........   01.7246   15.82   160112.........   01.4123   14.45
140184.......................   01.1967   14.20   150008..........   01.3398   18.38   150086.........   01.3006   15.72   160034.........   01.0681   13.81   160113.........   00.9561   11.39
140185.......................   01.4505   16.35   150009..........   01.3365   16.97   150088.........   01.1917   16.71   160035.........   00.9375   11.91   160114.........   01.0697   14.13
140186.......................   01.3274   18.01   150010..........   01.2041   16.10   150089.........   01.3985   18.99   160036.........   01.0756   12.83   160115.........   01.0280   13.87
140187.......................   01.4861   16.33   150011..........   01.2190   16.76   150090.........   01.2596   19.34   160037.........   01.1621   14.80   160116.........   01.1691   15.46
140188.......................   00.9575   10.54   150012..........   01.6875   20.57   150091.........   01.0611   15.60   160039.........   01.0670   15.23   160117.........   01.3337   15.63
140189.......................   01.1712   15.74   150013..........   01.1675   13.09   150092.........   01.0673   12.44   160040.........   01.3537   16.04   160118.........   01.0360   12.42
140190.......................   01.1195   13.36   150014..........   01.4216   18.85   150094.........   01.0035   16.65   160041.........   01.0646   12.88   160120.........   01.0091   09.94
140191.......................   01.3775   23.16   150015..........   01.2264   17.85   150095.........   01.1144   15.78   160043.........   01.0338   13.38   160122.........   01.1669   14.96
140192.......................   01.1869   16.51   150017..........   01.8448   17.26   150096.........   01.0971   17.15   160044.........   01.1574   13.36   160123.........   01.1780   12.18
140193.......................   01.0112   12.24   150018..........   01.2919   17.47   150097.........   01.1277   16.53   160045.........   01.6987   17.48   160124.........   01.2526   15.35
140197.......................   01.2709   16.05   150019..........   01.1266   13.09   150098.........   01.1300   11.81   160046.........   01.0369   11.92   160126.........   01.1504   13.82
140199.......................   01.0139   15.13   150020..........   01.1554   13.19   150099.........   01.3115   17.10   160047.........   01.3602   15.87   160129.........   01.0228   13.07
140200.......................   01.4295   20.12   150021..........   01.6718   18.22   150100.........   01.6839   18.15   160048.........   01.0179   11.76   160130.........   01.1652   13.04
140202.......................   01.3141   20.09   150022..........   01.1381   17.62   150101.........   01.0868   14.46   160049.........   00.9842   12.04   160131.........   01.1087   12.63
140203.......................   01.1570   19.02   150023..........   01.4914   17.81   150102.........   01.0903   14.61   160050.........   01.0246   14.12   160134.........   00.9843   11.37
140205.......................   00.9221   13.88   150024..........   01.4448   16.96   150103.........   01.0416   17.63   160051.........   00.9907   12.90   160135.........   01.0019   13.24
140206.......................   01.0864   19.58   150025..........   01.4616   16.32   150104.........   01.1413   15.09   160052.........   01.0589   14.80   160138.........   01.0588   13.48
140207.......................   01.3743   26.85   150026..........   01.1878   16.69   150105.........   01.4085   16.61   160054.........   01.0231   10.82   160140.........   01.0939   14.86
140208.......................   01.6111   23.73   150027..........   01.0647   16.04   150106.........   01.1373   15.58   160055.........   01.0477   11.48   160142.........   01.0237   13.60
140209.......................   01.7011   17.46   150029..........   01.2733   20.57   150109.........   01.4583   16.04   160056.........   01.0409   13.16   160143.........   01.1324   13.03
140210.......................   01.0690   12.87   150030..........   01.1956   16.20   150110.........   00.9896   14.72   160057.........   01.3309   15.92   160145.........   01.0880   13.74
140211.......................   01.2233   20.44   150031..........   01.0590   15.93   150111.........   01.2056   12.88   160058.........   01.6642   18.42   160146.........   01.4124   15.32
140212.......................   01.3189   22.65   150032..........   01.7894   18.85   150112.........   01.2207   16.78   160060.........   01.0892   13.82   160147.........   01.2670   15.41
140213.......................   01.2806   20.44   150033..........   01.6083   20.07   150113.........   01.1860   16.78   160061.........   01.0020   14.19   160151.........   01.0767   12.75
140215.......................   01.1642   13.22   150034..........   01.3961   18.15   150114.........   01.0330   13.44   160062.........   00.9619   11.95   160152.........   01.0085   13.30
140217.......................   01.2322   20.90   150035..........   01.4087   17.90   150115.........   01.3933   17.31   160063.........   01.2910   14.24   160153.........   01.7014   17.05
140218.......................   01.0541   13.64   150036..........   01.0486   17.35   150122.........   01.1412   15.83   160064.........   01.6406   16.37   170001.........   01.2028   15.90
140220.......................   01.1056   14.22   150037..........   01.2673   17.06   150123.........   01.1642   12.81   160065.........   01.0735   14.51   170004.........   01.0851   13.18
140223.......................   01.5438  .......  150038..........   01.2744   16.27   150124.........   01.1229   15.00   160066.........   01.1266   14.06   170006.........   01.2031   13.48
140224.......................   01.3604   22.10   150039..........   01.0121   14.51   150125.........   01.4243   18.09   160067.........   01.3705   16.70   170008.........   00.9823   13.35
140228.......................   01.7003   17.36   150042..........   01.2850   15.47   150126.........   01.5058   19.24   160068.........   01.1116   13.30   170009.........   01.1211   16.81
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27510]]



                                                                                          Page 6 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
170010.......................   01.2608   16.38   170090..........   01.1085   09.58   180012.........   01.3389   17.14   180104.........   01.5043   16.55   190064.........   01.5583   17.46
170011.......................   01.4071   14.59   170092..........   00.8754   11.45   180013.........   01.4998   17.38   180105.........   00.9304   12.23   190065.........   01.4754   15.75
170012.......................   01.4843   15.48   170093..........   00.9342   11.58   180014.........   01.6064   18.86   180106.........   00.9106   12.65   190071.........   00.8641   11.38
170013.......................   01.3169   13.27   170094..........   01.0452   12.81   180015.........   01.2489   14.91   180108.........   00.8486   12.49   190077.........   00.9246   13.41
170014.......................   01.0405   15.18   170095..........   01.0812   13.80   180016.........   01.3171   14.91   180115.........   01.0261   13.72   190078.........   01.1324   11.21
170015.......................   00.9820   13.74   170097..........   01.0300   13.42   180017.........   01.2806   13.52   180116.........   01.3689   14.92   190079.........   01.2666   14.76
170016.......................   01.6627   21.80   170098..........   01.0817   16.21   180018.........   01.2192   15.73   180117.........   01.1619   16.14   190081.........   00.8838   09.89
170017.......................   01.1657   14.73   170099..........   01.3324   11.00   180019.........   01.3403   17.22   180118.........   01.0536   11.72   190083.........   00.9429   12.45
170018.......................   01.0727   12.23   170100..........   01.0203   14.63   180020.........   01.0315   15.37   180120.........   01.0378   12.49   190086.........   01.3598   14.02
170019.......................   01.1696   15.13   170101..........   00.9101   14.13   180021.........   01.1795   13.25   180121.........   01.2234   13.09   190088.........   01.1892   16.01
170020.......................   01.3199   14.54   170102..........   01.0187   12.78   180023.........   00.8295   11.27   180122.........   01.0373   14.67   190089.........   01.1201   09.60
170022.......................   01.1704   14.15   170103..........   01.2458   15.28   180024.........   01.3845   15.69   180123.........   01.4607   19.39   190090.........   01.0660   15.75
170023.......................   01.4044   15.57   170104..........   01.4205   19.52   180025.........   01.1284   16.18   180124.........   01.4836   16.00   190092.........   01.3355   20.14
170024.......................   01.1640   12.71   170105..........   01.0303   14.45   180026.........   01.1086   13.66   180125.........   00.9440   16.23   190095.........   00.9950   14.04
170025.......................   01.1596   18.37   170106..........   00.8419   12.54   180027.........   01.2742   14.17   180126.........   01.1707   11.90   190098.........   01.5272   17.56
170026.......................   01.0181   16.38   170108..........   00.9468   10.88   180028.........   01.0014   16.19   180127.........   01.2444   16.63   190099.........   01.1506   17.31
170027.......................   01.3677   15.02   170109..........   01.0506   14.67   180029.........   01.2273   15.99   180128.........   01.1902   15.40   190102.........   01.5823   16.15
170030.......................   01.0391   13.61   170110..........   01.0039   13.62   180030.........   01.1759   12.89   180129.........   01.0293   13.93   190103.........   00.8416   09.66
170031.......................   00.9148   12.36   170112..........   00.9127   13.44   180031.........   01.0226   12.38   180130.........   01.4291   17.87   190106.........   01.1367   17.27
170032.......................   01.1156   14.18   170113..........   01.1547   13.43   180032.........   00.9954   15.30   180132.........   01.2480   15.19   190109.........   01.2092   13.68
170033.......................   01.3483   14.08   170114..........   00.9562   12.96   180033.........   01.1235   12.57   180133.........   01.2433   20.73   190110.........   00.9491   11.96
170034.......................   00.9541   13.74   170115..........   00.9903   11.01   180034.........   01.0753   13.61   180134.........   01.0116   13.71   190111.........   01.5215   17.24
170035.......................   00.9390   12.37   170116..........   01.0372   13.94   180035.........   01.5699   18.26   180136.........   01.5878   16.63   190112.........   01.5163   20.35
170036.......................   00.8720   12.31   170117..........   01.0112   12.63   180036.........   01.2440   17.36   180137.........   01.6535   16.82   190113.........   01.3665   17.85
170037.......................   01.1255   15.02   170119..........   00.9561   11.32   180037.........   01.2889   20.29   180138.........   01.2129   17.02   190114.........   01.0055   11.51
170038.......................   00.9185   10.94   170120..........   01.2849   14.66   180038.........   01.4243   14.73   180139.........   01.0726   16.41   190115.........   01.2502   16.88
170039.......................   01.1367   11.69   170122..........   01.8944   19.69   180040.........   02.0334   19.04   180140.........   01.0095  .......  190116.........   01.3017   14.97
170040.......................   01.5625   18.21   170123..........   01.7747   17.69   180041.........   01.0945   13.03   190001.........   00.9375   16.35   190118.........   01.0495   11.87
170041.......................   00.9823   11.41   170124..........   00.9503   11.92   180042.........   01.1163   13.43   190002.........   01.6513   16.28   190120.........   00.9247   12.89
170043.......................   00.9081   13.41   170126..........   00.9191   11.07   180043.........   01.0156   15.31   190003.........   01.4519   17.16   190122.........   01.2572   13.85
170044.......................   01.1101   14.73   170128..........   01.0769   14.31   180044.........   01.0359   14.68   190004.........   01.3759   14.75   190124.........   01.5739   18.80
170045.......................   01.0299   10.95   170131..........   01.0980   10.54   180045.........   01.2057   16.78   190005.........   01.6645   14.94   190125.........   01.5811   16.74
170049.......................   01.3313   18.05   170133..........   01.1443   14.09   180046.........   01.2012   16.81   190006.........   01.2072   14.50   190128.........   01.2060   17.04
170050.......................   00.8380   09.63   170134..........   00.9114   12.10   180047.........   01.0191   13.79   190007.........   01.0078   12.79   190130.........   00.9913   11.74
170051.......................   00.9598   13.31   170137..........   01.1842   16.81   180048.........   01.1403   15.53   190008.........   01.6528   17.79   190131.........   01.2797   17.33
170052.......................   01.0682   13.31   170139..........   00.9877   11.66   180049.........   01.3563   14.47   190009.........   01.2058   13.40   190133.........   01.0482   15.09
170053.......................   01.0069   13.09   170140..........   01.0533   11.17   180050.........   01.2697   15.58   190010.........   01.0884   14.69   190134.........   00.9967   12.16
170054.......................   01.0848   12.86   170142..........   01.2641   16.10   180051.........   01.4187   14.35   190011.........   01.1233   14.08   190135.........   01.4063   21.99
170055.......................   01.0698   17.05   170143..........   01.1251   12.53   180053.........   01.1091   14.22   190013.........   01.4220   15.27   190136.........   01.1262   10.66
170056.......................   00.9402   10.99   170144..........   01.6112   18.74   180054.........   01.1611   14.02   190014.........   01.0578   15.36   190138.........   00.6897   15.62
170057.......................   01.0566   13.75   170145..........   01.1694   17.02   180055.........   01.0370   13.61   190015.........   01.2421   16.38   190140.........   00.9431   11.60
170058.......................   01.1738   17.54   170146..........   01.4168   17.58   180056.........   01.1099   16.68   190017.........   01.3736   17.22   190142.........   00.9421   12.20
170060.......................   01.1313   12.73   170147..........   01.2245   18.33   180058.........   01.0090   12.85   190018.........   01.1816   13.78   190144.........   01.2097   18.82
170061.......................   01.1593   12.59   170148..........   01.4763   18.35   180059.........   00.9670   11.98   190019.........   01.5042   17.57   190145.........   00.9824   13.77
170062.......................   00.9501   10.45   170150..........   01.0726   13.13   180060.........   00.7427   13.48   190020.........   01.2002   15.83   190146.........   01.5901   18.99
170063.......................   00.8965   09.30   170151..........   01.0012   11.69   180063.........   00.9649   10.28   190025.........   01.2859   12.36   190147.........   00.9911   13.30
170064.......................   00.9513   11.38   170152..........   00.9801   13.27   180064.........   01.2906   14.40   190026.........   01.4470   15.65   190148.........   00.8975   11.81
170066.......................   00.9908   12.26   170160..........   01.0468   11.25   180065.........   00.9809   09.05   190027.........   01.4852   15.62   190149.........   00.9959   11.02
170067.......................   01.0357   11.05   170164..........   01.0426   13.87   180066.........   01.2068   16.87   190029.........   01.1320   14.09   190151.........   01.1518   12.30
170068.......................   01.3949   14.01   170166..........   01.1504   13.49   180067.........   01.8783   15.96   190033.........   00.9721   09.64   190152.........   01.4522   20.50
170069.......................   01.1769   13.20   170168..........   00.9486   09.97   180069.........   01.0397   16.08   190034.........   01.2434   14.93   190155.........   00.9203   10.54
170070.......................   01.0225   11.83   170171..........   01.0889   11.15   180070.........   01.0977   14.86   190035.........   01.4128   20.27   190156.........   00.8945   11.89
170072.......................   00.9565   11.53   170172..........   00.9841   11.07   180072.........   01.0513   13.80   190036.........   01.6475   18.96   190158.........   01.2308   20.36
170073.......................   01.0984   12.66   170174..........   01.0890   11.58   180075.........   00.9736   13.08   190037.........   00.9653   11.05   190160.........   01.2187   15.56
170074.......................   01.1552   12.86   170175..........   01.2928   16.30   180078.........   01.1230   17.35   190039.........   01.4080   16.41   190161.........   01.0441   12.98
170075.......................   00.8720   10.55   170176..........   01.5021   18.40   180079.........   01.2486   13.22   190040.........   01.3863   19.03   190162.........   01.1806   21.04
170076.......................   01.0770   11.15   170181..........   01.1668  .......  180080.........   01.0636   15.16   190041.........   01.4973   19.72   190164.........   01.2246   16.86
170077.......................   00.9689   11.12   170182..........   00.8647  .......  180085.........   01.2892   17.49   190043.........   01.1348   12.38   190166.........   01.0758   14.81
170079.......................   01.0810   11.81   170183..........   02.1585  .......  180087.........   01.0887   13.72   190044.........   01.1634   18.27   190167.........   01.2058   16.09
170080.......................   00.9459   11.05   180001..........   01.2246   16.18   180088.........   01.5722   19.42   190045.........   01.3672   19.09   190170.........   00.9592   12.34
170081.......................   00.9294   10.42   180002..........   01.0070   17.16   180092.........   01.0482   14.43   190046.........   01.4814   17.16   190173.........   01.4578   19.47
170082.......................   01.0577   10.60   180004..........   01.0888   13.51   180093.........   01.3617   14.72   190048.........   01.0669   14.55   190175.........   01.2835  ......
170084.......................   00.9862   11.06   180005..........   01.0390   17.40   180094.........   01.0163   11.93   190049.........   00.9644   14.74   190176.........   01.7028   18.06
170085.......................   00.9109   12.01   180006..........   00.9063   08.63   180095.........   01.1664   12.78   190050.........   01.0420   13.90   190177.........   01.6125   22.02
170086.......................   01.7190   18.04   180007..........   01.5485   14.17   180099.........   01.1988   11.72   190053.........   01.0567   11.98   190178.........   00.9868   11.20
170087.......................   01.4582   18.87   180009..........   01.3310   17.70   180101.........   01.3486   18.84   190054.........   01.4052   13.67   190182.........   01.1720   20.12
170088.......................   00.9139   10.59   180010..........   01.8382   16.91   180102.........   01.5215   15.95   190059.........   00.9447   13.58   190183.........   01.1294   13.43
170089.......................   01.0037   14.21   180011..........   01.1737   15.71   180103.........   02.0850   18.62   190060.........   01.4907   16.51   190184.........   01.0550   12.13
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27511]]



                                                                                          Page 7 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
190185.......................   01.3116   19.03   210004..........   01.3245   20.30   220030.........   01.0852   16.42   220171.........   01.6972   22.55   230103.........   01.0124   17.37
190186.......................   00.9539   11.69   210005..........   01.2407   17.70   220031.........   01.8518   27.21   220897.........   04.8084  .......  230104.........   01.6163   20.32
190187.......................   00.7801   14.05   210006..........   01.1291   16.84   220033.........   01.3898   19.40   230001.........   01.2015   15.98   230105.........   01.6088   19.46
190189.......................   00.9445   14.54   210007..........   01.6215   18.82   220035.........   01.2698   19.72   230002.........   01.2238   19.28   230106.........   01.1784   18.07
190190.......................   00.9291   18.74   210008..........   01.3146   21.21   220036.........   01.6218   23.26   230003.........   01.0945   18.07   230107.........   00.8964   12.56
190191.......................   01.3068   18.47   210009..........   01.7134   18.57   220038.........   01.2841   21.85   230004.........   01.6105   20.95   230108.........   01.2432   16.64
190194.......................   01.1471   19.16   210010..........   01.1960   17.00   220041.........   01.2492   20.87   230005.........   01.2825   18.02   230110.........   01.3309   17.10
190196.......................   00.9097   16.46   210011..........   01.2110   20.12   220042.........   01.2078   24.10   230006.........   01.1303   16.19   230111.........   00.9772   15.13
190197.......................   01.2655   18.80   210012..........   01.4840   21.27   220046.........   01.3942   21.48   230007.........   01.0869   16.51   230113.........   00.9511   17.66
190199.......................   01.3623  .......  210013..........   01.2780   20.65   220049.........   01.2664   21.58   230013.........   01.2659   20.70   230114.........   00.6368   23.27
190200.......................   01.5241   21.33   210015..........   01.2720   18.48   220050.........   01.0888   17.45   230015.........   01.1338   18.01   230115.........   01.0164   15.14
190201.......................   01.2315   18.24   210016..........   01.7279   20.37   220051.........   01.2702   19.70   230017.........   01.5125   20.40   230116.........   00.9155   15.58
190202.......................   01.4459   18.34   210017..........   01.1256   15.35   220052.........   01.2994   22.76   230019.........   01.5077   20.50   230117.........   01.9674   23.81
190203.......................   01.6074   19.50   210018..........   01.2414   20.93   220053.........   01.2564   18.86   230020.........   01.7180   21.17   230118.........   01.2419   17.25
190204.......................   01.5314   20.12   210019..........   01.4011   17.42   220055.........   01.3486   20.61   230021.........   01.6010   17.25   230119.........   01.3145   21.13
190205.......................   01.8790   17.63   210022..........   01.4536   20.07   220057.........   01.4381   20.91   230022.........   01.2422   17.62   230120.........   01.2315   19.00
190206.......................   01.4995   21.17   210023..........   01.2956   20.31   220058.........   01.0650   17.55   230024.........   01.4216   21.79   230121.........   01.2320   19.67
190207.......................   01.1825   19.43   210024..........   01.5336   18.06   220060.........   01.2565   24.78   230027.........   01.0587   16.25   230122.........   01.3296   18.32
190208.......................   00.8198   10.36   210025..........   01.3227   17.84   220062.........   00.6021   19.30   230029.........   01.5998   20.91   230124.........   01.1555   16.49
190218.......................   01.1389   15.05   210026..........   01.3187   24.54   220063.........   01.2909   18.42   230030.........   01.2415   16.55   230125.........   01.3676   12.83
190223.......................   00.5039   09.72   210027..........   01.2046   17.10   220064.........   01.2167   20.66   230031.........   01.4660   18.32   230128.........   01.3700   19.33
190227.......................   00.8050   30.01   210028..........   01.2256   16.66   220065.........   01.2182   20.00   230032.........   01.7444   18.97   230129.........   01.8923   19.07
190230.......................   00.8737  .......  210029..........   01.3064   20.04   220066.........   01.2760   19.39   230034.........   01.1948   16.64   230130.........   01.6884   22.37
190231.......................   01.2825  .......  210030..........   01.0993   15.77   220067.........   01.2944   22.82   230035.........   01.1377   15.84   230132.........   01.5373   22.92
190232.......................   01.6623  .......  210031..........   01.6370   16.97   220068.........   00.5244   15.95   230036.........   01.2807   19.78   230133.........   01.2350   14.06
190233.......................   01.0997  .......  210032..........   01.2096   18.42   220070.........   01.2635   17.77   230037.........   01.1606   16.96   230134.........   01.1081   15.87
200001.......................   01.2712   15.74   210033..........   01.1818   17.38   220071.........   01.8550   24.38   230038.........   01.6451   21.18   230135.........   01.1885   19.88
200002.......................   01.0212   16.15   210034..........   01.3996   20.29   220073.........   01.3882   25.34   230040.........   01.1976   18.35   230137.........   01.1691   17.78
200003.......................   01.1264   15.90   210035..........   01.1952   17.25   220074.........   01.2614   21.18   230041.........   01.2085   18.20   230141.........   01.6883   20.84
200006.......................   01.0731   14.95   210037..........   01.2887   16.14   220075.........   01.3228   20.09   230042.........   01.1542   19.03   230142.........   01.2092   18.71
200007.......................   01.0066   15.63   210038..........   01.3413   19.90   220076.........   01.1851   22.47   230046.........   01.8239   24.65   230143.........   01.1481   15.23
200008.......................   01.2497   18.34   210039..........   01.1613   15.25   220077.........   01.7122   22.32   230047.........   01.3070   19.61   230144.........   01.1092   21.06
200009.......................   01.7602   19.84   210040..........   01.2993   20.32   220079.........   01.1880   21.28   230053.........   01.5387   23.82   230145.........   01.1742   15.41
200012.......................   01.1641   16.11   210043..........   01.2569   20.04   220080.........   01.2773   17.77   230054.........   01.8228   19.74   230146.........   01.2845   19.49
200013.......................   01.1401   15.32   210044..........   01.2000   20.28   220081.........   00.9446   23.55   230055.........   01.1760   17.36   230147.........   01.4742   19.34
200015.......................   01.2358   17.15   210045..........   01.0148   11.73   220082.........   01.2902   19.28   230056.........   00.9776   14.17   230149.........   01.2419   14.92
200016.......................   01.0350   16.10   210046..........   01.1079   12.34   220083.........   01.1831   19.80   230058.........   01.0786   17.42   230151.........   01.3631   21.32
200017.......................   01.2447   16.86   210048..........   01.1746   22.47   220084.........   01.2425   22.24   230059.........   01.4842   19.00   230153.........   01.1118   15.61
200018.......................   01.1602   14.27   210049..........   01.1517   16.57   220086.........   01.5483   24.60   230060.........   01.2882   16.90   230154.........   00.9493   12.09
200019.......................   01.2486   18.01   210051..........   01.4541   13.94   220088.........   01.5778   21.76   230062.........   01.0291   10.93   230155.........   00.9752   13.80
200020.......................   01.1930   19.86   210054..........   01.2790   20.17   220089.........   01.3304   22.99   230063.........   01.3106   18.41   230156.........   01.6989   21.57
200021.......................   01.1723   17.66   210055..........   01.2914   22.48   220090.........   01.2260   20.78   230065.........   01.4805   18.63   230157.........   01.2084   19.67
200023.......................   00.8814   14.61   210056..........   01.4132   16.51   220092.........   01.2533   20.86   230066.........   01.3629   17.55   230159.........   01.3614   18.93
200024.......................   01.2940   19.16   210057..........   01.3587  .......  220094.........   01.2679   19.76   230068.........   01.4269   22.29   230162.........   00.9841   13.73
200025.......................   01.2732   18.81   210058..........   01.6842   18.09   220095.........   01.2234   17.77   230069.........   01.1751   18.86   230165.........   01.8763   20.92
200026.......................   01.0896   15.20   210059..........   01.2581   21.91   220098.........   01.2884   19.81   230070.........   01.4926   19.30   230167.........   01.3662   19.18
200027.......................   01.1423   16.51   210060..........   01.1731   25.28   220099.........   01.1644   15.97   230071.........   01.1363   20.78   230169.........   01.4366   21.16
200028.......................   00.9339   14.83   210061..........   01.0980   14.25   220100.........   01.2619   23.48   230072.........   01.2879   18.87   230171.........   00.9849   14.18
200031.......................   01.2965   14.96   220001..........   01.1636   20.98   220101.........   01.5059   22.58   230075.........   01.5257   19.29   230172.........   01.3176   17.85
200032.......................   01.3588   17.72   220002..........   01.5368   21.62   220104.........   01.2419   23.12   230076.........   01.3128   21.53   230174.........   01.3016   19.11
200033.......................   01.7105   19.57   220003..........   01.0806   16.92   220105.........   01.2111   21.97   230077.........   01.9772   18.44   230176.........   01.2388   20.89
200034.......................   01.1962   17.19   220004..........   01.1812   18.85   220106.........   01.2458   21.83   230078.........   01.0869   14.76   230178.........   01.0320   16.02
200037.......................   01.2193   15.53   220006..........   01.4332   21.79   220107.........   01.1742   18.46   230080.........   01.1933   20.41   230180.........   01.0676   15.03
200038.......................   01.1145   17.66   220008..........   01.2523   19.26   220108.........   01.1503   20.96   230081.........   01.2191   16.55   230184.........   01.2246   16.99
200039.......................   01.2494   18.06   220010..........   01.2949   20.94   220110.........   01.9520   30.07   230082.........   01.1643   14.88   230186.........   01.3835   15.81
200040.......................   01.0969   16.12   220011..........   01.1570   27.95   220111.........   01.2612   21.21   230085.........   01.1115   17.10   230188.........   01.1787   15.49
200041.......................   01.2255   17.37   220012..........   01.3654   27.84   220116.........   01.9484   23.95   230086.........   00.9885   14.03   230189.........   00.8927   14.50
200043.......................   00.5362   16.96   220015..........   01.1767   20.35   220118.........   02.0446   26.47   230087.........   01.0641   13.65   230190.........   01.0483   22.66
200050.......................   01.2051   16.71   220016..........   01.3547   20.16   220119.........   01.3255   24.40   230089.........   01.3379   21.55   230191.........   00.8947   14.99
200051.......................   00.9656   17.70   220017..........   01.4233   23.78   220123.........   01.0371   23.85   230092.........   01.3295   17.77   230193.........   01.2340   16.03
200052.......................   00.9605   13.07   220019..........   01.1716   17.06   220126.........   01.3077   19.39   230093.........   01.2320   17.37   230194.........   01.2090   14.37
200055.......................   01.1609   14.56   220020..........   01.2174   18.47   220128.........   01.1494   20.85   230095.........   01.2251   15.53   230195.........   01.2803   19.80
200062.......................   00.9155   14.64   220021..........   01.3823   23.21   220133.........   00.8435   30.53   230096.........   01.1954   19.85   230197.........   01.2564   22.00
200063.......................   01.1630   16.63   220023..........   01.1522   19.37   220135.........   01.2581   23.97   230097.........   01.5433   17.75   230199.........   01.1386   17.72
200066.......................   01.1762   14.34   220024..........   01.1696   20.14   220153.........   01.0459   19.74   230099.........   01.2223   19.06   230201.........   01.2166   14.02
210001.......................   01.4081   17.94   220025..........   01.1948   18.87   220154.........   00.8972   18.96   230100.........   01.1604   15.19   230204.........   01.3584   19.78
210002.......................   01.9534   16.84   220028..........   01.4680   22.20   220162.........   01.0891  .......  230101.........   01.0566   16.79   230205.........   01.0607   14.54
210003.......................   01.5503   22.97   220029..........   01.1933   22.25   220163.........   02.0719   24.73   230102.........   01.1047  .......  230207.........   01.2544   19.85
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27512]]



                                                                                          Page 8 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
230208.......................   01.1783   16.10   240047..........   01.5215   18.27   240132.........   01.2422   20.49   250034.........   01.5418   12.99   250138.........   01.3553   16.91
230211.......................   00.9786   13.86   240048..........   01.2786   20.43   240133.........   01.1715   16.16   250035.........   00.9041   11.82   250140.........   00.9213   09.37
230212.......................   01.0964   21.13   240049..........   01.7763   20.33   240135.........   00.8386   11.38   250036.........   00.9863   11.34   250141.........   01.2142   15.50
230213.......................   01.0251   12.69   240050..........   01.1234   19.89   240137.........   01.2521   15.40   250037.........   00.8717   09.53   250144.........   00.9383   11.18
230216.......................   01.5363   17.91   240051..........   00.9749   15.97   240138.........   00.8953   13.09   250038.........   00.9909   12.52   250145.........   00.9362  ......
230217.......................   01.2142   18.06   240052..........   01.2480   17.21   240139.........   00.9551   14.24   250039.........   01.0004   11.71   250146.........   01.0020   12.89
230219.......................   01.0153   15.18   240053..........   01.5190   19.67   240141.........   01.0836   19.12   250040.........   01.2911   15.65   250148.........   01.1589  ......
230221.......................   01.1831   18.15   240056..........   01.2490   20.13   240142.........   01.1491   15.16   250042.........   01.1491   13.78   250149.........   00.9157  ......
230222.......................   01.3602   18.98   240057..........   01.7418   22.04   240143.........   01.0673   12.48   250043.........   01.0303   10.49   260001.........   01.6548   15.06
230223.......................   01.3164   19.85   240058..........   00.9730   09.64   240144.........   00.9419   13.39   250044.........   00.9825   13.98   260002.........   01.4785   20.05
230227.......................   01.5246   22.00   240059..........   01.1011   17.98   240145.........   00.9681   12.37   250045.........   01.1454   17.17   260003.........   00.9487   12.45
230228.......................   01.2133   17.29   240061..........   01.7409   20.93   240146.........   00.9270   17.20   250047.........   00.9527   09.12   260004.........   01.0315   11.86
230230.......................   01.5449   20.38   240063..........   01.4559   20.88   240148.........   00.9433   11.34   250048.........   01.4527   13.51   260005.........   01.6121   19.68
230232.......................   01.0330   15.87   240064..........   01.2630   18.13   240150.........   00.8874   11.72   250049.........   00.9058   09.93   260006.........   01.5286   16.72
230235.......................   01.1141   14.65   240065..........   01.1480   11.14   240152.........   01.0177   17.85   250050.........   01.2448   12.30   260007.........   01.4659   16.03
230236.......................   01.3372   21.07   240066..........   01.3895   19.08   240153.........   01.0210   14.30   250051.........   00.8585   09.44   260008.........   01.2051   13.88
230239.......................   01.1697   16.07   240069..........   01.1596   18.31   240154.........   01.0138   13.15   250057.........   01.1766   14.06   260009.........   01.2372   15.63
230241.......................   01.1519   17.08   240071..........   01.1245   18.05   240155.........   00.9817   14.39   250058.........   01.1385   13.65   260011.........   01.6786   16.21
230244.......................   01.3177   20.14   240072..........   01.0272   16.08   240157.........   01.1265   13.92   250059.........   01.0322   12.16   260012.........   01.0505   11.96
230253.......................   01.0740   17.39   240073..........   00.9172   15.13   240160.........   00.9997   14.65   250060.........   00.8084   12.19   260013.........   01.1491   12.68
230254.......................   01.2799   22.64   240075..........   01.2180   18.79   240161.........   00.9389   14.56   250061.........   00.8634   10.75   260014.........   01.7751   17.84
230257.......................   01.1068   19.01   240076..........   01.1373   19.69   240162.........   00.9645   15.28   250063.........   00.8596   12.68   260015.........   01.2666   13.16
230259.......................   01.1982   19.06   240077..........   01.0463   14.15   240163.........   00.9330   14.10   250065.........   00.8907   11.72   260017.........   01.2286   13.94
230264.......................   00.9438   16.74   240078..........   01.4536   21.46   240166.........   01.1669   14.67   250066.........   00.9404   12.17   260018.........   00.9652   09.56
230269.......................   01.3034   21.71   240079..........   01.0176   12.57   240169.........   00.9534   15.25   250067.........   01.1253   14.14   260019.........   00.9816   12.63
230270.......................   01.2162   20.08   240080..........   01.3774   20.87   240170.........   01.1564   14.42   250068.........   00.8556   11.19   260020.........   01.7259   18.73
230273.......................   01.6607   22.11   240082..........   01.1194   14.55   240171.........   00.9950   14.02   250069.........   01.1870   13.42   260021.........   01.5153   17.51
230275.......................   00.5787   16.53   240083..........   01.3925   16.60   240172.........   01.0869   14.50   250071.........   00.9541   08.06   260022.........   01.3501   18.69
230276.......................   00.8129   16.23   240084..........   01.3436   17.20   240173.........   00.9599   14.82   250072.........   01.2914   16.67   260023.........   01.2567   15.57
230277.......................   01.2425   21.76   240085..........   00.9247   14.90   240179.........   01.0022   14.30   250076.........   00.9579   10.32   260024.........   01.0210   12.28
230278.......................   02.0914   19.50   240086..........   01.0520   15.23   240180.........   01.0157   10.51   250077.........   00.9505   11.08   260025.........   01.3121   13.61
230279.......................   00.6989  .......  240087..........   01.0824   15.69   240184.........   01.0424   11.31   250078.........   01.4419   14.21   260027.........   01.5941   18.92
230280.......................   01.0281  .......  240088..........   01.4444   18.10   240187.........   01.2617   16.56   250079.........   00.8562   15.12   260029.........   01.1264   15.76
230281.......................   01.7080  .......  240089..........   01.0010   15.23   240193.........   01.0582   14.73   250081.........   01.3034   15.19   260030.........   01.0891   09.73
240001.......................   01.5708   21.24   240090..........   01.0970   13.57   240196.........   00.6132   22.50   250082.........   01.2857   12.30   260031.........   01.4989   18.67
240002.......................   01.6938   19.40   240093..........   01.3186   16.49   240200.........   00.8962   13.34   250083.........   01.0251   11.01   260032.........   01.5795   17.59
240004.......................   01.4661   20.16   240094..........   01.0543   17.26   240205.........   00.9014  .......  250084.........   01.0930   13.92   260034.........   00.9785   14.22
240005.......................   00.9960   13.49   240096..........   01.0160   14.12   240206.........   00.8472  .......  250085.........   01.0093   11.42   260035.........   01.0729   11.44
240006.......................   01.1385   19.75   240097..........   01.1270   17.05   240207.........   01.2326   21.47   250088.........   00.9591   15.56   260036.........   01.0628   15.72
240007.......................   01.1171   15.15   240098..........   00.9677   16.41   240210.........   01.2588   21.44   250089.........   01.0276   11.77   260037.........   01.4003   15.17
240008.......................   01.0569   15.22   240099..........   01.1143   11.00   240211.........   00.9532   11.18   250093.........   01.1064   12.17   260039.........   01.1432   11.17
240009.......................   00.9895   14.18   240100..........   01.3089   19.58   240212.........   01.9942  .......  250094.........   01.2377   14.41   260040.........   01.6075   14.92
240010.......................   01.9742   20.17   240101..........   01.1581   17.32   250001.........   01.6688   15.91   250095.........   00.9795   13.57   260042.........   01.4257   15.65
240011.......................   01.1400   15.69   240102..........   00.8915   12.27   250002.........   00.7926   13.34   250096.........   01.2945   16.48   260044.........   01.0361   14.29
240013.......................   01.3150   15.90   240103..........   01.0772   14.10   250003.........   01.0305   14.13   250097.........   01.1910   13.83   260047.........   01.3634   14.19
240014.......................   01.0820   17.79   240104..........   01.2345   21.68   250004.........   01.4613   15.12   250098.........   00.8668   13.73   260048.........   01.2847   18.05
240016.......................   01.3076   15.46   240105..........   01.0028   12.70   250005.........   00.9643   09.15   250099.........   01.2680   12.73   260050.........   01.0968   14.71
240017.......................   01.1439   15.15   240106..........   01.3245   23.78   250006.........   00.9651   12.27   250100.........   01.2315   14.53   260052.........   01.3337   15.95
240018.......................   01.2866   15.82   240107..........   00.9788   15.07   250007.........   01.2618   16.88   250101.........   00.9408   09.89   260053.........   01.1331   09.46
240019.......................   01.2275   19.58   240108..........   00.9539   11.64   250008.........   00.8996   11.36   250102.........   01.5414   14.80   260054.........   01.3206   15.14
240020.......................   01.1482   18.11   240109..........   00.9922   13.59   250009.........   01.1809   15.04   250104.........   01.3619   15.58   260055.........   01.0378   13.67
240021.......................   00.9369   12.49   240110..........   01.0305   15.18   250010.........   01.0381   11.07   250105.........   00.9206   13.13   260057.........   01.1548   13.85
240022.......................   01.1174   17.33   240111..........   00.9867   13.06   250012.........   00.9568   13.77   250107.........   00.9087   14.16   260059.........   01.1275   14.17
240023.......................   01.0074   15.86   240112..........   01.0531   13.30   250015.........   01.0942   09.75   250109.........   00.9352   11.54   260061.........   01.1793   10.87
240025.......................   01.1734   15.02   240114..........   00.9888   11.13   250017.........   01.0107   13.77   250112.........   00.9947   14.22   260062.........   01.1602   19.89
240027.......................   01.0011   12.60   240115..........   01.6063   22.30   250018.........   00.9603   09.81   250117.........   01.0705   13.28   260063.........   01.1913   14.82
240028.......................   01.1386   16.50   240116..........   00.9465   12.43   250019.........   01.4259   17.43   250119.........   01.2047   10.80   260064.........   01.3295   15.38
240029.......................   01.1610   15.70   240117..........   01.0697   16.21   250020.........   01.0082   10.70   250120.........   01.0645   12.04   260065.........   01.7778   15.31
240030.......................   01.3037   16.78   240119..........   00.8486   16.93   250021.........   00.8579   07.74   250122.........   01.2735   15.87   260066.........   01.0927   13.19
240031.......................   00.9361   13.50   240121..........   00.9008   16.90   250023.........   00.8647   11.22   250123.........   01.3262   17.72   260067.........   00.9820   10.43
240036.......................   01.5543   19.05   240122..........   01.0504   16.80   250024.........   00.9894   08.25   250124.........   00.9137   10.69   260068.........   01.6715   18.49
240037.......................   01.0408   16.40   240123..........   01.0498   13.30   250025.........   01.1455   13.58   250125.........   01.3231   18.35   260070.........   01.0862   11.09
240038.......................   01.4454   22.37   240124..........   01.0139   15.71   250027.........   01.0256   10.40   250126.........   00.9923   10.22   260073.........   00.9681   11.58
240040.......................   01.2251   17.67   240125..........   00.9399   10.75   250029.........   00.8872   11.87   250127.........   00.7630  .......  260074.........   01.2427   14.81
240041.......................   01.2877   14.43   240127..........   01.0142   12.51   250030.........   00.9688   11.39   250128.........   01.1010   12.64   260077.........   01.7271   16.15
240043.......................   01.1990   16.83   240128..........   01.1180   14.55   250031.........   01.3157   17.20   250131.........   01.0539   09.36   260078.........   01.1782   12.39
240044.......................   01.2046   16.02   240129..........   01.0153   12.18   250032.........   01.2551   15.70   250134.........   00.9795   12.70   260079.........   00.9824   11.78
240045.......................   01.0655   18.49   240130..........   01.0151   14.54   250033.........   00.9921   11.57   250136.........   00.7871   16.84   260080.........   00.9654   09.77
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27513]]



                                                                                          Page 9 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
260081.......................   01.4971   16.44   270004..........   01.6477   16.49   280026.........   01.1254   12.80   280115.........   00.9809   13.59   310017.........   01.3295   21.95
260082.......................   01.1231   13.50   270006..........   01.0290   18.67   280028.........   01.0559   13.64   280117.........   01.2229   14.48   310018.........   01.2194   21.06
260085.......................   01.5684   18.57   270007..........   00.9630   12.26   280029.........   01.0506   12.62   280118.........   00.9757   13.28   310019.........   01.6403   20.84
260086.......................   01.0649   12.67   270009..........   01.0387   14.91   280030.........   01.7392   23.13   280119.........   00.8364  .......  310020.........   01.1974   19.66
260089.......................   00.9614   13.31   270011..........   01.1242  .......  280031.........   01.0575   12.48   280123.........   00.7918  .......  310021.........   01.3472   21.15
260091.......................   01.6022   18.86   270012..........   01.5945   17.10   280032.........   01.3182   15.11   290001.........   01.6372   22.35   310022.........   01.2384   19.38
260094.......................   01.1872   14.91   270013..........   01.2847   16.78   280033.........   00.9766   13.62   290002.........   00.8981   17.99   310024.........   01.2566   22.60
260095.......................   01.4432   16.05   270014..........   01.7192   15.97   280034.........   01.2078   13.41   290003.........   01.6179   21.15   310025.........   01.2260   21.92
260096.......................   01.5521   21.52   270016..........   00.8187   11.51   280035.........   00.9433   11.75   290005.........   01.4399   19.66   310026.........   01.2647   21.91
260097.......................   01.1913   15.82   270017..........   01.2275   18.32   280037.........   01.0146   13.55   290006.........   01.2170   16.54   310027.........   01.3646   18.17
260100.......................   00.9630   13.12   270019..........   01.0625   13.34   280038.........   01.0763   13.39   290007.........   01.8961   25.07   310028.........   01.1530   20.46
260102.......................   01.0125   16.75   270021..........   01.1007   15.55   280039.........   01.1970   14.24   290008.........   01.2200   17.14   310029.........   01.8925   20.69
260103.......................   01.3849   16.73   270023..........   01.2916   18.76   280040.........   01.5940   18.30   290009.........   01.6244   21.07   310031.........   02.5990   24.14
260104.......................   01.6403   19.57   270024..........   00.9931   11.15   280041.........   01.0014   10.95   290010.........   01.2053   19.33   310032.........   01.2921   20.00
260105.......................   01.8664   19.47   270026..........   00.8654   11.95   280042.........   01.0880   13.22   290011.........   00.8812   14.39   310034.........   01.2545   19.14
260107.......................   01.3815   18.77   270027..........   01.0389   12.69   280043.........   01.1268   12.75   290012.........   01.4385   19.97   310036.........   01.2092   18.44
260108.......................   01.8100   17.90   270028..........   01.0741   14.91   280045.........   01.1401   13.48   290013.........   01.0185   14.85   310037.........   01.3076   24.97
260109.......................   00.9959   11.92   270029..........   00.9031   14.51   280046.........   01.0732   11.09   290014.........   01.0444   16.52   310038.........   01.9146   22.82
260110.......................   01.6120   14.16   270031..........   00.8747   09.71   280047.........   01.1620   15.70   290015.........   00.9730   15.38   310039.........   01.2871   20.51
260111.......................   00.9980   08.04   270032..........   01.1788   16.46   280048.........   01.0800   11.17   290016.........   01.1392   18.71   310040.........   01.2688   23.12
260112.......................   01.4171   17.75   270033..........   00.8766   11.39   280049.........   01.0408   13.82   290019.........   01.2774   17.92   310041.........   01.3218   22.90
260113.......................   01.1053   14.05   270035..........   01.0275   15.87   280050.........   00.9290   13.11   290020.........   01.0859   17.65   310042.........   01.2459   21.74
260115.......................   01.2345   14.63   270036..........   00.9483   10.42   280051.........   01.0735   13.72   290021.........   01.5601   19.17   310043.........   01.2080   20.60
260116.......................   01.1223   13.70   270039..........   01.0661   11.99   280052.........   01.0491   11.85   290022.........   01.7399   22.47   310044.........   01.3055   20.16
260119.......................   01.1640   14.93   270040..........   01.0825   17.60   280054.........   01.2628   17.92   290027.........   00.9567   14.68   310045.........   01.3849   25.76
260120.......................   01.1599   15.72   270041..........   01.0693   11.14   280055.........   00.9347   11.63   290029.........   00.9400  .......  310047.........   01.3410   23.05
260122.......................   01.1502   13.12   270044..........   01.1913   13.40   280056.........   00.9886   10.99   290032.........   01.4149   18.66   310048.........   01.1852   20.69
260123.......................   01.0312   11.56   270046..........   00.9346   13.50   280057.........   01.0055   14.48   290038.........   01.1064  .......  310049.........   01.3294   23.54
260127.......................   00.9514   13.71   270048..........   01.0940   13.30   280058.........   01.3123   13.75   300001.........   01.3957   20.70   310050.........   01.2677   20.88
260128.......................   00.9851   08.95   270049..........   01.8346   18.19   280060.........   01.5884   18.35   300003.........   01.8607   20.92   310051.........   01.3207   24.26
260129.......................   01.2124   13.51   270050..........   01.0380   15.96   280061.........   01.4628   14.76   300005.........   01.2620   18.65   310052.........   01.2545   20.53
260131.......................   01.2940   16.32   270051..........   01.2980   17.65   280062.........   01.2187   11.92   300006.........   01.1221   16.24   310054.........   01.2880   23.19
260134.......................   01.1526   13.82   270052..........   01.0663   18.02   280064.........   01.0759   12.61   300007.........   01.1527   16.76   310056.........   01.1826   20.11
260137.......................   01.2614   13.71   270053..........   00.8678   09.53   280065.........   01.2879   16.22   300008.........   01.2481   16.95   310057.........   01.2933   20.10
260138.......................   01.9711   20.66   270057..........   01.1715   17.35   280066.........   01.0191   11.38   300009.........   01.0977   17.45   310058.........   01.1025   25.35
260141.......................   01.8695   16.53   270058..........   00.9411   11.20   280068.........   00.9659   09.31   300010.........   01.2364   17.80   310060.........   01.2116   17.55
260142.......................   01.1566   14.50   270059..........   00.8676   19.21   280070.........   01.0724   10.75   300011.........   01.3481   21.53   310061.........   01.2085   19.85
260143.......................   00.9463   10.52   270060..........   00.9702   11.92   280073.........   01.0386   12.78   300012.........   01.2749   21.64   310062.........   01.2936   23.90
260147.......................   01.0469   12.81   270063..........   00.8933   12.94   280074.........   01.1165   12.87   300013.........   01.2241   16.87   310063.........   01.3528   20.78
260148.......................   00.9572   09.33   270068..........   00.8629   12.38   280075.........   01.2096   12.90   300014.........   01.2293   18.41   310064.........   01.2956   21.35
260158.......................   01.1275   11.80   270072..........   00.8605   14.88   280076.........   01.0719   12.54   300015.........   01.1807   17.56   310067.........   01.3198   21.14
260159.......................   01.2924   18.02   270073..........   01.0764   11.06   280077.........   01.3635   17.36   300016.........   01.3137   17.41   310069.........   01.1292   18.19
260160.......................   01.0663   14.07   270074..........   00.8832  .......  280079.........   01.0636   09.40   300017.........   01.2137   20.49   310070.........   01.3977   22.16
260162.......................   01.7006   17.70   270075..........   00.8610  .......  280080.........   01.0860   11.34   300018.........   01.2397   18.85   310072.........   01.3053   20.74
260163.......................   01.3037   14.11   270076..........   00.8395  .......  280081.........   01.5614   17.24   300019.........   01.2613   18.43   310073.........   01.5567   22.31
260164.......................   01.0000   12.07   270079..........   00.9594   13.36   280082.........   01.0967   13.03   300020.........   01.2666   19.78   310074.........   01.4153   21.08
260166.......................   01.2144   21.51   270080..........   01.1499   14.27   280083.........   01.0671   15.64   300021.........   01.1635   15.69   310075.........   01.2965   21.67
260172.......................   01.0176   12.07   270081..........   01.0780   09.77   280084.........   01.0314   10.92   300022.........   01.0939   17.08   310076.........   01.3883   28.16
260173.......................   00.9560   11.15   270082..........   01.0050   16.10   280085.........   00.7201   14.72   300023.........   01.3251   20.13   310077.........   01.5000   23.09
260175.......................   01.1270   14.60   270083..........   01.1179   10.96   280088.........   01.8180   17.33   300024.........   01.2662   16.56   310078.........   01.3399   22.70
260176.......................   01.6758   18.44   270084..........   00.9031   12.77   280089.........   01.0614   13.79   300028.........   01.2716   15.52   310081.........   01.2643   20.80
260177.......................   01.3871   19.46   280001..........   01.0866   14.11   280090.........   00.9838   11.70   300029.........   01.3165   21.79   310083.........   01.2405   22.20
260178.......................   01.4760   19.06   280003..........   01.9467   18.11   280091.........   01.1320   13.17   300033.........   01.1041   13.70   310084.........   01.2611   20.43
260179.......................   01.5653   18.02   280005..........   01.3791   16.72   280092.........   00.8959   11.63   300034.........   01.9294   21.31   310086.........   01.1743   20.89
260180.......................   01.7024   18.45   280009..........   01.7304   16.70   280094.........   01.1287   13.55   310001.........   01.7682   24.56   310087.........   01.2357   18.95
260183.......................   01.6443   16.51   280011..........   00.9606   11.56   280097.........   01.0459   12.56   310002.........   01.7260   25.58   310088.........   01.2439   19.57
260186.......................   01.2600   15.20   280012..........   01.2348   14.88   280098.........   01.0110   09.68   310003.........   01.2210   23.16   310090.........   01.1901   22.86
260188.......................   01.2714   15.70   280013..........   02.0127   19.71   280101.........   01.1114   10.92   310005.........   01.2226   19.20   310091.........   01.2170   21.35
260189.......................   00.9400   11.23   280014..........   01.0034   10.78   280102.........   01.1187   11.77   310006.........   01.2198   19.02   310092.........   01.3046   20.52
260190.......................   01.2072   18.46   280015..........   01.0314   13.78   280104.........   00.9608   09.88   310008.........   01.2739   21.23   310093.........   01.2163   19.52
260191.......................   01.1707   19.44   280017..........   01.1537   13.42   280105.........   01.2920   16.46   310009.........   01.2782   21.35   310096.........   01.9004   21.19
260193.......................   01.2240   19.13   280018..........   01.1931   12.25   280106.........   00.9402   13.23   310010.........   01.2912   21.05   310105.........   01.1999   22.41
260195.......................   01.1660  .......  280020..........   01.5257   18.97   280107.........   01.0294   12.36   310011.........   01.3017   21.71   310108.........   01.3824   21.08
260197.......................   01.3182   20.38   280021..........   01.3499   14.01   280108.........   01.1461   13.26   310012.........   01.5940   23.47   310110.........   01.2143   19.69
260198.......................   01.2213   14.98   280022..........   00.9770   11.07   280109.........   00.9501   10.61   310013.........   01.2768   19.91   310111.........   01.2557   19.70
260200.......................   01.3554   19.14   280023..........   01.3780   13.73   280110.........   00.9942   10.88   310014.........   01.7025   23.69   310112.........   01.2426   20.58
270002.......................   01.1911   13.92   280024..........   01.0114   13.22   280111.........   01.2372   16.06   310015.........   01.7776   24.34   310113.........   01.2089   20.70
270003.......................   01.2465   18.65   280025..........   00.9810   11.07   280114.........   00.9353   10.26   310016.........   01.2225   22.93   310115.........   01.1943   19.78
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27514]]



                                                                                          Page 10 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
310116.......................   01.2919   21.67   330028..........   01.3448   23.76   330132.........   01.1620   13.74   330233.........   01.5441   29.08   330399.........   01.3239   29.65
310118.......................   01.1849   21.86   330029..........   01.1111   17.36   330133.........   01.3428   28.31   330234.........   02.1918   24.17   340001.........   01.4951   19.39
310119.......................   01.5594   27.27   330030..........   01.2349   14.89   330135.........   01.2563   16.25   330235.........   01.1332   17.37   340002.........   01.8825   18.53
310120.......................   01.0603   17.24   330033..........   01.2846   13.46   330136.........   01.2637   20.45   330236.........   01.3832   26.18   340003.........   01.1188   16.56
310121.......................   01.0460   16.61   330034..........   00.7718   36.61   330140.........   01.7132   17.19   330238.........   01.1820   14.53   340004.........   01.4966   17.21
320001.......................   01.4620   16.76   330036..........   01.3298   21.00   330141.........   01.3504   23.17   330239.........   01.2013   15.44   340005.........   01.2221   14.57
320002.......................   01.4159   21.55   330037..........   01.1242   15.17   330144.........   00.9758   13.17   330240.........   01.3354   26.47   340006.........   01.2338   14.56
320003.......................   01.1576   15.57   330038..........   01.2140   14.91   330148.........   01.0784   14.39   330241.........   01.8652   20.92   340007.........   01.1848   14.81
320004.......................   01.2677   17.86   330039..........   00.8486   13.18   330151.........   01.0421   13.73   330242.........   01.3516   18.35   340008.........   01.1458   16.48
320005.......................   01.3217   17.80   330041..........   01.3912   27.81   330152.........   01.4273   27.77   330245.........   01.2716   17.15   340009.........   01.4043   18.58
320006.......................   01.3699   15.02   330043..........   01.2400   25.15   330153.........   01.6522   17.44   330246.........   01.2502   22.99   340010.........   01.3129   16.41
320009.......................   01.5348   16.75   330044..........   01.2405   16.99   330154.........   01.5884  .......  330247.........   00.7071   26.49   340011.........   01.1134   13.98
320011.......................   00.9939   17.79   330045..........   01.4167   24.83   330157.........   01.3091   18.41   330249.........   01.2314   15.89   340012.........   01.2605   15.82
320012.......................   01.0231   16.57   330046..........   01.5105   28.39   330158.........   01.3668   24.33   330250.........   01.3166   16.01   340013.........   01.2719   16.58
320013.......................   01.2225   18.28   330047..........   01.2265   16.63   330159.........   01.3291   17.35   330252.........   00.9141   15.40   340014.........   01.5921   22.15
320014.......................   01.0141   08.42   330048..........   01.2888   16.10   330160.........   01.4618   26.09   330254.........   01.0327   15.52   340015.........   01.2388   16.44
320016.......................   01.1571   12.00   330049..........   01.2436   17.52   330161.........   00.7163   16.00   330258.........   01.4234   25.28   340016.........   01.1961   15.18
320017.......................   01.2175   17.67   330053..........   01.1270   14.39   330162.........   01.2602   26.18   330259.........   01.4434   21.99   340017.........   01.2581   15.69
320018.......................   01.4643   16.61   330055..........   01.5089   29.02   330163.........   01.2099   17.75   330261.........   01.2224   24.35   340018.........   01.1212   14.78
320019.......................   01.4799   19.01   330056..........   01.4367   28.30   330164.........   01.3999   18.96   330263.........   00.9948   17.00   340019.........   01.0453   13.69
320021.......................   01.7045   20.62   330057..........   01.7192   15.43   330166.........   00.9641   13.96   330264.........   01.2753   20.00   340020.........   01.1711   17.33
320022.......................   01.1678   16.34   330058..........   01.3255   15.69   330167.........   01.6419   27.45   330265.........   01.3114   15.78   340021.........   01.2221   15.08
320023.......................   01.0224   13.29   330059..........   01.6149   29.66   330169.........   01.4285   31.70   330267.........   01.2789   22.78   340022.........   01.0451   14.56
320030.......................   00.9845   16.54   330061..........   01.2961   23.38   330171.........   01.2758   21.15   330268.........   00.9689   15.79   340023.........   01.3842   18.44
320031.......................   00.8961   14.78   330062..........   01.1834   14.99   330175.........   01.1250   14.28   330270.........   01.9667   30.33   340024.........   01.2260   15.05
320032.......................   01.0053   16.66   330064..........   01.3837   28.38   330177.........   01.0204   12.46   330273.........   01.2909   21.36   340025.........   01.1908   14.15
320033.......................   01.1561   19.23   330065..........   01.1753   17.14   330179.........   00.8644   14.09   330275.........   01.2168   18.19   340027.........   01.2025   15.46
320035.......................   01.0000   14.82   330066..........   01.2326   17.26   330180.........   01.1942   16.09   330276.........   01.1889   16.58   340028.........   01.5288   17.48
320037.......................   01.2063   15.17   330067..........   01.3792   19.68   330181.........   01.3113   28.32   330277.........   01.1317   16.35   340030.........   02.0064   19.06
320038.......................   01.1613   15.62   330072..........   01.3367   26.92   330182.........   02.5604   26.92   330279.........   01.2905   17.24   340031.........   00.9382   12.56
320046.......................   01.1938   18.23   330073..........   01.1865   14.20   330183.........   01.4402   18.88   330285.........   01.8179   21.81   340032.........   01.3951   17.87
320048.......................   01.3453   13.90   330074..........   01.1952   16.89   330184.........   01.3357   25.83   330286.........   01.3134   22.59   340035.........   01.1716   14.97
320056.......................   00.9819  .......  330075..........   01.0925   16.48   330185.........   01.2303   24.23   330290.........   01.7595   28.28   340036.........   01.1656   17.04
320057.......................   01.0612  .......  330078..........   01.4429   16.90   330186.........   00.9205   18.79   330293.........   01.1658   13.72   340037.........   01.1731   15.50
320058.......................   00.9103  .......  330079..........   01.3056   16.60   330188.........   01.1826   17.75   330304.........   01.2716   25.62   340038.........   01.1099   14.52
320059.......................   00.9799  .......  330080..........   01.4028   24.95   330189.........   01.3836   16.20   330306.........   01.4564   26.59   340039.........   01.2731   19.18
320060.......................   00.9135  .......  330082..........   01.1164   16.29   330191.........   01.2642   17.14   330307.........   01.2198   18.33   340040.........   01.7730   17.75
320061.......................   01.0790  .......  330084..........   00.9954   15.59   330193.........   01.2990   27.34   330308.........   01.1771   28.68   340041.........   01.2428   15.99
320062.......................   00.9353  .......  330085..........   01.3139   18.66   330194.........   01.8175   26.07   330309.........   01.2301   24.67   340042.........   01.1875   13.80
320063.......................   01.3344   15.84   330086..........   01.2522   24.13   330195.........   01.6251   29.02   330314.........   01.3625   21.07   340044.........   01.1061   13.26
320065.......................   01.2800   16.76   330088..........   01.1053   24.41   330196.........   01.3279   25.53   330315.........   01.2528   24.58   340045.........   01.0396   10.95
320067.......................   00.8183   09.19   330090..........   01.5574   16.86   330197.........   01.0999   14.43   330316.........   01.3007   26.23   340047.........   01.8881   17.90
320068.......................   00.9221   17.98   330091..........   01.3825   17.64   330198.........   01.3312   22.17   330327.........   00.9294   15.30   340048.........   00.9055   09.39
320069.......................   01.0367   09.08   330092..........   01.1062   13.64   330199.........   01.4730   24.90   330331.........   01.2281   27.78   340049.........   00.6394   15.10
320070.......................   01.0220  .......  330094..........   01.2285   15.57   330201.........   01.5327   27.38   330332.........   01.2569   24.30   340050.........   01.1927   14.69
320074.......................   01.1134   17.15   330095..........   01.2586   16.43   330202.........   01.4667   25.07   330333.........   01.3666   22.00   340051.........   01.2724   16.23
320079.......................   01.1977   17.41   330096..........   01.0690   14.47   330203.........   01.4028   19.16   330336.........   01.3373   27.39   340052.........   01.0387   18.62
330001.......................   01.1965   24.84   330097..........   01.1645   14.51   330204.........   01.4276   24.90   330338.........   01.1337   22.52   340053.........   01.6979   18.94
330002.......................   01.4946   24.26   330100..........   00.6809   25.95   330205.........   01.1548   19.46   330339.........   00.8047   18.09   340054.........   01.0903   12.68
330003.......................   01.3431   19.29   330101..........   01.7909   33.09   330208.........   01.2046   23.16   330340.........   01.2007   23.91   340055.........   01.2066   16.69
330004.......................   01.2765   19.10   330102..........   01.2998   16.32   330209.........   01.1899   21.17   330350.........   01.8078   27.96   340060.........   01.1317   16.38
330005.......................   01.8086   19.53   330103..........   01.2457   15.94   330211.........   01.2056   16.31   330353.........   01.3988   27.49   340061.........   01.7130   19.20
330006.......................   01.3140   24.11   330104..........   01.3533   25.44   330212.........   01.1780   20.25   330354.........   01.3850  .......  340063.........   01.0618   13.01
330007.......................   01.3275   17.39   330106..........   01.5693   33.04   330213.........   01.1258   16.19   330357.........   01.3770   32.07   340064.........   01.2274   16.89
330008.......................   01.1201   15.74   330107..........   01.2581   24.38   330214.........   01.7374   28.82   330359.........   00.9481   23.70   340065.........   01.3093   12.82
330009.......................   01.3524   28.08   330108..........   01.2108   15.85   330215.........   01.2093   15.65   330372.........   01.2689   22.53   340067.........   01.1980   12.84
330010.......................   01.1699   15.34   330111..........   01.0835   14.62   330218.........   01.1561   17.16   330381.........   01.1775   26.80   340068.........   01.2347   14.09
330011.......................   01.2484   17.22   330114..........   00.8917   15.48   330219.........   01.6451   18.39   330385.........   01.1714   29.27   340069.........   01.7147   18.31
330012.......................   01.6092   27.82   330115..........   01.2026   14.46   330221.........   01.3287   26.57   330386.........   01.1388   20.82   340070.........   01.3855   16.89
330013.......................   02.0610   16.84   330116..........   00.9205   13.82   330222.........   01.2641   15.28   330387.........   00.8466   23.28   340071.........   01.0722   14.30
330014.......................   01.3839   27.12   330118..........   01.6256   18.16   330223.........   01.0773   15.10   330389.........   01.8147   29.95   340072.........   01.1441   13.86
330016.......................   01.0259   14.55   330119..........   01.7361   29.88   330224.........   01.2693   18.85   330390.........   01.2508   28.38   340073.........   01.4620   20.47
330019.......................   01.1269   23.60   330121..........   01.0046   14.35   330225.........   01.1710   23.34   330393.........   01.7066   25.24   340075.........   01.1488   15.98
330020.......................   01.0498   14.20   330122..........   01.2006   20.92   330226.........   01.2690   16.53   330394.........   01.5060   17.27   340080.........   01.1232   13.55
330023.......................   01.2458   22.76   330125..........   01.8084   19.69   330229.........   01.3174   14.90   330395.........   01.3465   30.16   340084.........   01.0577   14.51
330024.......................   01.9139   30.03   330126..........   01.2271   20.35   330230.........   01.5132   26.44   330396.........   01.2729   26.86   340085.........   01.2634   15.46
330025.......................   01.1935   13.80   330127..........   01.3930   25.99   330231.........   01.1306   27.57   330397.........   01.2901   23.98   340087.........   01.1402   16.80
330027.......................   01.4632   28.56   330128..........   01.3068   25.26   330232.........   01.2194   15.46   330398.........   01.2229   26.59   340088.........   01.1242   16.32
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27515]]



                                                                                          Page 11 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
340089.......................   00.9624   12.28   350011..........   01.9150   17.37   360036.........   01.3220   17.27   360113.........   01.3029   18.24   360204.........   01.2911   16.96
340090.......................   01.1324   15.49   350012..........   01.1423   12.36   360037.........   02.1403   20.14   360114.........   01.1471   16.05   360210.........   01.2281   19.23
340091.......................   01.6487   18.32   350013..........   01.0828   14.58   360038.........   01.5899   17.85   360115.........   01.3208   18.08   360211.........   01.2341   17.25
340093.......................   01.0683   11.60   350014..........   01.0438   14.29   360039.........   01.2504   15.38   360116.........   01.1336   16.04   360212.........   01.3982   20.25
340094.......................   01.3312   16.83   350015..........   01.7039   14.44   360040.........   01.3208   17.72   360118.........   01.3257   17.37   360213.........   01.1677   15.77
340096.......................   01.2015   17.18   350016..........   01.0482   10.35   360041.........   01.3759   18.25   360121.........   01.2853   16.74   360218.........   01.2994   16.21
340097.......................   01.1584   16.04   350017..........   01.4595   14.52   360042.........   01.1088   16.74   360122.........   01.3802   17.77   360230.........   01.3282   20.27
340098.......................   01.6790   19.05   350018..........   01.1672   10.67   360044.........   01.1425   15.79   360123.........   01.2539   17.50   360231.........   01.1364   12.45
340099.......................   01.0973   13.36   350019..........   01.6119   18.69   360045.........   01.4898   19.25   360124.........   01.2571   17.08   360234.........   01.3614   17.90
340101.......................   01.0284   11.11   350020..........   01.4933   17.82   360046.........   01.1375   18.60   360125.........   01.1173   16.87   360236.........   01.1885   18.56
340104.......................   00.9509   10.60   350021..........   01.0719   10.94   360047.........   01.2246   13.85   360126.........   01.2013   18.97   360239.........   01.2445   18.70
340105.......................   01.3875   17.75   350023..........   00.8794   15.59   360048.........   01.7427   21.00   360127.........   01.1556   16.28   360241.........   00.5303   17.69
340106.......................   01.1119   17.79   350024..........   01.1055   13.69   360049.........   01.2627   17.36   360128.........   01.1296   13.85   360242.........   01.6927  ......
340107.......................   01.3175   16.17   350025..........   01.0584   12.60   360050.........   01.1772   12.43   360129.........   01.0407   14.06   360243.........   00.7499   14.35
340109.......................   01.3284   15.91   350027..........   00.9693   12.57   360051.........   01.5377   21.83   360130.........   01.1314   15.16   360244.........   00.7183   16.77
340111.......................   01.1696   13.78   350029..........   01.0052   12.34   360052.........   01.7099   17.88   360131.........   01.4113   16.27   360245.........   00.8026   12.10
340112.......................   01.2281   14.03   350030..........   01.0850   16.04   360054.........   01.2577   15.55   360132.........   01.2353   20.78   360246.........   00.8761   15.05
340113.......................   01.9956   19.50   350033..........   00.9626   13.23   360055.........   01.2369   18.92   360133.........   01.4730   17.61   360247.........   00.4357  ......
340114.......................   01.5144   19.16   350034..........   01.0422   13.58   360056.........   01.3471   16.92   360134.........   01.5906   18.25   370001.........   01.6940   18.41
340115.......................   01.5599   17.23   350035..........   00.9058   10.11   360057.........   01.0323   13.04   360135.........   01.1609   17.12   370002.........   01.2409   13.60
340116.......................   01.9326   20.30   350038..........   01.0433   13.26   360058.........   01.2713   15.35   360136.........   01.0537   14.73   370004.........   01.2787   15.30
340119.......................   01.2864   15.21   350039..........   00.9735   13.53   360059.........   01.5326   20.00   360137.........   01.5595   18.98   370005.........   01.0310   14.12
340120.......................   01.1407   12.33   350041..........   01.0473   13.05   360062.........   01.4664   18.40   360140.........   01.0061   15.47   370006.........   01.3098   14.88
340121.......................   01.0454   14.52   350042..........   01.0545   12.39   360063.........   01.1442   17.19   360141.........   01.4435   19.84   370007.........   01.1454   12.80
340122.......................   00.9955   10.30   350043..........   01.6433   16.58   360064.........   01.5484   19.65   360142.........   01.0217   14.99   370008.........   01.4101   16.02
340123.......................   01.1301   14.07   350044..........   00.9167   10.01   360065.........   01.2285   16.97   360143.........   01.2936   17.74   370011.........   01.0535   12.51
340124.......................   01.0290   12.27   350047..........   01.2270   16.64   360066.........   01.3888   17.16   360144.........   01.3153   20.19   370012.........   00.8431   09.22
340125.......................   01.4128   16.94   350049..........   01.2236   10.38   360067.........   01.2739   12.11   360145.........   01.6266   16.84   370013.........   01.7649   18.61
340126.......................   01.4341   16.23   350050..........   00.9361   10.25   360068.........   01.6561   21.91   360147.........   01.2668   15.55   370014.........   01.3220   17.14
340127.......................   01.3124   16.30   350051..........   00.9479   14.13   360069.........   01.1403   16.38   360148.........   01.0725   16.50   370015.........   01.2733   13.84
340129.......................   01.3428   18.65   350053..........   01.0745   09.47   360070.........   01.6756   16.57   360149.........   01.1481   20.33   370016.........   01.3805   14.25
340130.......................   01.3270   16.03   350055..........   00.9216   11.50   360071.........   01.2663   15.42   360150.........   01.2805   17.70   370017.........   01.1032   12.14
340131.......................   01.4309   15.77   350056..........   00.9559   12.92   360072.........   01.1415   16.29   360151.........   01.3134   16.55   370018.........   01.2603   14.06
340132.......................   01.3108   12.41   350058..........   00.9358   12.18   360074.........   01.3554   19.15   360152.........   01.4800   17.65   370019.........   01.3065   11.91
340133.......................   01.0442   13.87   350060..........   00.7458   07.59   360075.........   01.4959   20.80   360153.........   01.1489   13.64   370020.........   01.2921   12.53
340136.......................   00.7885   24.45   350061..........   01.0638   13.77   360076.........   01.3053   18.84   360154.........   01.0301   12.39   370021.........   00.9804   10.01
340137.......................   01.2184   12.68   350063..........   00.8926  .......  360077.........   01.4743   18.59   360155.........   01.3265   18.75   370022.........   01.2770   15.09
340138.......................   01.1777   17.60   350064..........   00.9587  .......  360078.........   01.2792   18.97   360156.........   01.3473   16.47   370023.........   01.3268   14.95
340141.......................   01.6350   18.27   350066..........   00.7912  .......  360079.........   01.7583   19.31   360159.........   01.1944   18.50   370025.........   01.3983   15.37
340142.......................   01.2013   14.94   360001..........   01.3143   17.88   360080.........   01.1127   14.39   360161.........   01.2723   18.78   370026.........   01.4214   16.08
340143.......................   01.3902   18.50   360002..........   01.1965   15.17   360081.........   01.3567   17.92   360162.........   01.2555   17.27   370028.........   01.8667   17.67
340144.......................   01.4374   14.85   360003..........   01.7521   19.64   360082.........   01.3134   19.81   360163.........   01.8595   19.87   370029.........   01.2233   12.79
340145.......................   01.3310   16.80   360006..........   01.7493   19.53   360083.........   01.2570   15.49   360164.........   00.8555   13.98   370030.........   01.2426   12.05
340146.......................   01.0146   15.42   360007..........   01.0552   15.41   360084.........   01.6203   18.16   360165.........   01.2257   14.31   370032.........   01.5278   14.28
340147.......................   01.2935   17.80   360008..........   01.2985   16.20   360085.........   01.8174   19.63   360166.........   01.1556   15.83   370033.........   01.0835   11.23
340148.......................   01.4339   18.28   360009..........   01.3946   17.35   360086.........   01.4601   16.75   360169.........   00.9799   16.99   370034.........   01.2667   12.80
340151.......................   01.1224   14.05   360010..........   01.2275   15.38   360087.........   01.4074   17.32   360170.........   01.2837   16.07   370035.........   01.6190   15.21
340153.......................   01.9701   21.08   360011..........   01.2285   17.83   360088.........   01.2127   15.48   360172.........   01.3763   16.62   370036.........   01.0290  ......
340155.......................   01.3926   20.91   360012..........   01.3020   17.61   360089.........   01.1680   16.92   360174.........   01.2365   19.24   370037.........   01.7236   17.83
340156.......................   00.8066  .......  360013..........   01.0836   16.71   360090.........   01.2316   17.90   360175.........   01.2401   17.61   370038.........   00.9187   12.01
340158.......................   01.1738   16.16   360014..........   01.1219   17.57   360091.........   01.2648   18.90   360176.........   01.1559   15.53   370039.........   01.4573   17.22
340159.......................   01.1571   16.88   360016..........   01.6012   17.81   360092.........   01.2659   17.85   360177.........   01.2581   16.30   370040.........   01.1051   10.89
340160.......................   01.0774   12.88   360017..........   01.7592   19.82   360093.........   01.2188   16.66   360178.........   01.2276   15.58   370041.........   01.0285   13.52
340162.......................   01.2237   17.29   360018..........   01.5445   18.51   360094.........   01.2950   20.27   360179.........   01.2916   19.01   370042.........   00.8575   10.56
340164.......................   01.4566   18.15   360019..........   01.2857   18.22   360095.........   01.3340   16.68   360180.........   02.0922   22.07   370043.........   00.9719   12.91
340166.......................   01.4166   18.51   360020..........   01.4313   20.05   360096.........   01.1097   16.20   360184.........   00.4913   17.11   370045.........   01.0983   10.20
340168.......................   00.5085   14.78   360021..........   01.2770   18.04   360098.........   01.4006   18.00   360185.........   01.2493   17.09   370046.........   00.9827   09.22
340171.......................   01.1229  .......  360024..........   01.4310   17.76   360099.........   01.1130   16.91   360186.........   01.1727   15.04   370047.........   01.3245   15.40
350001.......................   01.0099   11.13   360025..........   01.2355   17.66   360100.........   01.3239   15.63   360187.........   01.2787   16.00   370048.........   01.1876   13.46
350002.......................   01.7678   16.04   360026..........   01.1897   15.59   360101.........   01.7334   19.71   360188.........   00.9998   14.77   370049.........   01.3566   15.60
350003.......................   01.1971   15.67   360027..........   01.5255   19.06   360102.........   01.2713   19.68   360189.........   01.0092   15.40   370051.........   00.9627   13.31
350004.......................   01.9429   17.88   360028..........   01.4563   15.28   360103.........   01.3290   18.70   360192.........   01.2404   19.28   370054.........   01.3878   14.79
350005.......................   01.0670   13.14   360029..........   01.1611   16.41   360104.........   01.8950   20.28   360193.........   01.3104   16.77   370056.........   01.5609   15.41
350006.......................   01.3958   16.16   360030..........   01.1326   14.82   360106.........   01.0509   13.89   360194.........   01.1180   16.14   370057.........   01.1711   15.05
350007.......................   00.9510   12.20   360031..........   01.3534   18.42   360107.........   01.2373   16.98   360195.........   01.1319   17.72   370059.........   01.1178   13.53
350008.......................   01.0408   15.15   360032..........   01.0876   16.18   360108.........   01.0371   15.08   360197.........   01.2030   16.76   370060.........   01.0787   12.88
350009.......................   01.1648   15.74   360034..........   01.1698   13.30   360109.........   01.0970   17.43   360200.........   00.9989   13.48   370063.........   01.0947   13.12
350010.......................   01.1768   12.30   360035..........   01.5734   19.90   360112.........   01.7594   21.61   360203.........   01.1502   15.55   370064.........   01.0006   10.14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27516]]



                                                                                          Page 12 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
370065.......................   01.0475   14.76   370195..........   00.9505  .......  390004.........   01.3767   16.70   390080.........   01.2555   18.66   390167.........   01.2691   20.71
370071.......................   01.0381   10.18   380001..........   01.3213   19.27   390005.........   01.0865   14.82   390081.........   01.3510   20.23   390168.........   01.1971   17.49
370072.......................   00.9034   11.67   380002..........   01.2104   22.74   390006.........   01.7405   17.39   390083.........   01.2377   20.87   390169.........   01.2059   18.63
370076.......................   01.3228   12.42   380003..........   01.1411   18.75   390007.........   01.1827   21.33   390084.........   01.2406   15.29   390170.........   01.8512   22.43
370077.......................   01.2244   16.30   380004..........   01.6835   22.89   390008.........   01.1329   15.08   390086.........   01.1338   16.87   390173.........   01.1970   17.08
370078.......................   01.7096   14.58   380005..........   01.1844   19.47   390009.........   01.6076   17.97   390088.........   01.3128   18.42   390174.........   01.7084   24.17
370079.......................   00.9596   11.98   380006..........   01.3941   18.29   390010.........   01.1788   16.58   390090.........   01.7984   19.42   390176.........   01.1554   16.79
370080.......................   00.9895   11.12   380007..........   01.5747   22.66   390011.........   01.2486   16.49   390091.........   01.1719   17.09   390178.........   01.2863   17.63
370082.......................   00.9026   12.48   380008..........   01.0694   18.69   390012.........   01.1879   19.15   390093.........   01.1483   15.20   390179.........   01.2723   22.80
370083.......................   00.9519   10.95   380009..........   01.8168   22.17   390013.........   01.2292   16.77   390095.........   01.1706   13.95   390180.........   01.5471   22.83
370084.......................   01.0346   08.88   380010..........   01.0963   24.15   390014.........   01.6409   16.42   390096.........   01.2685   16.88   390181.........   01.0604   17.80
370085.......................   00.8099   12.94   380011..........   01.0945   14.95   390015.........   01.1953   13.06   390097.........   01.3276   20.91   390183.........   01.1832   17.16
370086.......................   01.1956   09.89   380013..........   01.2681   21.54   390016.........   01.2237   15.58   390098.........   01.7625   20.06   390184.........   01.1052   17.69
370089.......................   01.2826   14.01   380014..........   01.4140   18.89   390017.........   01.1682   14.20   390100.........   01.6300   19.30   390185.........   01.2228   16.12
370091.......................   01.6822   16.13   380017..........   01.7069   21.77   390018.........   01.2273   19.41   390101.........   01.1992   15.70   390189.........   01.0395   17.78
370092.......................   01.0705   12.73   380018..........   01.8382   19.21   390019.........   01.1151   14.53   390102.........   01.3664   20.34   390191.........   01.0524   13.91
370093.......................   01.8611   18.67   380019..........   01.2076   18.88   390022.........   01.3923   21.81   390103.........   01.0990   17.17   390192.........   01.1238   17.15
370094.......................   01.4135   16.67   380020..........   01.4350   20.06   390023.........   01.2514   19.71   390104.........   01.0557   15.15   390193.........   01.1950   15.39
370095.......................   00.9154   11.62   380021..........   01.2873   19.10   390024.........   00.8646   22.54   390106.........   01.0122   14.85   390194.........   01.1560   18.97
370097.......................   01.3691   18.65   380022..........   01.1702   19.92   390025.........   00.6443   16.64   390107.........   01.2482   18.52   390195.........   01.8265   22.08
370099.......................   01.1663   13.22   380023..........   01.2350   17.76   390026.........   01.2687   20.58   390108.........   01.4077   19.97   390196.........   01.4066  ......
370100.......................   01.0423   13.02   380025..........   01.2670   21.81   390027.........   01.9708   23.48   390109.........   01.1523   14.44   390197.........   01.3091   18.40
370103.......................   00.9024   11.77   380026..........   01.1899   16.87   390028.........   01.7871   18.54   390110.........   01.6465   17.36   390198.........   01.1942   15.21
370105.......................   02.0043   17.06   380027..........   01.2587   20.25   390029.........   01.9395   18.73   390111.........   01.8583   26.22   390199.........   01.2016   14.89
370106.......................   01.5411   16.96   380029..........   01.1474   17.29   390030.........   01.2365   16.29   390112.........   01.1488   12.16   390200.........   01.0147   14.67
370108.......................   01.0551   10.82   380031..........   01.0329   15.92   390031.........   01.1587   16.93   390113.........   01.2113   16.04   390201.........   01.2666   18.75
370112.......................   01.0769   12.33   380033..........   01.7783   22.97   390032.........   01.2498   17.80   390114.........   01.1217   21.07   390203.........   01.3102   20.45
370113.......................   01.1674   12.33   380035..........   01.3580   18.58   390035.........   01.2774   17.24   390115.........   01.3154   21.40   390204.........   01.2596   20.05
370114.......................   01.6305   14.69   380036..........   01.1305   17.27   390036.........   01.3337   17.63   390116.........   01.2237   19.91   390205.........   01.3479   22.42
370121.......................   01.1729   15.78   380037..........   01.2063   18.24   390037.........   01.3426   18.07   390117.........   01.1636   15.65   390206.........   01.3349   19.91
370122.......................   01.1291   09.78   380038..........   01.3425   21.15   390039.........   01.0948   15.60   390118.........   01.1524   16.29   390209.........   01.0438   15.48
370123.......................   01.2098   14.12   380039..........   01.3082   18.89   390040.........   01.0024   12.71   390119.........   01.3475   17.17   390211.........   01.1929   16.47
370125.......................   01.0284   11.90   380040..........   01.2507   19.23   390041.........   01.2475   16.82   390121.........   01.3363   18.95   390213.........   00.9476   14.55
370126.......................   00.9483   10.66   380042..........   01.1550   18.06   390042.........   01.4374   20.74   390122.........   01.0719   16.06   390215.........   01.1565   20.69
370131.......................   01.0232   12.93   380047..........   01.6960   19.84   390043.........   01.0988   15.65   390123.........   01.3041   20.58   390217.........   01.2781   17.92
370133.......................   01.1213   09.82   380048..........   01.0936   13.92   390044.........   01.5993   18.80   390125.........   01.2255   15.08   390219.........   01.3149   18.57
370138.......................   01.1138   14.40   380050..........   01.3349   16.37   390045.........   01.7321   17.35   390126.........   01.3266   20.07   390220.........   01.2126   19.33
370139.......................   01.0944   10.62   380051..........   01.5217   19.13   390046.........   01.5446   18.49   390127.........   01.2319   20.26   390222.........   01.3083   20.42
370140.......................   01.0059   11.71   380052..........   01.1764   16.70   390047.........   01.6845   18.24   390128.........   01.2014   17.96   390223.........   01.6376   23.15
370141.......................   01.3883   19.17   380055..........   01.2275   23.88   390048.........   01.1857   16.26   390130.........   01.1480   16.62   390224.........   00.9314   13.04
370146.......................   01.0486   12.03   380056..........   01.0753   15.78   390049.........   01.5514   19.82   390131.........   01.2704   16.06   390225.........   01.2124   15.42
370148.......................   01.6050   19.01   380060..........   01.5375   21.51   390050.........   02.1389   21.60   390132.........   01.2425   20.25   390226.........   01.7861   23.22
370149.......................   01.2373   15.19   380061..........   01.5190   22.00   390051.........   02.1828   24.98   390133.........   01.7790   20.57   390228.........   01.2071   18.67
370153.......................   01.0915   13.17   380062..........   01.1039   15.07   390052.........   01.1846   16.68   390135.........   01.2913   19.73   390231.........   01.3122   21.89
370154.......................   01.0164   12.31   380063..........   01.3354   21.48   390054.........   01.2245   14.56   390136.........   01.2338   15.66   390233.........   01.3268   16.71
370156.......................   01.1022   13.37   380064..........   01.4398   18.47   390055.........   01.7751   21.82   390137.........   01.2962   17.80   390235.........   01.5635   23.94
370158.......................   01.0538   12.08   380065..........   01.0680   19.24   390056.........   01.1222   15.73   390138.........   01.3365   17.41   390236.........   01.1643   15.90
370159.......................   01.3427   13.95   380066..........   01.3162   17.60   390057.........   01.3263   18.94   390139.........   01.4984   23.50   390237.........   01.6149   20.17
370163.......................   00.8558   10.99   380068..........   01.0655   19.31   390058.........   01.3239   17.46   390142.........   01.6716   22.64   390238.........   01.3009   16.12
370165.......................   01.0872   11.74   380069..........   01.1328   17.51   390060.........   01.1432   16.68   390145.........   01.3596   18.64   390242.........   01.2772   18.69
370166.......................   01.0886   15.48   380070..........   01.3924   21.21   390061.........   01.4426   20.47   390146.........   01.3088   16.19   390244.........   00.9339   13.32
370169.......................   01.1024   10.66   380071..........   01.2894   18.06   390062.........   01.1400   15.76   390147.........   01.2505   19.22   390245.........   01.3465   23.15
370170.......................   00.9792  .......  380072..........   00.9714   14.15   390063.........   01.7324   19.20   390149.........   01.2579   19.59   390246.........   01.2349   15.91
370171.......................   01.0341  .......  380075..........   01.4281   20.90   390064.........   01.5561   16.25   390150.........   01.1065   17.50   390247.........   01.0497   17.22
370172.......................   00.8587  .......  380078..........   01.1638   16.95   390065.........   01.2903   18.85   390151.........   01.2927   18.26   390249.........   01.0291   10.81
370173.......................   01.2420  .......  380081..........   01.1568   17.66   390066.........   01.2933   17.15   390152.........   01.0351   17.07   390256.........   01.7792   23.51
370174.......................   00.9656  .......  380082..........   01.2906   20.35   390067.........   01.8083   18.03   390153.........   01.2473   21.93   390258.........   01.2502   19.78
370176.......................   01.1495   16.48   380083..........   01.2487   18.93   390068.........   01.3245   18.13   390154.........   01.1877   13.93   390260.........   01.1823   15.95
370177.......................   00.9686   10.10   380084..........   01.2127   20.61   390069.........   01.3242   19.23   390155.........   01.2985   20.06   390262.........   01.9798   17.25
370178.......................   01.0015   12.17   380087..........   01.0083   12.30   390070.........   01.2898   19.49   390156.........   01.4337   22.61   390263.........   01.4331   18.66
370179.......................   00.8966   14.28   380088..........   01.0059   15.71   390071.........   01.1154   13.36   390157.........   01.3427   17.97   390265.........   01.3123   17.72
370180.......................   01.0716  .......  380089..........   01.2909   21.87   390072.........   01.1133   15.76   390158.........   01.5891  .......  390266.........   01.2098   16.69
370183.......................   01.0864   14.00   380090..........   01.3011   24.41   390073.........   01.6002   18.94   390160.........   01.2031   17.67   390267.........   01.2930   18.93
370186.......................   01.0206   12.72   380091..........   01.2113   23.79   390074.........   01.2369   16.26   390161.........   01.0981   14.87   390268.........   01.3884   19.94
370189.......................   00.9754   10.13   380897..........   04.9268  .......  390075.........   01.2410   15.92   390162.........   01.4238   19.03   390270.........   01.3090   15.89
370190.......................   01.5480   17.49   390001..........   01.3578   18.16   390076.........   01.3094   20.45   390163.........   01.2248   16.55   390272.........   00.4549  ......
370192.......................   01.1656  .......  390002..........   01.3668   17.03   390078.........   01.0633   15.98   390164.........   01.9412   19.14   390277.........   00.5643   20.34
370194.......................   01.1343  .......  390003..........   01.2571   15.57   390079.........   01.7083   16.83   390166.........   01.1041   17.40   390278.........   00.7673   17.52
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27517]]



                                                                                          Page 13 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
390279.......................   01.0726   09.45   420005..........   01.2017   14.35   430013.........   01.2330   15.06   440029.........   01.2864   16.30   440148.........   01.1406   14.37
390281.......................   03.1739  .......  420006..........   01.2785   18.90   430014.........   01.2742   16.77   440030.........   01.1989   13.21   440149.........   01.1993   15.19
400001.......................   01.2170   08.68   420007..........   01.5103   16.31   430015.........   01.1801   14.41   440031.........   00.9653   12.29   440150.........   01.2853   19.58
400002.......................   01.4586   10.39   420009..........   01.2131   15.70   430016.........   01.8185   17.59   440032.........   01.0553   12.65   440151.........   01.3706   15.86
400003.......................   01.2378   07.14   420010..........   01.1070   14.35   430018.........   00.9882   14.06   440033.........   01.0675   14.84   440152.........   01.5616   16.91
400004.......................   01.1516   07.34   420011..........   01.0905   14.89   430022.........   00.9656   10.91   440034.........   01.5798   16.64   440153.........   01.2607   15.10
400005.......................   01.1122   06.10   420014..........   01.1343   14.11   430023.........   00.9173   09.95   440035.........   01.3176   15.65   440156.........   01.5650   18.85
400006.......................   01.2005   08.16   420015..........   01.3145   15.96   430024.........   00.9117   12.28   440039.........   01.6355   16.76   440157.........   01.0913   13.64
400007.......................   01.2599   07.55   420016..........   01.0635   14.39   430026.........   01.0798   11.36   440040.........   00.9697   17.03   440159.........   01.2358   14.83
400009.......................   01.0253   07.68   420018..........   01.7204   18.94   430027.........   01.8117   16.54   440041.........   01.0374   12.35   440161.........   01.6916   20.58
400010.......................   00.9067   07.94   420019..........   01.2221   14.90   430028.........   01.0938   13.68   440046.........   01.3271   13.59   440166.........   01.4407   17.80
400011.......................   00.9999   08.65   420020..........   01.3908   15.98   430029.........   00.9886   13.10   440047.........   00.9568   15.31   440168.........   01.0199   13.03
400012.......................   01.2156   07.09   420023..........   01.4241   18.07   430031.........   00.9673   11.31   440048.........   01.7988   16.64   440173.........   01.5155   16.91
400013.......................   01.2969   08.96   420026..........   01.9266   18.05   430033.........   01.0218   11.90   440049.........   01.6566   15.62   440174.........   00.9837   13.30
400014.......................   01.3613   07.51   420027..........   01.3790   15.50   430034.........   01.0752   11.58   440050.........   01.2035   15.14   440175.........   01.2366   18.06
400015.......................   01.2211   10.88   420030..........   01.2885   15.83   430036.........   01.0398   10.11   440051.........   00.9285   13.29   440176.........   01.2916   18.36
400016.......................   01.3614   10.48   420031..........   00.9586   12.15   430037.........   00.9784   12.89   440052.........   01.2226   14.15   440178.........   01.1880   20.20
400017.......................   01.2405   06.27   420033..........   01.2216   19.24   430038.........   01.0179   10.77   440053.........   01.3071   15.64   440180.........   01.1517   16.68
400018.......................   01.3516   09.35   420035..........   00.7985   12.43   430039.........   01.0871   11.53   440054.........   01.2182   13.84   440181.........   01.0190   11.75
400019.......................   01.6737   09.48   420036..........   01.2011   15.38   430040.........   00.9098   12.17   440056.........   01.0857   13.45   440182.........   00.9568   15.33
400021.......................   01.4421   07.62   420037..........   01.2778   19.65   430041.........   00.9376   11.91   440057.........   01.0155   10.77   440183.........   01.5296   15.06
400022.......................   01.3098   09.79   420038..........   01.2852   14.43   430042.........   00.9807   10.63   440058.........   01.3158   14.95   440184.........   01.3494   18.63
400024.......................   01.0265   08.62   420039..........   01.1511   14.52   430043.........   01.1938   11.97   440059.........   01.3336   15.98   440185.........   01.1231   14.24
400026.......................   00.9430   05.90   420042..........   01.2035   12.15   430044.........   00.9249   13.17   440060.........   01.1799   14.76   440186.........   01.1885   16.21
400027.......................   01.1317   08.32   420043..........   01.1800   18.82   430047.........   01.1381   12.24   440061.........   01.2121   15.46   440187.........   01.1952   14.85
400028.......................   01.0328   07.14   420048..........   01.1376   14.26   430048.........   01.2063   15.01   440063.........   01.6136   17.43   440189.........   01.4819   18.81
400029.......................   01.1287   06.64   420049..........   01.1769   14.55   430049.........   00.9360   12.66   440064.........   01.1860   15.05   440192.........   01.1489   13.99
400031.......................   01.1446   08.00   420051..........   01.5568   17.99   430051.........   01.0355   13.48   440065.........   01.2301   16.18   440193.........   01.2852   17.88
400032.......................   01.1257   07.75   420053..........   01.1378   14.03   430054.........   01.0034   13.13   440067.........   01.1879   15.54   440194.........   01.4249   16.89
400044.......................   01.2430   09.09   420054..........   01.3709   16.39   430056.........   00.8479   08.93   440068.........   01.2130   16.43   440196.........   00.9475   13.32
400048.......................   01.1320   07.91   420055..........   01.0623   12.51   430057.........   00.9205   10.47   440069.........   01.1874   14.17   440197.........   01.4007   19.15
400061.......................   01.7050   13.68   420056..........   01.1625   13.41   430060.........   01.1594   08.46   440070.........   01.1257   12.52   440200.........   01.1917   15.41
400079.......................   01.2488   08.95   420057..........   01.1395   14.96   430062.........   00.8739   10.31   440071.........   01.3946   14.87   440203.........   00.9346   13.17
400087.......................   01.3761   08.90   420059..........   00.9844   13.96   430064.........   01.1205   11.89   440072.........   01.5118   13.92   440205.........   01.0962   15.86
400094.......................   01.0405   07.41   420061..........   01.1517   16.16   430065.........   00.9527   09.93   440073.........   01.3464   16.95   440206.........   01.0340   13.82
400098.......................   01.2435   07.17   420062..........   01.4444   15.65   430066.........   00.9685   10.93   440078.........   01.0260   13.28   440208.........   02.0269  ......
400102.......................   01.1413   08.65   420064..........   01.1161   13.45   430073.........   01.0814  .......  440081.........   01.1575   15.31   450002.........   01.4623   19.35
400103.......................   01.3671   08.80   420065..........   01.3051   16.72   430076.........   00.9768   09.41   440082.........   01.9905   20.54   450004.........   01.1684   12.38
400104.......................   01.3703   08.97   420066..........   00.9099   14.40   430077.........   01.5832   16.53   440083.........   01.1099   10.96   450005.........   01.1503   13.79
400105.......................   01.1725   08.37   420067..........   01.2333   16.24   430079.........   00.9628   11.47   440084.........   01.1544   11.41   450007.........   01.2442   13.73
400106.......................   01.2084   08.12   420068..........   01.2885   16.08   430080.........   01.1317   08.89   440087.........   00.9572   14.44   450008.........   01.3624   14.96
400109.......................   01.5298   09.13   420069..........   01.1002   13.71   430081.........   01.0452  .......  440090.........   00.9308   13.29   450010.........   01.3415   15.37
400110.......................   01.1119   07.87   420070..........   01.2639   15.05   430082.........   00.8001  .......  440091.........   01.5472   16.53   450011.........   01.5000   17.43
400111.......................   01.1553   07.98   420071..........   01.3110   16.13   430083.........   00.8672  .......  440100.........   01.0273   12.82   450014.........   01.0699   13.84
400112.......................   01.2298   09.26   420072..........   01.0735   10.64   430084.........   00.9280  .......  440102.........   01.0695   12.26   450015.........   01.5543   14.96
400113.......................   01.2400   07.57   420073..........   01.3095   18.10   430085.........   00.8385  .......  440103.........   01.2284   17.24   450016.........   01.6256   17.57
400114.......................   01.0377   06.50   420074..........   00.8992   11.72   430087.........   00.9105   09.29   440104.........   01.6509   17.68   450018.........   01.6091   21.75
400115.......................   01.0054   07.56   420075..........   00.9719   12.66   440001.........   01.1227   12.18   440105.........   01.3723   16.69   450020.........   01.0171   15.47
400117.......................   01.1773   09.23   420078..........   01.8088   18.59   440002.........   01.5965   15.80   440109.........   01.1308   12.28   450021.........   01.8117   21.11
400118.......................   01.1900   08.14   420079..........   01.5669   16.94   440003.........   01.0714   15.23   440110.........   00.9687   16.06   450023.........   01.4846   15.80
400120.......................   01.3084   09.14   420080..........   01.2589   19.18   440006.........   01.6500   17.60   440111.........   01.3613   18.00   450024.........   01.3672   16.45
400121.......................   01.0121   06.51   420082..........   01.3946   19.13   440007.........   01.0148   11.83   440114.........   01.0474   12.68   450025.........   01.5058   16.27
400122.......................   01.0009   05.88   420083..........   01.2042   18.36   440008.........   00.9878   13.50   440115.........   01.1172   14.66   450028.........   01.6335   17.17
400123.......................   01.1728   08.05   420084..........   00.7413   13.56   440009.........   01.1753   13.22   440120.........   01.5385   16.14   450029.........   01.3991   12.98
400124.......................   02.6604   09.27   420085..........   01.3970   16.86   440010.........   00.9235   08.75   440125.........   01.4408   16.09   450031.........   01.5830   18.72
410001.......................   01.3246   23.02   420086..........   01.3613   16.90   440011.........   01.2901   16.28   440130.........   01.1687   14.16   450032.........   01.2715   13.63
410004.......................   01.3655   21.15   420087..........   01.5946   16.53   440012.........   01.4699   17.72   440131.........   01.1317   13.44   450033.........   01.6308   16.84
410005.......................   01.3492   21.90   420088..........   01.1349   15.05   440014.........   01.0615   09.06   440132.........   01.1116   14.01   450034.........   01.6445   16.28
410006.......................   01.2670   21.40   420089..........   01.2336   19.40   440015.........   01.6051   16.42   440133.........   01.5494   17.78   450035.........   01.4519   18.91
410007.......................   01.6550   20.96   420091..........   01.2147   13.16   440016.........   01.0116   11.35   440135.........   01.3062   14.03   450037.........   01.6279   17.69
410008.......................   01.1691   21.05   430004..........   01.0955   17.25   440017.........   01.6136   18.42   440137.........   00.9770   12.14   450039.........   01.3345   18.70
410009.......................   01.2968   20.66   430005..........   01.3167   14.06   440018.........   01.4675   16.10   440141.........   01.0771   13.59   450040.........   01.5518   17.75
410010.......................   01.0160   25.40   430007..........   01.0540   12.52   440019.........   01.6253   19.06   440142.........   01.0311   10.75   450042.........   01.6646   15.75
410011.......................   01.2110   22.25   430008..........   01.1248   14.01   440020.........   01.2392   15.43   440143.........   01.1020   17.21   450043.........   01.4473   20.40
410012.......................   01.7208   19.51   430009..........   01.0939   12.21   440022.........   01.2040   13.72   440144.........   01.3327   18.35   450044.........   01.6182   20.04
410013.......................   01.3105   24.63   430010..........   01.1273   09.23   440023.........   00.9963   11.58   440145.........   01.0439   10.99   450046.........   01.3724   14.67
420002.......................   01.3794   18.80   430011..........   01.3139   14.33   440024.........   01.3302   16.61   440146.........   01.0036   12.98   450047.........   01.1155   13.43
420004.......................   01.8612   18.35   430012..........   01.3055   14.97   440025.........   01.1317   13.01   440147.........   01.1079   17.06   450050.........   01.0582   16.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27518]]



                                                                                          Page 14 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
450051.......................   01.5923   18.22   450154..........   01.2004   12.23   450296.........   01.3139   16.46   450484.........   01.4849   18.53   450651.........   01.8166   21.92
450052.......................   01.0171   13.13   450155..........   01.0191   12.61   450297.........   01.0190   12.01   450488.........   01.2528   14.98   450652.........   00.9114   13.44
450053.......................   01.1479   13.11   450157..........   01.0041   12.97   450299.........   01.3455   16.28   450489.........   00.9859   11.56   450653.........   01.2485   17.98
450054.......................   01.7181   21.32   450160..........   00.9838   17.50   450303.........   00.9458   09.97   450497.........   01.1299   12.05   450654.........   01.0034   11.11
450055.......................   01.1238   12.92   450162..........   01.1851   16.63   450306.........   01.0878   12.50   450498.........   01.2653   13.88   450656.........   01.4908   16.48
450056.......................   01.6174   18.26   450163..........   01.0364   15.34   450307.........   00.9041   13.62   450508.........   01.5582   16.37   450658.........   00.9746   14.01
450058.......................   01.5774   14.76   450164..........   01.0684   12.56   450309.........   01.0677   12.74   450514.........   01.2163   18.78   450659.........   01.5762   22.12
450059.......................   01.2421   13.21   450165..........   00.9569   14.34   450315.........   01.1137   19.65   450517.........   01.0029   10.94   450660.........   01.5698   21.85
450060.......................   01.3622   22.17   450166..........   00.9672   10.06   450320.........   01.3364   18.20   450518.........   01.5325   16.84   450661.........   01.1378   18.94
450063.......................   00.9758   11.51   450169..........   00.9171   13.82   450321.........   00.9661   12.45   450523.........   01.5243   21.18   450662.........   01.6712   16.53
450064.......................   01.5083   15.34   450170..........   00.9792   11.32   450322.........   00.7151   15.40   450530.........   01.4505   21.64   450665.........   00.9334   11.45
450065.......................   01.1393   14.75   450176..........   01.2241   15.23   450324.........   01.6484   15.19   450534.........   00.9542   20.29   450666.........   01.2708   19.05
450068.......................   01.7951   20.31   450177..........   01.0967   13.18   450325.........   01.2279   11.93   450535.........   01.2557   14.12   450668.........   01.5484   18.90
450070.......................   01.2671   15.46   450178..........   01.0123   14.64   450327.........   00.9734   12.11   450537.........   01.3698   17.80   450669.........   01.2923   19.10
450072.......................   01.2351   18.19   450181..........   01.0065   15.15   450330.........   01.2256   16.86   450538.........   01.3931   21.17   450670.........   01.2960   19.44
450073.......................   01.1202   12.84   450184..........   01.5429   17.74   450334.........   01.0568   11.65   450539.........   01.2925   13.27   450672.........   01.6578   18.91
450076.......................   01.5802  .......  450185..........   01.1137   08.47   450337.........   01.2313   17.14   450544.........   01.4408   22.65   450673.........   01.1428   11.38
450078.......................   00.9949   11.17   450187..........   01.2789   16.44   450340.........   01.3177   14.54   450545.........   01.2710   14.13   450674.........   01.0203   22.09
450079.......................   01.4395   19.03   450188..........   01.0085   12.46   450341.........   01.0264   16.26   450546.........   01.8365   18.37   450675.........   01.5171   17.78
450080.......................   01.2966   15.79   450190..........   01.1841   19.53   450346.........   01.3443   16.27   450547.........   01.1613   15.09   450677.........   01.4324   19.18
450081.......................   01.1087   12.87   450191..........   01.0864   15.75   450347.........   01.1430   15.48   450550.........   00.9800   17.01   450678.........   01.4776   20.45
450082.......................   00.9627   12.75   450192..........   01.2403   15.49   450348.........   00.9975   10.99   450551.........   01.1957   13.75   450681.........   03.0551   17.29
450083.......................   01.7142   17.21   450193..........   01.8944   21.32   450351.........   01.1727   18.76   450558.........   01.7767   17.17   450683.........   01.3083   20.17
450085.......................   01.0903   14.38   450194..........   01.2291   18.11   450352.........   01.1141   16.21   450559.........   00.9811   12.75   450684.........   01.2695   18.53
450087.......................   01.4141   19.35   450196..........   01.5101   17.34   450353.........   01.3226   16.13   450561.........   01.6522   17.65   450686.........   01.5555   14.30
450090.......................   01.2144   12.40   450197..........   01.0544   19.66   450355.........   01.1121   11.18   450563.........   01.2306   21.98   450688.........   01.2802   18.65
450092.......................   01.2129   13.12   450200..........   01.3827   16.35   450358.........   02.0930   20.57   450565.........   01.2925   15.63   450690.........   01.4169   21.31
450094.......................   01.2531   19.39   450201..........   01.0233   15.38   450362.........   01.1896   17.62   450570.........   01.0316   11.23   450691.........   01.1089   14.91
450096.......................   01.5315   19.25   450203..........   01.1919   16.13   450369.........   01.0842   10.21   450571.........   01.4989   14.52   450694.........   01.2338   15.91
450097.......................   01.4577   18.33   450209..........   01.5494   16.26   450370.........   01.1269   13.02   450573.........   01.0008   13.58   450696.........   01.6701   23.37
450098.......................   01.1683   13.75   450210..........   01.1950   12.03   450371.........   01.1487   11.02   450574.........   00.9382   13.41   450697.........   01.5431   16.28
450099.......................   01.2816   17.70   450211..........   01.3861   14.13   450372.........   01.2680   20.49   450575.........   01.0572   16.98   450698.........   00.9742   11.66
450101.......................   01.4848   15.03   450213..........   01.5055   16.27   450373.........   01.1462   13.68   450578.........   00.9224   12.94   450700.........   00.9302   12.68
450102.......................   01.7093   21.87   450214..........   01.3721   18.61   450374.........   00.9541   12.20   450580.........   01.1076   12.59   450702.........   01.6063   17.58
450104.......................   01.2182   13.74   450217..........   01.0508   12.61   450376.........   01.5102   16.26   450583.........   01.0094   12.24   450703.........   01.5299   20.96
450107.......................   01.6171   18.75   450219..........   01.1346   14.22   450378.........   01.0973   21.56   450584.........   01.2257   12.86   450704.........   01.3719   17.86
450108.......................   00.9967   14.49   450221..........   01.0814   14.05   450379.........   01.5198   21.28   450586.........   00.9987   11.26   450705.........   01.0246   16.80
450109.......................   00.9911   15.36   450222..........   01.6508   17.32   450381.........   01.0567   12.56   450587.........   01.2266   16.93   450706.........   01.2165   21.90
450110.......................   01.2522   19.34   450224..........   01.3702   15.85   450388.........   01.7602   17.41   450591.........   01.1417   16.28   450709.........   01.2281   20.05
450111.......................   01.2466   18.63   450229..........   01.5708   14.82   450389.........   01.2066   16.74   450596.........   01.3150   17.29   450711.........   01.6431   17.88
450112.......................   01.3508   13.87   450231..........   01.5945   16.94   450393.........   01.3320   20.94   450597.........   01.0561   14.23   450712.........   00.7387   15.03
450113.......................   01.2359   16.99   450234..........   00.9823   11.27   450395.........   01.0348   14.68   450603.........   00.8332   16.27   450713.........   01.4783   18.10
450118.......................   01.5629   20.94   450235..........   01.0563   13.47   450399.........   00.9957   13.37   450604.........   01.3817   13.57   450715.........   01.4531   17.40
450119.......................   01.2958   16.37   450236..........   01.0665   14.17   450400.........   01.1526   13.70   450605.........   01.4745   17.91   450716.........   01.2682   19.64
450121.......................   01.4393   18.70   450237..........   01.5510   16.60   450403.........   01.3684   19.90   450609.........   00.8790   12.25   450717.........   01.3585   22.95
450123.......................   01.1554   17.47   450239..........   01.1977   12.35   450411.........   00.9524   11.46   450610.........   01.4506   15.52   450718.........   01.2381   19.18
450124.......................   01.5864   19.48   450241..........   01.0458   15.67   450417.........   01.0539   12.95   450614.........   01.0471   12.43   450723.........   01.3474   18.17
450126.......................   01.3845   11.95   450243..........   00.8395   11.57   450418.........   01.3370   17.42   450615.........   01.0767   11.70   450724.........   01.2905   16.59
450128.......................   01.2434   14.78   450246..........   00.9676   15.02   450419.........   01.2738   22.40   450617.........   01.2885   20.82   450725.........   00.9969   20.18
450130.......................   01.5025   15.17   450249..........   00.9712   10.70   450422.........   00.8075   23.47   450620.........   01.0455   12.48   450726.........   00.8676   14.54
450131.......................   01.3707   19.58   450250..........   00.9532   09.93   450423.........   01.4394   21.03   450623.........   01.1429   17.62   450727.........   00.9596   09.78
450132.......................   01.6610   16.45   450253..........   01.3163   13.51   450424.........   01.2047   16.33   450626.........   01.0877   14.09   450728.........   00.9627   14.31
450133.......................   01.5384   16.49   450258..........   01.0962   11.17   450429.........   01.1242   13.35   450628.........   00.9420   15.48   450730.........   01.3579   21.14
450135.......................   01.7273   21.81   450259..........   01.2084   17.44   450431.........   01.6589   17.28   450630.........   01.6424   20.60   450733.........   01.3470   16.91
450137.......................   01.5099   24.28   450264..........   00.8643   11.94   450438.........   01.1793   14.39   450631.........   01.7535   18.05   450735.........   00.8720   11.91
450140.......................   00.8414   16.46   450269..........   01.1388   12.62   450446.........   00.8625   13.07   450632.........   01.0125   11.17   450742.........   01.3448   21.43
450142.......................   01.4366   19.50   450270..........   01.1746   10.16   450447.........   01.3505   17.69   450633.........   01.5938   19.18   450743.........   01.4622   18.40
450143.......................   01.0982   12.23   450271..........   01.2762   14.41   450450.........   01.0872  .......  450634.........   01.6943   21.57   450746.........   01.0500   13.39
450144.......................   01.1175   16.23   450272..........   01.2923   16.29   450451.........   01.1254   20.23   450637.........   01.3647   18.24   450747.........   01.3619   16.51
450145.......................   00.8692   12.46   450276..........   01.0996   10.44   450457.........   01.7832   17.14   450638.........   01.5844   22.52   450749.........   01.0128   12.35
450146.......................   00.9881   16.53   450278..........   00.8495   18.12   450460.........   01.0299   12.06   450639.........   01.4141   21.41   450750.........   01.0228   11.86
450147.......................   01.4175   17.66   450280..........   01.5286   20.58   450462.........   01.8354   17.99   450641.........   01.0224   12.60   450751.........   01.3246   21.80
450148.......................   01.3079   19.02   450283..........   01.0519   12.09   450464.........   00.9825   13.41   450643.........   01.2796   17.60   450754.........   00.8884   13.19
450149.......................   01.3501   19.33   450286..........   01.0373   14.54   450465.........   01.3178   14.66   450644.........   01.4715   20.30   450755.........   01.1540   13.66
450150.......................   00.8919   13.62   450288..........   01.2105   12.58   450467.........   00.9653   14.39   450646.........   01.6143   19.59   450757.........   00.9784   13.32
450151.......................   01.1057   13.27   450289..........   01.4907   17.37   450469.........   01.3736   16.94   450647.........   02.0240   19.98   450758.........   01.2423  ......
450152.......................   01.2645   16.04   450292..........   01.2051   20.15   450473.........   01.0047   17.83   450648.........   01.0382   11.36   450760.........   01.2068   16.97
450153.......................   01.5803   17.10   450293..........   00.9746   13.55   450475.........   01.1363   14.13   450649.........   01.0756   14.64   450761.........   01.0642   09.63
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27519]]



                                                                                          Page 15 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
450763.......................   01.0163   15.68   460047..........   01.7740   19.49   490067.........   01.2062   14.95   500029.........   00.9339   14.30   500141.........   01.3258   21.93
450766.......................   02.3234   14.24   460049..........   01.9207   17.05   490069.........   01.3990   15.10   500030.........   01.4753   22.13   500143.........   00.7662   14.92
450769.......................   01.0378   13.28   460050..........   01.3106   20.35   490071.........   01.4398   17.56   500031.........   01.2905   20.19   500146.........   01.0318  ......
450770.......................   00.9496   13.59   460051..........   01.1901  .......  490073.........   01.3538   21.49   500033.........   01.2047   18.05   510001.........   01.7139   17.08
450771.......................   01.9690   17.01   470001..........   01.2043   17.11   490074.........   01.3343   16.00   500036.........   01.3185   19.11   510002.........   01.2708   16.31
450774.......................   00.9708   23.99   470003..........   01.8136   17.82   490075.........   01.3332   16.62   500037.........   01.1216   17.63   510004.........   00.9183   12.62
450775.......................   01.1940   19.26   470004..........   01.1118   14.18   490077.........   01.1636   16.87   500039.........   01.3772   21.32   510005.........   01.0028   13.71
450776.......................   00.9251  .......  470005..........   01.2608   18.71   490079.........   01.3187   14.30   500041.........   01.2872   22.09   510006.........   01.2565   17.08
450777.......................   01.0014   15.01   470006..........   01.1898   17.05   490083.........   00.6451   14.63   500042.........   01.3735   20.95   510007.........   01.4707   17.81
450779.......................   01.3450   20.59   470008..........   01.2516   15.41   490084.........   01.2535   15.96   500043.........   01.2939   16.56   510008.........   01.1226   15.33
450780.......................   01.6140   19.78   470010..........   01.1804   18.58   490085.........   01.2071   13.36   500044.........   01.8920   20.56   510012.........   01.0670   14.26
450781.......................   01.4783   16.23   470011..........   01.1610   19.30   490088.........   01.2024   13.97   500045.........   01.1167   20.65   510013.........   01.1365   15.10
450785.......................   01.0516   26.08   470012..........   01.2651   17.52   490089.........   01.0748   14.37   500048.........   00.9122   16.01   510015.........   00.9706   12.51
450788.......................   01.4208  .......  470013..........   01.1682   18.28   490090.........   01.1783   14.25   500049.........   01.4708   19.34   510016.........   00.9917   11.27
450792.......................   01.3306  .......  470015..........   01.0806   16.29   490091.........   01.2045   20.14   500050.........   01.4079   20.41   510018.........   01.1351   14.40
450793.......................   01.6623  .......  470018..........   01.1930   17.37   490092.........   01.2038   14.32   500051.........   01.6292   22.71   510020.........   01.0494   10.16
450794.......................   01.4602  .......  470020..........   00.9884   14.50   490093.........   01.2927   15.31   500052.........   01.2781  .......  510022.........   01.7998   19.52
450795.......................   00.8520  .......  470023..........   01.2947   17.20   490094.........   01.0700   14.57   500053.........   01.2686   20.10   510023.........   01.1454   15.14
450797.......................   00.6382  .......  470024..........   01.1136   17.08   490095.........   01.4745   16.13   500054.........   01.8788   20.41   510024.........   01.4093   17.94
450798.......................   00.8871  .......  490001..........   01.0799   19.41   490097.........   01.1333   13.69   500055.........   01.0886   20.32   510026.........   00.9392   12.19
450799.......................   01.3895  .......  490002..........   01.0625   13.61   490098.........   01.3132   11.69   500057.........   01.3490   16.24   510027.........   00.9669   13.86
450800.......................   01.3919  .......  490003..........   00.6018   17.55   490099.........   00.9348   15.29   500058.........   01.5095   19.82   510028.........   01.0731   14.90
450801.......................   01.4818  .......  490004..........   01.2303   16.67   490100.........   01.3757   16.69   500059.........   01.1588   20.02   510029.........   01.2953   16.69
450802.......................   01.2487  .......  490005..........   01.5364   16.10   490101.........   01.1933   23.64   500060.........   01.4869   20.70   510030.........   01.0968   14.87
450803.......................   00.8537  .......  490006..........   01.1569   13.27   490104.........   00.9110   14.46   500061.........   00.9842   17.95   510031.........   01.3367   16.27
450804.......................   01.5293  .......  490007..........   02.0310   17.19   490105.........   00.7427   16.55   500062.........   01.0856   17.16   510033.........   01.2624   14.42
450805.......................   01.1693  .......  490009..........   01.8204   18.08   490106.........   00.9047   14.86   500064.........   01.5371   21.69   510035.........   01.1467   16.46
450807.......................   00.9104  .......  490010..........   01.0912   17.08   490107.........   01.3155   22.64   500065.........   01.3049   17.67   510036.........   01.0129   09.34
450809.......................   01.6570  .......  490011..........   01.4170   17.03   490108.........   00.8737   13.78   500068.........   01.0186   17.17   510038.........   01.1610   13.71
450897.......................   04.8548  .......  490012..........   01.1990   15.55   490109.........   00.9185   14.09   500069.........   01.1665   18.62   510039.........   01.3580   15.02
460001.......................   01.7866   19.82   490013..........   01.2514   14.82   490110.........   01.3986   15.90   500071.........   01.3666   19.46   510043.........   00.9310   11.33
460003.......................   01.7210   18.38   490014..........   01.3584   21.04   490111.........   01.2348   16.79   500072.........   01.1952   21.19   510046.........   01.2605   15.26
460004.......................   01.7712   20.68   490015..........   01.4630   17.30   490112.........   01.7326   19.07   500073.........   01.0859   16.85   510047.........   01.2074   17.37
460005.......................   01.5499   18.80   490017..........   01.3623   16.44   490113.........   01.3003   20.96   500074.........   01.1671   14.80   510048.........   01.0733   17.39
460006.......................   01.4322   18.21   490018..........   01.2580   16.83   490114.........   01.0988   15.00   500075.........   03.7376   20.25   510050.........   01.4642   15.34
460007.......................   01.5450   19.27   490019..........   01.2006   15.60   490115.........   01.2451   14.25   500077.........   01.3913   21.63   510053.........   01.0396   13.50
460008.......................   01.3609   16.02   490020..........   01.1565   14.16   490116.........   01.2251   15.61   500079.........   01.4055   19.87   510055.........   01.2246   19.41
460009.......................   01.8852   18.11   490021..........   01.1505   17.11   490117.........   01.1729   13.62   500080.........   00.8427   11.56   510058.........   01.2002   16.23
460010.......................   01.9161   20.15   490022..........   01.4063   17.59   490118.........   01.7642   21.32   500084.........   01.1439   20.05   510059.........   01.2290   13.65
460011.......................   01.3884   16.16   490023..........   01.2234   17.03   490119.........   01.3467   16.41   500085.........   01.0619   17.19   510060.........   01.1538   15.36
460013.......................   01.5056   18.54   490024..........   01.7803   17.06   490120.........   01.3270   16.88   500086.........   01.4244   18.48   510061.........   01.0749   12.59
460014.......................   01.0358   15.38   490027..........   01.1310   13.11   490122.........   01.5152   20.86   500088.........   01.3586   22.86   510062.........   01.1797   15.38
460015.......................   01.2592   19.75   490028..........   01.3516   18.42   490123.........   01.1414   14.80   500089.........   00.9469   13.99   510063.........   01.0126   10.63
460016.......................   00.8970   13.58   490030..........   01.1033   11.16   490124.........   01.1521   16.99   500090.........   01.1042   12.60   510065.........   01.0089   12.04
460017.......................   01.4549   16.52   490031..........   01.1369   12.61   490126.........   01.3837   14.72   500092.........   01.0798   15.65   510066.........   01.1288   12.02
460018.......................   00.9760   13.59   490032..........   01.7249   19.08   490127.........   01.0179   14.44   500094.........   00.9177   15.53   510067.........   01.2496   15.91
460019.......................   01.1515   12.90   490033..........   01.1854   15.21   490130.........   01.3118   16.58   500096.........   01.0950   17.13   510068.........   01.1196   14.01
460020.......................   01.0589   14.21   490035..........   01.2179   09.64   490131.........   01.0427   14.06   500097.........   01.1371   16.12   510070.........   01.2210   16.05
460021.......................   01.3873   19.20   490037..........   01.1278   13.27   500001.........   01.3342   20.92   500098.........   00.9192   13.66   510071.........   01.2767   14.49
460022.......................   00.9374   19.41   490038..........   01.2195   12.54   500002.........   01.4828   18.75   500101.........   01.0080   17.84   510072.........   01.0650   13.50
460023.......................   01.1831   20.75   490040..........   01.4100  .......  500003.........   01.4073   21.28   500102.........   00.9391   18.43   510077.........   01.1079   14.36
460024.......................   00.8662   13.51   490041..........   01.3633   16.88   500005.........   01.8398   22.52   500104.........   01.2622   18.71   510080.........   01.1530   09.35
460025.......................   00.8105   12.63   490042..........   01.3475   15.18   500007.........   01.4207   20.14   500106.........   00.9247   15.53   510081.........   01.0320   13.19
460026.......................   01.0881   16.98   490043..........   01.3704   16.74   500008.........   01.8411   22.88   500107.........   01.1321   15.58   510082.........   01.0578   12.08
460027.......................   00.9430   18.61   490044..........   01.3658   16.65   500009.........   01.2857   21.07   500108.........   01.6669   21.40   510084.........   00.9741   12.87
460029.......................   01.0255   15.71   490045..........   01.1319   18.60   500011.........   01.3718   21.44   500110.........   01.2887   18.75   510085.........   01.2422   17.99
460030.......................   01.2141   15.78   490046..........   01.4645   17.24   500012.........   01.5217   20.94   500118.........   01.1240   20.88   510086.........   01.0448   15.65
460032.......................   01.0120   19.00   490047..........   01.0663   16.34   500014.........   01.5715   22.36   500119.........   01.3333   20.48   520002.........   01.2873   17.24
460033.......................   00.9450   18.22   490048..........   01.4906   17.53   500015.........   01.3714   20.92   500122.........   01.1925   20.27   520003.........   01.1635   15.19
460035.......................   00.9610   10.93   490050..........   01.4363   20.06   500016.........   01.4877   22.76   500123.........   00.8543   14.78   520004.........   01.1581   16.53
460036.......................   00.9397   19.41   490052..........   01.6013   15.06   500019.........   01.3295   19.82   500124.........   01.3292   22.39   520006.........   01.0583   18.05
460037.......................   01.0502   15.92   490053..........   01.2501   14.14   500021.........   01.5380   20.77   500125.........   00.9834   10.72   520007.........   01.2469   14.14
460039.......................   01.0976   21.08   490054..........   01.1101   13.91   500023.........   01.1763   19.09   500129.........   01.7339   22.41   520008.........   01.5546   20.54
460041.......................   01.2179   18.29   490057..........   01.5486   17.02   500024.........   01.6324   21.06   500132.........   01.0006   19.79   520009.........   01.5961   16.88
460042.......................   01.4657   16.14   490059..........   01.5727   18.24   500025.........   01.8715   21.69   500134.........   00.7903   15.75   520010.........   01.1768   19.39
460043.......................   00.9888   20.44   490060..........   01.0661   16.72   500026.........   01.4324   22.42   500137.........   00.7110   19.99   520011.........   01.2031   16.46
460044.......................   01.2018   19.41   490063..........   01.6611   22.34   500027.........   01.5334   23.68   500138.........   03.4209  .......  520013.........   01.2909   17.88
460046.......................   00.7432   10.23   490066..........   01.2178   17.42   500028.........   01.0839   14.76   500139.........   01.4763   21.33   520014.........   01.2083   15.55
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27520]]



                                                                                          Page 16 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
520015.......................   01.1174   16.65   520107..........   01.2599   17.46   530026.........   01.0473   14.63                                                                        
520016.......................   01.0872   12.75   520109..........   00.9937   17.25   530027.........   00.8416   09.56                                                                        
520017.......................   01.1927   16.87   520110..........   01.1756   16.47   530029.........   00.9590   13.49                                                                        
520018.......................   01.0801   15.88   520111..........   00.9841   14.44   530031.........   00.8745   10.95                                                                        
520019.......................   01.2873   16.65   520112..........   01.0805   18.15   530032.........   01.1558   17.33                                                                        
520021.......................   01.3538   19.16   520113..........   01.1645   17.80                                                                                                            
520024.......................   01.0377   13.33   520114..........   01.1037   12.61                                                                                                            
520025.......................   01.1242   15.19   520115..........   01.3222   15.89                                                                                                            
520026.......................   01.1051   17.48   520116..........   01.2576   17.66                                                                                                            
520027.......................   01.2244   19.22   520117..........   01.0303   15.40                                                                                                            
520028.......................   01.3261   17.60   520118..........   00.9469   10.95                                                                                                            
520029.......................   00.9657   16.70   520120..........   00.8647   11.95                                                                                                            
520030.......................   01.6772   20.19   520121..........   00.9763   14.18                                                                                                            
520031.......................   01.1054   16.11   520122..........   00.9894   13.96                                                                                                            
520032.......................   01.1683   14.56   520123..........   01.1427   16.55                                                                                                            
520033.......................   01.1820   15.91   520124..........   01.1255   14.34                                                                                                            
520034.......................   01.1271   17.17   520130..........   01.0776   12.60                                                                                                            
520035.......................   01.2587   14.67   520131..........   01.0620   15.82                                                                                                            
520037.......................   01.6518   18.23   520132..........   01.1878   14.31                                                                                                            
520038.......................   01.4916   17.14   520134..........   01.0269   15.14                                                                                                            
520039.......................   00.9998   16.24   520135..........   00.9427   13.84                                                                                                            
520040.......................   01.4327   20.05   520136..........   01.4778   18.87                                                                                                            
520041.......................   01.1487   14.54   520138..........   01.8773   18.18                                                                                                            
520042.......................   01.0742   16.25   520139..........   01.2893   18.50                                                                                                            
520044.......................   01.3803   16.09   520140..........   01.6143   19.31                                                                                                            
520045.......................   01.6794   17.97   520141..........   01.1223   15.63                                                                                                            
520047.......................   01.0211   14.50   520142..........   00.9152   12.48                                                                                                            
520048.......................   01.4410   17.67   520144..........   01.0302   16.10                                                                                                            
520049.......................   01.9925   17.97   520145..........   00.9155   16.57                                                                                                            
520051.......................   02.0296   19.41   520146..........   01.0749   13.71                                                                                                            
520053.......................   01.1007   14.78   520148..........   01.1668   15.34                                                                                                            
520054.......................   01.0919   16.40   520149..........   00.9581   13.31                                                                                                            
520056.......................   01.3164   17.77   520151..........   01.0803   14.43                                                                                                            
520057.......................   01.1308   16.08   520152..........   01.1177   16.38                                                                                                            
520058.......................   01.0511   17.87   520153..........   00.9775   13.19                                                                                                            
520059.......................   01.3130   18.17   520154..........   01.1520   16.15                                                                                                            
520060.......................   01.2970   15.15   520156..........   01.1216   16.37                                                                                                            
520062.......................   01.2707   16.18   520157..........   00.9447   13.70                                                                                                            
520063.......................   01.2571   17.61   520159..........   00.9412   16.25                                                                                                            
520064.......................   01.7132   18.60   520160..........   01.7643   17.77                                                                                                            
520066.......................   01.4169   17.73   520161..........   01.0283   14.76                                                                                                            
520068.......................   00.8891   15.82   520170..........   01.2367   18.51                                                                                                            
520069.......................   01.1915   16.75   520171..........   00.9904   13.69                                                                                                            
520070.......................   01.6012   16.93   520173..........   01.1609   17.36                                                                                                            
520071.......................   01.1175   17.71   520174..........   01.3641   20.57                                                                                                            
520074.......................   01.1086   14.96   520177..........   01.6458   20.33                                                                                                            
520075.......................   01.4753   17.44   520178..........   01.0634   14.61                                                                                                            
520076.......................   01.1296   14.40   520186..........   02.5906  .......                                                                                                           
520077.......................   01.0286   14.50   530002..........   01.1932   18.07                                                                                                            
520078.......................   01.5021   17.89   530003..........   00.9310   12.59                                                                                                            
520082.......................   01.3454   15.25   530004..........   01.0270   13.17                                                                                                            
520083.......................   01.5871   21.59   530005..........   01.1389   13.19                                                                                                            
520084.......................   01.0883   15.73   530006..........   01.1268   16.83                                                                                                            
520087.......................   01.6162   17.16   530007..........   01.0516   11.52                                                                                                            
520088.......................   01.2469   17.56   530008..........   01.2810   17.75                                                                                                            
520089.......................   01.5230   18.79   530009..........   00.9688   20.60                                                                                                            
520090.......................   01.2710   16.16   530010..........   01.2195   16.30                                                                                                            
520091.......................   01.3709   17.25   530011..........   01.0899   15.27                                                                                                            
520092.......................   01.1124   15.11   530012..........   01.5874   17.25                                                                                                            
520094.......................   01.0158   16.07   530014..........   01.3289   15.01                                                                                                            
520095.......................   01.3510   18.56   530015..........   01.1500   19.22                                                                                                            
520096.......................   01.4979   17.78   530016..........   01.2060   11.87                                                                                                            
520097.......................   01.3308   17.90   530017..........   01.0038   16.09                                                                                                            
520098.......................   01.7143   19.40   530018..........   01.0645   14.57                                                                                                            
520100.......................   01.2350   15.91   530019..........   00.9449   14.32                                                                                                            
520101.......................   01.0947   15.75   530022..........   01.1147   15.94                                                                                                            
520102.......................   01.2141   19.00   530023..........   00.8514   17.76                                                                                                            
520103.......................   01.3242   17.70   530025..........   01.3686   18.12                                                                                                            
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Case mix indexes do not include discharges from PPS-exempt units. Case mix indexes include cases received in HCFA central office through December 1995.                                   


[[Page 27521]]



Table 4a.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Urban Areas                              
------------------------------------------------------------------------
     Urban area (constituent counties or county         Wage            
                    equivalents)                        index      GAF  
------------------------------------------------------------------------
0040  Abilene, TX...................................    0.8055    0.8623
  Taylor, TX                                                            
0060  Aguadilla, PR.................................    0.4430    0.5726
  Aguada, PR                                                            
  Aguadilla, PR                                                         
  Moca, PR                                                              
0080  Akron, OH.....................................    0.9875    0.9914
  Portage, OH                                                           
  Summit, OH                                                            
0120  Albany, GA....................................    0.8353    0.8841
  Dougherty, GA                                                         
  Lee, GA                                                               
0160  Albany-Schenectady-Troy, NY...................    0.8510    0.8954
  Albany, NY                                                            
  Montgomery, NY                                                        
  Rensselaer, NY                                                        
  Saratoga, NY                                                          
  Schenectady, NY                                                       
  Schoharie, NY                                                         
0200  Albuquerque, NM...............................    0.9390    0.9578
  Bernalillo, NM                                                        
  Sandoval, NM                                                          
  Valencia, NM                                                          
0220  Alexandria, LA................................    0.8213    0.8739
  Rapides, LA                                                           
0240  Allentown-Bethlehem-Easton, PA................    1.0014    1.0160
  Carbon, PA                                                            
  Lehigh, PA                                                            
  Northampton, PA                                                       
0280  Altoona, PA...................................    0.9531    0.9676
  Blair, PA                                                             
0320  Amarillo, TX..................................    0.8557    0.8988
  Potter, TX                                                            
  Randall, TX                                                           
0380  Anchorage, AK.................................    1.3285    1.3104
  Anchorage, AK                                                         
0440  Ann Arbor, MI.................................    1.1688    1.1218
  Lenawee, MI                                                           
  Livingston, MI                                                        
  Washtenaw, MI                                                         
0450  Anniston, AL..................................    0.7848    0.8471
  Calhoun, AL                                                           
0460  Appleton-Oshkosh-Neenah, WI...................    0.8910    0.9240
  Calumet, WI                                                           
  Outagamie, WI                                                         
  Winnebago, WI                                                         
0470  Arecibo, PR...................................    0.4631    0.5903
  Arecibo, PR                                                           
  Camuy, PR                                                             
  Hatillo, PR                                                           
0480  Asheville, NC.................................    0.9365    0.9561
  Buncombe, NC                                                          
  Madison, NC                                                           
0500  Athens, GA....................................    0.9259    0.9771
  Clarke, GA                                                            
  Madison, GA                                                           
  Oconee, GA                                                            
0520  *Atlanta, GA..................................    1.0089    1.0363
  Barrow, GA                                                            
  Bartow, GA                                                            
  Carroll, GA                                                           
  Cherokee, GA                                                          
  Clayton, GA                                                           
  Cobb, GA                                                              
  Coweta, GA                                                            
  DeKalb, GA                                                            
  Douglas, GA                                                           
  Fayette, GA                                                           
  Forsyth, GA                                                           
  Fulton, GA                                                            
  Gwinnett, GA                                                          
  Henry, GA                                                             
  Newton, GA                                                            
  Paulding, GA                                                          
  Pickens, GA                                                           
  Rockdale, GA                                                          
  Spalding, GA                                                          
  Walton, GA                                                            
0560  Atlantic-Cape May, NJ.........................    1.1102    1.0742
  Atlantic, NJ                                                          
  Cape May, NJ                                                          
0600  Augusta-Aiken, GA-SC..........................    0.8849    0.9197
  Columbia, GA                                                          
  McDuffie, GA                                                          
  Richmond, GA                                                          
  Aiken, SC                                                             
  Edgefield, SC                                                         
0640  Austin-San Marcos, TX.........................    0.9252    0.9482
  Bastrop, TX                                                           
  Caldwell, TX                                                          
  Hays, TX                                                              
  Travis, TX                                                            
  Williamson, TX                                                        
0680  Bakersfield, CA...............................    1.0202    1.0168
  Kern, CA                                                              
0720  *Baltimore, MD................................    0.9820    1.0173
  Anne Arundel, MD                                                      
  Baltimore, MD                                                         
  Baltimore City, MD                                                    
  Carroll, MD                                                           
  Harford, MD                                                           
  Howard, MD                                                            
  Queen Anne's, MD                                                      
0733  Bangor, ME....................................    0.9412    0.9594
  Penobscot, ME                                                         
0743  Barnstable-Yarmouth, MA.......................    1.3682    1.2395
  Barnstable, MA                                                        
0760  Baton Rouge, LA...............................    0.8442    0.8905
  Ascension, LA                                                         
  East Baton Rouge, LA                                                  
  Livingston, LA                                                        
  West Baton Rouge, LA                                                  
0840  Beaumont-Port Arthur, TX......................    0.8578    0.9003
  Hardin, TX                                                            
  Jefferson, TX                                                         
  Orange, TX                                                            
0860  Bellingham, WA................................    1.1342    1.0901
  Whatcom, WA                                                           
0870  Benton Harbor, MI.............................    0.8553    0.8985
  Berrien, MI                                                           
0875  *Bergen-Passaic, NJ...........................    1.1717    1.1146
  Bergen, NJ                                                            
  Passaic, NJ                                                           
0880  Billings, MT..................................    0.8903    0.9235
  Yellowstone, MT                                                       
0920  Biloxi-Gulfport-Pascagoula, MS................    0.8573    0.8999
  Hancock, MS                                                           
  Harrison, MS                                                          
  Jackson, MS                                                           
0960  Binghamton, NY................................    0.8842    0.9192
  Broome, NY                                                            
  Tioga, NY                                                             
1000  Birmingham, AL................................    0.9047    0.9337
  Blount, AL                                                            
  Jefferson, AL                                                         
  St. Clair, AL                                                         
  Shelby, AL                                                            
1010  Bismarck, ND..................................    0.7976    0.8565
  Burleigh, ND                                                          
  Morton, ND                                                            
1020  Bloomington, IN...............................    0.8619    0.9303
  Monroe, IN                                                            
1040  Bloomington-Normal, IL........................    0.8921    0.9248
  McLean, IL                                                            
1080  Boise City, ID................................    0.9269    0.9493
  Ada, ID                                                               
  Canyon, ID                                                            
1123  *Boston-Worcester-Lawrence-Lowell-Brockton, MA-                   
 NH.................................................    1.1639    1.1428
  Bristol, MA                                                           
  Essex, MA                                                             
  Middlesex, MA                                                         
  Norfolk, MA                                                           
  Plymouth, MA                                                          
  Suffolk, MA                                                           
  Worcester, MA                                                         
  Hillsborough, NH                                                      
  Merrimack, NH                                                         
  Rockingham, NH                                                        
  Strafford, NH                                                         
1125  Boulder-Longmont, CO..........................    0.9383    0.9573
  Boulder, CO                                                           
1145  Brazoria, TX..................................    0.8865    0.9208
  Brazoria, TX                                                          
1150  Bremerton, WA.................................    1.0926    1.0625
  Kitsap, WA                                                            
1240  Brownsville-Harlingen-San Benito, TX..........    0.8561    0.8991
  Cameron, TX                                                           
1260  Bryan-College Station, TX.....................    0.8760    0.9133
  Brazos, TX                                                            
1280  *Buffalo-Niagara Falls, NY....................    0.9123    0.9673
  Erie, NY                                                              
  Niagara, NY                                                           
1303  Burlington, VT................................    0.9126    0.9393
  Chittenden, VT                                                        
  Franklin, VT                                                          
  Grand Isle, VT                                                        
1310  Caguas, PR....................................    0.4661    0.5929
  Caguas, PR                                                            
  Cayey, PR                                                             
  Cidra, PR                                                             
  Gurabo, PR                                                            
  San Lorenzo, PR                                                       

[[Page 27522]]

                                                                        
1320  Canton-Massillon, OH..........................    0.8667    0.9067
  Carroll, OH                                                           
  Stark, OH                                                             
1350  Casper, WY....................................    0.8841    0.9191
  Natrona, WY                                                           
1360  Cedar Rapids, IA..............................    0.8477    0.8930
  Linn, IA                                                              
1400  Champaign-Urbana, IL..........................    0.9413    0.9594
  Champaign, IL                                                         
1440  Charleston-North Charleston, SC...............    0.8984    0.9293
  Berkeley, SC                                                          
  Charleston, SC                                                        
  Dorchester, SC                                                        
1480  Charleston, WV................................    0.9547    0.9688
  Kanawha, WV                                                           
  Putnam, WV                                                            
1520  *Charlotte-Gastonia-Rock Hill, NC-SC..........    0.9631    1.0038
  Cabarrus, NC                                                          
  Gaston, NC                                                            
  Lincoln, NC                                                           
  Mecklenburg, NC                                                       
  Rowan, NC                                                             
  Union, NC                                                             
  York, SC                                                              
1540  Charlottesville, VA...........................    0.9175    0.9427
  Albemarle, VA                                                         
  Charlottesville City, VA                                              
  Fluvanna, VA                                                          
  Greene, VA                                                            
1560  Chattanooga, TN-GA............................    0.8867    0.9210
  Catoosa, GA                                                           
  Dade, GA                                                              
  Walker, GA                                                            
  Hamilton, TN                                                          
  Marion, TN                                                            
1580  Cheyenne, WY..................................    0.7695    0.8357
  Laramie, WY                                                           
1600  *Chicago, IL..................................    1.0756    1.0827
  Cook, IL                                                              
  DeKalb, IL                                                            
  DuPage, IL                                                            
  Grundy, IL                                                            
  Kane, IL                                                              
  Kendall, IL                                                           
  Lake, IL                                                              
  McHenry, IL                                                           
  Will, IL                                                              
1620  Chico-Paradise, CA............................    1.0441    1.0300
  Butte, CA                                                             
1640  *Cincinnati, OH-KY-IN.........................    0.9477    0.9928
  Dearborn, IN                                                          
  Ohio, IN                                                              
  Boone, KY                                                             
  Campbell, KY                                                          
  Gallatin, KY                                                          
  Grant, KY                                                             
  Kenton, KY                                                            
  Pendleton, KY                                                         
  Brown, OH                                                             
  Clermont, OH                                                          
  Hamilton, OH                                                          
  Warren, OH                                                            
1660  Clarksville-Hopkinsville, TN-KY...............    0.7733    0.8386
  Christian, KY                                                         
  Montgomery, TN                                                        
1680  *Cleveland-Lorain-Elyria, OH..................    0.9908    1.0235
  Ashtabula, OH                                                         
  Cuyahoga, OH                                                          
  Geauga, OH                                                            
  Lake, OH                                                              
  Lorain, OH                                                            
  Medina, OH                                                            
1720  Colorado Springs, CO..........................    0.9456    0.9624
  El Paso, CO                                                           
1740  Columbia, MO..................................    0.8919    0.9246
  Boone, MO                                                             
1760  Columbia, SC..................................    0.9178    0.9430
  Lexington, SC                                                         
  Richland, SC                                                          
1800  Columbus, GA-AL...............................    0.7655    0.8328
  Russell, AL                                                           
  Chattanoochee, GA                                                     
  Harris, GA                                                            
  Muscogee, GA                                                          
1840  *Columbus, OH.................................    0.9699    1.0087
  Delaware, OH                                                          
  Fairfield, OH                                                         
  Franklin, OH                                                          
  Licking, OH                                                           
  Madison, OH                                                           
  Pickaway, OH                                                          
1880  Corpus Christi, TX............................    0.8641    0.9048
  Nueces, TX                                                            
  San Patricio, TX                                                      
1900  Cumberland, MD-WV.............................    0.8613    0.9028
  Allegany, MD                                                          
  Mineral, WV                                                           
1920  *Dallas, TX...................................    0.9530    0.9966
  Collin, TX                                                            
  Dallas, TX                                                            
  Denton, TX                                                            
  Ellis, TX                                                             
  Henderson, TX                                                         
  Hunt, TX                                                              
  Kaufman, TX                                                           
  Rockwall, TX                                                          
1950  Danville, VA..................................    0.8516    0.8958
  Danville City, VA                                                     
  Pittsylvania, VA                                                      
1960  Davenport-Moline-Rock Island, IA-IL...........    0.8407    0.8880
  Scott, IA                                                             
  Henry, IL                                                             
  Rock Island, IL                                                       
2000  Dayton-Springfield, OH........................    0.9582    0.9858
  Clark, OH                                                             
  Greene, OH                                                            
  Miami, OH                                                             
  Montgomery, OH                                                        
2020  Daytona Beach, FL.............................    0.8891    0.9296
  Flagler, FL                                                           
  Volusia, FL                                                           
2030  Decatur, AL...................................    0.8403    0.8877
  Lawrence, AL                                                          
  Morgan, AL                                                            
2040  Decatur, IL...................................    0.7866    0.8484
  Macon, IL                                                             
2080  *Denver, CO...................................    1.0291    1.0504
  Adams, CO                                                             
  Arapahoe, CO                                                          
  Denver, CO                                                            
  Douglas, CO                                                           
  Jefferson, CO                                                         
2120  Des Moines, IA................................    0.8772    0.9142
  Dallas, IA                                                            
  Polk, IA                                                              
  Warren, IA                                                            
2160  *Detroit, MI..................................    1.0748    1.0822
  Lapeer, MI                                                            
  Macomb, MI                                                            
  Monroe, MI                                                            
  Oakland, MI                                                           
  St. Clair, MI                                                         
  Wayne, MI                                                             
2180  Dothan, AL....................................    0.7758    0.8404
  Dale, AL                                                              
  Houston, AL                                                           
2190  Dover, DE.....................................    0.9017    0.9595
  Kent, DE                                                              
2200  Dubuque, IA...................................    0.8149    0.8692
  Dubuque, IA                                                           
2240  Duluth-Superior, MN-WI........................    0.9437    0.9611
  St. Louis, MN                                                         
  Douglas, WI                                                           
2281  Dutchess County, NY...........................    1.0604    1.0488
  Dutchess, NY                                                          
2290  Eau Claire, WI................................    0.8698    0.9089
  Chippewa, WI                                                          
  Eau Claire, WI                                                        
2320  El Paso, TX...................................    0.9486    0.9645
  El Paso, TX                                                           
2330  Elkhart-Goshen, IN............................    0.8820    0.9176
  Elkhart, IN                                                           
2335  Elmira, NY....................................    0.8436    0.8901
  Chemung, NY                                                           
2340  Enid, OK......................................    0.7879    0.8494
  Garfield, OK                                                          
2360  Erie, PA......................................    0.9137    0.9401
  Erie, PA                                                              
2400  Eugene-Springfield, OR........................    1.1503    1.1006
  Lane, OR                                                              
2440  Evansville-Henderson, IN-KY...................    0.8990    0.9297
  Posey, IN                                                             
  Vanderburgh, IN                                                       
  Warrick, IN                                                           
  Henderson, KY                                                         
2520  Fargo-Moorhead, ND-MN.........................    0.9010    0.9311

[[Page 27523]]

                                                                        
  Clay, MN                                                              
  Cass, ND                                                              
2560  Fayetteville, NC..............................    0.9025    0.9322
  Cumberland, NC                                                        
2580  Fayetteville-Springdale-Rogers, AR............    0.7236    0.8013
  Benton, AR                                                            
  Washington, AR                                                        
2620  Flagstaff, AZ-UT..............................    0.9039    0.9331
  Coconino, AZ                                                          
  Kane, UT                                                              
2640  Flint, MI.....................................    1.1273    1.0964
  Genesee, MI                                                           
2650  Florence, AL..................................    0.8157    0.8698
  Colbert, AL                                                           
  Lauderdale, AL                                                        
2655  Florence, SC..................................    0.8614    0.9029
  Florence, SC                                                          
2670  Fort Collins-Loveland, CO.....................    1.0628    1.0426
  Larimer, CO                                                           
2680  *Ft. Lauderdale, FL...........................    1.0968    1.0973
  Broward, FL                                                           
2700  Fort Myers-Cape Coral, FL.....................    0.9093    0.9370
  Lee, FL                                                               
2710  Fort Pierce-Port St. Lucie, FL................    1.0192    1.0131
  Martin, FL                                                            
  St. Lucie, FL                                                         
2720  Fort Smith, AR-OK.............................    0.7885    0.8498
  Crawford, AR                                                          
  Sebastian, AR                                                         
  Sequoyah, OK                                                          
2750  Fort Walton Beach, FL.........................    0.9186    0.9435
  Okaloosa, FL                                                          
2760  Fort Wayne, IN................................    0.8819    0.9175
  Adams, IN                                                             
  Allen, IN                                                             
  DeKalb, IN                                                            
  Huntington, IN                                                        
  Wells, IN                                                             
  Whitley, IN                                                           
2800  *Forth Worth-Arlington, TX....................    1.0095    1.0367
  Hood, TX                                                              
  Johnson, TX                                                           
  Parker, TX                                                            
  Tarrant, TX                                                           
2840  Fresno, CA....................................    1.1202    1.0808
  Fresno, CA                                                            
  Madera, CA                                                            
2880  Gadsden, AL...................................    0.8901    0.9234
  Etowah, AL                                                            
2900  Gainesville, FL...............................    0.9455    0.9623
  Alachua, FL                                                           
2920  Galveston-Texas City, TX......................    1.1022    1.0796
  Galveston, TX                                                         
2960  Gary, IN......................................    0.9176    0.9428
  Lake, IN                                                              
  Porter, IN                                                            
2975  Glens Falls, NY...............................    0.8560    0.8990
  Warren, NY                                                            
  Washington, NY                                                        
2980  Goldsboro, NC.................................    0.8412    0.8883
  Wayne, NC                                                             
2985  Grand Forks, ND-MN............................    0.9228    0.9465
  Polk, MN                                                              
  Grand Forks, ND                                                       
2995  Grand Junction, CO............................    0.8847    0.9195
  Mesa, CO                                                              
3000  Grand Rapids-Muskegon-Holland, MI.............    1.0088    1.0060
  Allegan, MI                                                           
  Kent, MI                                                              
  Muskegon, MI                                                          
  Ottawa, MI                                                            
3040  Great Falls, MT...............................    0.9007    0.9309
  Cascade, MT                                                           
3060  Greeley, CO...................................    0.9712    0.9802
  Weld, CO                                                              
3080  Green Bay, WI.................................    0.9387    0.9576
  Brown, WI                                                             
3120  *Greensboro-Winston-Salem-High Point, NC......    0.9327    0.9820
  Alamance, NC                                                          
  Davidson, NC                                                          
  Davie, NC                                                             
  Forsyth, NC                                                           
  Guilford, NC                                                          
  Randolph, NC                                                          
  Stokes, NC                                                            
  Yadkin, NC                                                            
3150  Greenville, NC................................    0.9098    0.9373
  Pitt, NC                                                              
3160  Greenville-Spartanburg-Anderson, SC...........    0.8947    0.9266
  Anderson, SC                                                          
  Cherokee, SC                                                          
  Greenville, SC                                                        
  Pickens, SC                                                           
  Spartanburg, SC                                                       
3180  Hagerstown, MD................................    0.9195    0.9441
  Washington, MD                                                        
3200  Hamilton-Middletown, OH.......................    0.9515    0.9665
  Butler, OH                                                            
3240  Harrisburg-Lebanon-Carlisle, PA...............    1.0181    1.0124
  Cumberland, PA                                                        
  Dauphin, PA                                                           
  Lebanon, PA                                                           
  Perry, PA                                                             
3283  *Hartford, CT.................................    1.2395    1.1931
  Hartford, CT                                                          
  Litchfield, CT                                                        
  Middlesex, CT                                                         
  Tolland, CT                                                           
3285  Hattiesburg, MS...............................    0.7269    0.8038
  Forrest, MS                                                           
  Lamar, MS                                                             
3290  Hickory-Morganton-Lenoir, NC..................    0.7945    0.8542
  Alexander, NC                                                         
  Burke, NC                                                             
  Caldwell, NC                                                          
  Catawba, NC                                                           
3320  Honolulu, HI..................................    1.1487    1.1776
  Honolulu, HI                                                          
3350  Houma, LA.....................................    0.7843    0.8518
  Lafourche, LA                                                         
  Terrebonne, LA                                                        
3360  *Houston, TX..................................    0.9790    1.0151
  Chambers, TX                                                          
  Fort Bend, TX                                                         
  Harris, TX                                                            
  Liberty, TX                                                           
  Montgomery, TX                                                        
  Waller, TX                                                            
3400  Huntington-Ashland, WV-KY-OH..................    0.9194    0.9441
  Boyd, KY                                                              
  Carter, KY                                                            
  Greenup, KY                                                           
  Lawrence, OH                                                          
  Cabell, WV                                                            
  Wayne, WV                                                             
3440  Huntsville, AL................................    0.8145    0.8689
  Limestone, AL                                                         
  Madison, AL                                                           
3480  *Indianapolis, IN.............................    0.9950    1.0265
  Boone, IN                                                             
  Hamilton, IN                                                          
  Hancock, IN                                                           
  Hendricks, IN                                                         
  Johnson, IN                                                           
  Madison, IN                                                           
  Marion, IN                                                            
  Morgan, IN                                                            
  Shelby, IN                                                            
3500  Iowa City, IA.................................    0.9382    0.9573
  Johnson, IA                                                           
3520  Jackson, MI...................................    0.9066    0.9351
  Jackson, MI                                                           
3560  Jackson, MS...................................    0.7906    0.8514
  Hinds, MS                                                             
  Madison, MS                                                           
  Rankin, MS                                                            
3580  Jackson, TN...................................    0.8340    0.8831
  Madison, TN                                                           
3605  Jacksonville, FL..............................    0.9018    0.9317
  Clay, FL                                                              
  Duval, FL                                                             
  Nassau, FL                                                            
  St. Johns, FL                                                         
3605  Jacksonville, NC..............................    0.7071    0.7887
  Onslow, NC                                                            
3610  Jamestown, NY.................................    0.7679    0.8346
  Chautaqua, NY                                                         
3620  Janesville-Beloit, WI.........................    0.8664    0.9065
  Rock, WI                                                              
3640  Jersey City, NJ...............................    1.1408    1.1236
  Hudson, NJ                                                            
3660  Johnson City-Kingsport-Bristol, TN-VA.........    0.8921    0.9248
  Carter, TN                                                            
  Hawkins, TN                                                           
  Sullivan, TN                                                          
  Unicoi, TN                                                            
  Washington, TN                                                        

[[Page 27524]]

                                                                        
  Bristol City, VA                                                      
  Scott, VA                                                             
  Washington, VA                                                        
3680  Johnstown, PA.................................    0.8417    0.8887
  Cambria, PA                                                           
  Somerset, PA                                                          
3710  Joplin, MO....................................    0.7409    0.8144
  Jasper, MO                                                            
  Newton, MO                                                            
3720  Kalamazoo-Battlecreek, MI.....................    1.0565    1.0384
  Calhoun, MI                                                           
  Kalamazoo, MI                                                         
  Van Buren, MI                                                         
3740  Kankakee, IL..................................    0.8998    0.9582
  Kankakee, IL                                                          
3760  *Kansas City, KS-MO...........................    0.9522    0.9960
  Johnson, KS                                                           
  Leavenworth, KS                                                       
  Miami, KS                                                             
  Wyandotte, KS                                                         
  Cass, MO                                                              
  Clay, MO                                                              
  Clinton, MO                                                           
  Jackson, MO                                                           
  Lafayette, MO                                                         
  Platte, MO                                                            
  Ray, MO                                                               
3800  Kenosha, WI...................................    0.9166    0.9421
  Kenosha, WI                                                           
3810  Killeen-Temple, TX............................    1.0415    1.0282
  Bell, TX                                                              
  Coryell, TX                                                           
3840  Knoxville, TN.................................    0.8520    0.8961
  Anderson, TN                                                          
  Blount, TN                                                            
  Knox, TN                                                              
  Loudon, TN                                                            
  Sevier, TN                                                            
  Union, TN                                                             
3850  Kokomo, IN....................................    0.8609    0.9025
  Howard, IN                                                            
  Tipton, IN                                                            
3870  La Crosse, WI-MN..............................    0.8638    0.9046
  Houston, MN                                                           
  La Crosse, WI                                                         
3880  Lafayette, LA.................................    0.8183    0.8717
  Acadia, LA                                                            
  Lafayette, LA                                                         
  St. Landry, LA                                                        
  St. Martin, LA                                                        
3920  Lafayette, IN.................................    0.8824    0.9179
  Clinton, IN                                                           
  Tippecanoe, IN                                                        
3960  Lake Charles, LA..............................    0.8052    0.8621
  Calcasieu, LA                                                         
3980  Lakeland-Winter Haven, FL.....................    0.8677    0.9074
  Polk, FL                                                              
4000  Lancaster, PA.................................    0.9605    0.9786
  Lancaster, PA                                                         
4040  Lansing-East Lansing, MI......................    1.0016    1.0011
  Clinton, MI                                                           
  Eaton, MI                                                             
  Ingham, MI                                                            
4080  Laredo, TX....................................    0.7092    0.7903
  Webb, TX                                                              
4100  Las Cruces, NM................................    0.8516    0.8958
  Dona Ana, NM                                                          
4120  *Las Vegas, NV-AZ.............................    1.0894    1.0922
  Mohave, AZ                                                            
  Clark, NV                                                             
  Nye, NV                                                               
4150  Lawrence, KS..................................    0.8616    0.9301
  Douglas, KS                                                           
4200  Lawton, OK....................................    0.8339    0.8830
  Comanche, OK                                                          
4243  Lewiston-Auburn, ME...........................    0.9431    0.9607
  Androscoggin, ME                                                      
4280  Lexington, KY.................................    0.8387    0.8865
  Bourbon, KY                                                           
  Clark, KY                                                             
  Fayette, KY                                                           
  Jessamine, KY                                                         
  Madison, KY                                                           
  Scott, KY                                                             
  Woodford, KY                                                          
4320  Lima, OH......................................    0.8752    0.9128
  Allen, OH                                                             
  Auglaize, OH                                                          
4360  Lincoln, NE...................................    0.9193    0.9440
  Lancaster, NE                                                         
4400  Little Rock-North Little Rock, AR.............    0.8616    0.9030
  Faulkner, AR                                                          
  Lonoke, AR                                                            
  Pulaski, AR                                                           
  Saline, AR                                                            
4420  Longview-Marshall, TX.........................    0.8633    0.9042
  Gregg, TX                                                             
  Harrison, TX                                                          
  Upshur, TX                                                            
4480  *Los Angeles-Long Beach, CA...................    1.2396    1.1932
  Los Angeles, CA                                                       
4520  Louisville, KY-IN.............................    0.9445    0.9617
  Clark, IN                                                             
  Floyd, IN                                                             
  Harrison, IN                                                          
  Scott, IN                                                             
  Bullitt, KY                                                           
  Jefferson, KY                                                         
  Oldham, KY                                                            
4600  Lubbock, TX...................................    0.8525    0.8965
  Lubbock, TX                                                           
4640  Lynchburg, VA.................................    0.8036    0.8609
  Amherst, VA                                                           
  Bedford, VA                                                           
  Bedford City, VA                                                      
  Campbell, VA                                                          
  Lynchburg City, VA                                                    
4680  Macon, GA.....................................    0.8836    0.9187
  Bibb, GA                                                              
  Houston, GA                                                           
  Jones, GA                                                             
  Peach, GA                                                             
  Twiggs, GA                                                            
4720  Madison, WI...................................    1.0048    1.0033
  Dane, WI                                                              
4800  Mansfield, OH.................................    0.8543    0.8978
  Crawford, OH                                                          
  Richland, OH                                                          
4840  Mayaguez, PR..................................    0.4186    0.5508
  Anasco, PR                                                            
  Cabo Rojo, PR                                                         
  Hormigueros, PR                                                       
  Mayaguez, PR                                                          
  Sabana Grande, PR                                                     
  San German, PR                                                        
4880  McAllen-Edinburg-Mission, TX..................    0.8502    0.8948
  Hidalgo, TX                                                           
4890  Medford-Ashland, OR...........................    1.0213    1.0145
  Jackson, OR                                                           
4900  Melbourne-Titusville-Palm Bay, FL.............    0.9089    0.9507
  Brevard, FL                                                           
4920  *Memphis, TN-AR-MS............................    0.8185    0.8980
  Crittenden, AR                                                        
  DeSoto, MS                                                            
  Fayette, TN                                                           
  Shelby, TN                                                            
  Tipton, TN                                                            
4940  Merced, CA....................................    1.0684    1.0463
  Merced, CA                                                            
5000  *Miami, FL....................................    0.9240    0.9757
  Dade, FL                                                              
5015  *Middlesex-Somerset-Hunterdon, NJ.............    1.0777    1.0842
  Hunterdon, NJ                                                         
  Middlesex, NJ                                                         
  Somerset, NJ                                                          
5080  *Milwaukee-Waukesha, WI.......................    0.9667    1.0064
  Milwaukee, WI                                                         
  Ozaukee, WI                                                           
  Washington, WI                                                        
  Waukesha, WI                                                          
5120  *Minneapolis-St. Paul, MN-WI..................    1.0785    1.0847
  Anoka, MN                                                             
  Carver, MN                                                            
  Chisago, MN                                                           
  Dakota, MN                                                            
  Hennepin, MN                                                          
  Isanti, MN                                                            
  Ramsey, MN                                                            
  Scott, MN                                                             
  Sherburne, MN                                                         
  Washington, MN                                                        
  Wright, MN                                                            
  Pierce, WI                                                            
  St. Croix, WI                                                         
5160  Mobile, AL....................................    0.7999    0.8582
  Baldwin, AL                                                           
  Mobile, AL                                                            
5170  Modesto, CA...................................    1.0135    1.0092
  Stanislaus, CA                                                        
5190  *Monmouth-Ocean, NJ...........................    1.0842    1.0569
  Monmouth, NJ                                                          

[[Page 27525]]

                                                                        
  Ocean, NJ                                                             
5200  Monroe, LA....................................    0.8234    0.8754
  Ouachita, LA                                                          
5240  Montgomery, AL................................    0.7949    0.8545
  Autauga, AL                                                           
  Elmore, AL                                                            
  Montgomery, AL                                                        
5280  Muncie, IN....................................    0.9736    1.0113
  Delaware, IN                                                          
5330  Myrtle Beach, SC..............................    0.7798    0.8434
  Horry, SC                                                             
5345  Naples, FL....................................    1.0222    1.0151
  Collier, FL                                                           
5360  *Nashville, TN................................    0.9065    0.9630
  Cheatham, TN                                                          
  Davidson, TN                                                          
  Dickson, TN                                                           
  Robertson, TN                                                         
  Rutherford TN                                                         
  Sumner, TN                                                            
  Williamson, TN                                                        
  Wilson, TN                                                            
5380  *Nassau-Suffolk, NY...........................    1.2852    1.2231
  Nassau, NY                                                            
  Suffolk, NY                                                           
5483  *New Haven-Bridgeport-Stamford-Waterbury-.....    1.2778    1.2183
  Danbury, CT                                                           
  Fairfield, CT                                                         
  New Haven, CT                                                         
5523  New London-Norwich, CT........................    1.2345    1.1898
  New London, CT                                                        
5560  *New Orleans, LA..............................    0.9434    0.9897
  Jefferson, LA                                                         
  Orleans, LA                                                           
  Plaquemines, LA                                                       
  St. Bernard, LA                                                       
  St. Charles, LA                                                       
  St. James, LA                                                         
  St. John The Baptist, LA                                              
  St. Tammany, LA                                                       
5600  *New York, NY.................................    1.4041    1.2995
  Bronx, NY                                                             
  Kings, NY                                                             
  New York, NY                                                          
  Putnam, NY                                                            
  Queens, NY                                                            
  Richmond, NY                                                          
  Rockland, NY                                                          
  Westchester, NY                                                       
5640  *Newark, NJ...................................    1.1057    1.1034
  Essex, NJ                                                             
  Morris, NJ                                                            
  Sussex, NJ                                                            
  Union, NJ                                                             
  Warren, NJ                                                            
5660  Newburgh, NY-PA...............................    1.0829    1.0561
  Orange, NY                                                            
  Pike, PA                                                              
5720  *Norfolk-Virginia Beach-Newport News, VA-NC...    0.8326    0.9086
  Currituck, NC                                                         
  Chesapeake City, VA                                                   
  Gloucester, VA                                                        
  Hampton City, VA                                                      
  Isle of Wight, VA                                                     
  James City, VA                                                        
  Mathews, VA                                                           
  Newport News City, VA                                                 
  Norfolk City, VA                                                      
  Poquoson City, VA                                                     
  Portsmouth City, VA                                                   
  Suffolk City, VA                                                      
  Virginia Beach City, VA                                               
  Williamsburg City, VA                                                 
  York, VA                                                              
5775  *Oakland, CA..................................    1.5113    1.3666
  Alameda, CA                                                           
  Contra Costa, CA                                                      
5790  Ocala, FL.....................................    0.8999    0.9303
  Marion, FL                                                            
5800  Odessa-Midland, TX............................    0.8552    0.8984
  Ector, TX                                                             
  Midland, TX                                                           
5880  *Oklahoma City, OK............................    0.8463    0.9188
  Canadian, OK                                                          
  Cleveland, OK                                                         
  Logan, OK                                                             
  McClain, OK                                                           
  Oklahoma, OK                                                          
  Pottawatomie, OK                                                      
5910  Olympia, WA...................................    1.0713    1.0483
  Thurston, WA                                                          
5920   Omaha, NE-IA.................................    0.9425    0.9603
  Pottawattamie, IA                                                     
  Cass, NE                                                              
  Douglas, NE                                                           
  Sarpy, NE                                                             
  Washington, NE                                                        
5945  *Orange County, CA............................    1.1929    1.1622
  Orange, CA                                                            
5960  *Orlando, FL..................................    0.9491    0.9938
  Lake, FL                                                              
  Orange, FL                                                            
  Osceola, FL                                                           
  Seminole, FL                                                          
5990  Owensboro, KY.................................    0.7578    0.8270
  Daviess, KY                                                           
6015  Panama City, FL...............................    0.8080    0.8642
  Bay, FL                                                               
6020  Parkersburg-Marietta, WV-OH...................    0.7895    0.8506
  Washington, OH                                                        
  Wood, WV                                                              
6080  Pensacola, FL.................................    0.8212    0.8738
  Escambia, FL                                                          
  Santa Rosa, FL                                                        
6120  Peoria-Pekin, IL..............................    0.8923    0.9249
  Peoria, IL                                                            
  Tazewell, IL                                                          
  Woodford, IL                                                          
6160  *Philadelphia, PA-NJ..........................    1.1197    1.1129
  Burlington, NJ                                                        
  Camden, NJ                                                            
  Gloucester, NJ                                                        
  Salem, NJ                                                             
  Bucks, PA                                                             
  Chester, PA                                                           
  Delaware, PA                                                          
  Montgomery, PA                                                        
  Philadelphia, PA                                                      
6200  *Phoenix-Mesa, AZ.............................    0.9832    1.0181
  Maricopa, AZ                                                          
  Pinal, AZ                                                             
6240  Pine Bluff, AR................................    0.7904    0.8512
  Jefferson, AR                                                         
6280  *Pittsburgh, PA...............................    0.9726    1.0106
  Allegheny, PA                                                         
  Beaver, PA                                                            
  Butler, PA                                                            
  Fayette, PA                                                           
  Washington, PA                                                        
  Westmoreland, PA                                                      
6323  Pittsfield, MA................................    1.0570    1.0387
  Berkshire, MA                                                         
6360  Ponce, PR.....................................    0.4500    0.5788
  Guayanilla, PR                                                        
  Juana Diaz, PR                                                        
  Penuelas, PR                                                          
  Ponce, PR                                                             
  Villalba, PR                                                          
  Yauco, PR                                                             
6403  Portland, ME..................................    0.9615    0.9735
  Cumberland, ME                                                        
  Sagadahoc, ME                                                         
  York, ME                                                              
6440  *Portland-Vancouver, OR-WA....................    1.1267    1.1177
  Clackamas, OR                                                         
  Columbia, OR                                                          
  Multnomah, OR                                                         
  Washington, OR                                                        
  Yamhill, OR                                                           
  Clark, WA                                                             
6483  Providence-Warwick-Pawtucket, RI..............    1.1116    1.0751
  Bristol, RI                                                           
  Kent, RI                                                              
  Newport, RI                                                           
  Providence, RI                                                        
  Washington, RI                                                        
6520  Provo-Orem, UT................................    1.0139    1.0095
  Utah, UT                                                              
6560  Pueblo, CO....................................    0.8302    0.8804
  Pueblo, CO                                                            
6580  Punta Gorda, FL...............................    0.8284    0.8790
  Charlotte, FL                                                         
6600  Racine, WI....................................    0.8855    0.9201
  Racine, WI                                                            
6640  Raleigh-Durham-Chapel Hill, NC................    0.9740    0.9821
  Chatham, NC                                                           
  Durham, NC                                                            
  Franklin, NC                                                          
  Johnston, NC                                                          

[[Page 27526]]

                                                                        
  Orange, NC                                                            
  Wake, NC                                                              
6660  Rapid City, SD................................    0.8493    0.8942
  Pennington, SD                                                        
6680  Reading, PA...................................    0.9467    0.9728
  Berks, PA                                                             
6690  Redding, CA...................................    1.1631    1.1090
  Shasta, CA                                                            
6720  Reno, NV......................................    1.1043    1.0703
  Washoe, NV                                                            
6740  Richland-Kennewick-Pasco, WA..................    0.9993    0.9995
  Benton, WA                                                            
  Franklin, WA                                                          
6760  Richmond-Petersburg, VA.......................    0.9189    0.9437
  Charles City County, VA                                               
  Chesterfield, VA                                                      
  Colonial Heights City, VA                                             
  Dinwiddie, VA                                                         
  Goochland, VA                                                         
  Hanover, VA                                                           
  Henrico, VA                                                           
  Hopewell City, VA                                                     
  New Kent, VA                                                          
  Petersburg City, VA                                                   
  Powhatan, VA                                                          
  Prince George, VA                                                     
  Richmond City, VA                                                     
6780  *Riverside-San Bernardino, CA.................    1.1251    1.1166
  Riverside, CA                                                         
  San Bernardino, CA                                                    
6800  Roanoke, VA...................................    0.8721    0.9105
  Botetourt, VA                                                         
  Roanoke, VA                                                           
  Roanoke City, VA                                                      
  Salem City, VA                                                        
6820  Rochester, MN.................................    1.0452    1.0307
  Olmsted, MN                                                           
6840  *Rochester, NY................................    0.9611    1.0024
  Genesee, NY                                                           
  Livingston, NY                                                        
  Monroe, NY                                                            
  Ontario, NY                                                           
  Orleans, NY                                                           
  Wayne, NY                                                             
6880  Rockford, IL..................................    0.9015    0.9315
  Boone, IL                                                             
  Ogle, IL                                                              
  Winnebago, IL                                                         
6895  Rocky Mount, NC...............................    0.8951    0.9269
  Edgecombe, NC                                                         
  Nash, NC                                                              
6920  *Sacramento, CA...............................    1.2382    1.1923
  El Dorado, CA                                                         
  Placer, CA                                                            
  Sacramento, CA                                                        
6960  Saginaw-Bay City-Midland, MI..................    0.9605    0.9728
  Bay, MI                                                               
  Midland, MI                                                           
  Saginaw, MI                                                           
6980  St. Cloud, MN.................................    0.9478    0.9640
  Benton, MN                                                            
  Stearns, MN                                                           
7000  St. Joseph, MO................................    0.8570    0.8997
  Andrews, MO                                                           
  Buchanan, MO                                                          
7040  *St. Louis, MO-IL.............................    0.8926    0.9529
  Clinton, IL                                                           
  Jersey, IL                                                            
  Madison, IL                                                           
  Monroe, IL                                                            
  St. Clair, IL                                                         
  Franklin, MO                                                          
  Jefferson, MO                                                         
  Lincoln, MO                                                           
  St. Charles, MO                                                       
  St. Louis, MO                                                         
  St. Louis City, MO                                                    
  Warren, MO                                                            
7080  Salem, OR.....................................    0.9749    0.9901
  Marion, OR                                                            
  Polk, OR                                                              
7120  Salinas, CA...................................    1.3835    1.2489
  Monterey, CA                                                          
7160  *Salt Lake City-Ogden, UT.....................    0.9677    1.0071
  Davis, UT                                                             
  Salt Lake, UT                                                         
  Weber, UT                                                             
7200  San Angelo, TX................................    0.7594    0.8282
  Tom Green, TX                                                         
7240  *San Antonio, TX..............................    0.8365    0.9115
  Bexar, TX                                                             
  Comal, TX                                                             
  Guadalupe, TX                                                         
  Wilson, TX                                                            
7320  *San Diego, CA................................    1.2183    1.1791
  San Diego, CA                                                         
7360  *San Francisco, CA............................    1.4210    1.3102
  Marin, CA                                                             
  San Francisco, CA                                                     
  San Mateo, CA                                                         
7400  *San Jose, CA.................................    1.4435    1.3244
  Santa Clara, CA                                                       
7440  *San Juan-Bayamon, PR.........................    0.4616    0.6066
  Aguas Buenas, PR                                                      
  Barceloneta, PR                                                       
  Bayamon, PR                                                           
  Canovanas, PR                                                         
  Carolina, PR                                                          
  Catano, PR                                                            
  Ceiba, PR                                                             
  Comerio, PR                                                           
  Corozal, PR                                                           
  Dorado, PR                                                            
  Fajardo, PR                                                           
  Florida, PR                                                           
  Guaynabo, PR                                                          
  Humacao, PR                                                           
  Juncos, PR                                                            
  Los Piedras, PR                                                       
  Loiza, PR                                                             
  Luguillo, PR                                                          
  Manati, PR                                                            
  Morovis, PR                                                           
  Naguabo, PR                                                           
  Naranjito, PR                                                         
  Rio Grande, PR                                                        
  San Juan, PR                                                          
  Toa Alta, PR                                                          
  Toa Baja, PR                                                          
  Trujillo Alto, PR                                                     
  Vega Alta, PR                                                         
  Vega Baja, PR                                                         
  Yabucoa, PR                                                           
7460  San Luis Obispo-Atascadero-Paso Robles, CA....    1.1587    1.1061
  San Luis Obispo, CA                                                   
7480  Santa Barbara-Santa Maria-Lompoc, CA..........    1.1267    1.0851
  Santa Barbara, CA                                                     
7485  Santa Cruz-Watsonville, CA....................    1.3551    1.2313
  Santa Cruz, CA                                                        
7490  Santa Fe, NM..................................    1.0847    1.0573
  Los Alamos, NM                                                        
  Santa Fe, NM                                                          
7500  Santa Rosa, CA................................    1.2558    1.1688
  Sonoma, CA                                                            
7510  Sarasota-Bradenton, FL........................    0.9770    0.9842
  Manatee, FL                                                           
  Sarasota, FL                                                          
7520  Savannah, GA..................................    1.0089    1.0061
  Bryan, GA                                                             
  Chatham, GA                                                           
  Effingham, GA                                                         
7560  Scranton-Wilkes-Barre-Hazleton, PA............    0.8767    0.9138
  Columbia, PA                                                          
  Lackawanna, PA                                                        
  Luzerne, PA                                                           
  Wyoming, PA                                                           
7600  *Seattle-Bellevue-Everett, WA.................    1.1410    1.1274
  Island, WA                                                            
  King, WA                                                              
  Snohomish, WA                                                         
7610  Sharon, PA....................................    0.8764    0.9136
  Mercer, PA                                                            
7620  Sheboygan, WI.................................    0.7782    0.8422
  Sheboygan, WI                                                         
7640  Sherman-Denison, TX...........................    0.8650    0.9055
  Grayson, TX                                                           
7680  Shreveport-Bossier City, LA...................    0.9379    0.9570
  Bossier, LA                                                           
  Caddo, LA                                                             
  Webster, LA                                                           
7720  Sioux City, IA-NE.............................    0.8331    0.8825
  Woodbury, IA                                                          
  Dakota, NE                                                            
7760  Sioux Falls, SD...............................    0.8606    0.9023
  Lincoln, SD                                                           
  Minnehaha, SD                                                         
7800  South Bend, IN................................    0.9957    0.9971
  St. Joseph, IN                                                        

[[Page 27527]]

                                                                        
7840  Spokane, WA...................................    1.0548    1.0372
  Spokane, WA                                                           
7880  Springfield, IL...............................    0.8783    0.9150
  Menard, IL                                                            
  Sangamon, IL                                                          
7920  Springfield, MO...............................    0.7840    0.8465
  Christian, MO                                                         
  Greene, MO                                                            
  Webster, MO                                                           
8003  Springfield, MA...............................    1.0609    1.0552
  Hampden, MA                                                           
  Hampshire, MA                                                         
8050  State College, PA.............................    0.8875    0.9215
  Centre, PA                                                            
8080  Steubenville-Weirton, OH-WV...................    0.8244    0.9024
  Jefferson, OH                                                         
  Brooke, WV                                                            
  Hancock, WV                                                           
8120  Stockton-Lodi, CA.............................    1.1417    1.0997
  San Joaquin, CA                                                       
8140  Sumter, SC....................................    0.7716    0.8373
  Sumter, SC                                                            
8160  Syracuse, NY..................................    0.9406    0.9589
  Cayuga, NY                                                            
  Madison, NY                                                           
  Onondaga, NY                                                          
  Oswego, NY                                                            
8200  Tacoma, WA....................................    1.0891    1.0655
  Pierce, WA                                                            
8240  Tallahassee, FL...............................    0.8332    0.8825
  Gadsden, FL                                                           
  Leon, FL                                                              
8280  *Tampa-St. Petersburg-Clearwater, FL..........    0.9322    0.9817
  Hernando, FL                                                          
  Hillsborough, FL                                                      
  Pasco, FL                                                             
  Pinellas, FL                                                          
8320  Terre Haute, IN...............................    0.8611    0.9027
  Clay, IN                                                              
  Vermillion, IN                                                        
  Vigo, IN                                                              
8360  Texarkana, AR-Texarkana, TX...................    0.8484    0.8935
  Miller, AR                                                            
  Bowie, TX                                                             
8400  Toledo, OH....................................    1.0383    1.0445
  Fulton, OH                                                            
  Lucas, OH                                                             
  Wood, OH                                                              
8440  Topeka, KS....................................    1.0108    1.0074
  Shawnee, KS                                                           
8480  Trenton, NJ...................................    1.0572    1.0388
  Mercer, NJ                                                            
8520  Tucson, AZ....................................    0.9050    0.9339
  Pima, AZ                                                              
8560  Tulsa, OK.....................................    0.8113    0.8666
  Creek, OK                                                             
  Osage, OK                                                             
  Rogers, OK                                                            
  Tulsa, OK                                                             
  Wagoner, OK                                                           
8600  Tuscaloosa, AL................................    0.7723    0.8378
  Tuscaloosa, AL                                                        
8640  Tyler, TX.....................................    1.0158    1.0108
  Smith, TX                                                             
8680  Utica-Rome, NY................................    0.8421    0.8890
  Herkimer, NY                                                          
  Oneida, NY                                                            
8720  Vallejo-Fairfield-Napa, CA....................    1.3483    1.2271
  Napa, CA                                                              
  Solano, CA                                                            
8735  Ventura, CA...................................    1.1169    1.0786
  Ventura, CA                                                           
8750  Victoria, TX..................................    0.8478    0.8931
  Victoria, TX                                                          
8760  Vineland-Millville-Bridgeton, NJ..............    1.0015    1.0010
  Cumberland, NJ                                                        
8780  Visalia-Tulare-Porterville, CA................    1.0174    1.0119
  Tulare, CA                                                            
8800  Waco, TX......................................    0.7789    0.8427
  McLennan, TX                                                          
8840  *Washington, DC-MD-VA-WV......................    1.0842    1.0886
  District of Columbia, DC                                              
  Calvert, MD                                                           
  Charles, MD                                                           
  Frederick, MD                                                         
  Montgomery, MD                                                        
  Prince Georges, MD                                                    
  Alexandria City, VA                                                   
  Arlington, VA                                                         
  Clarke, VA                                                            
  Culpepper, VA                                                         
  Fairfax, VA                                                           
  Fairfax City, VA                                                      
  Falls Church City, VA                                                 
  Fauquier, VA                                                          
  Fredericksburg City, VA                                               
  King George, VA                                                       
  Loudoun, VA                                                           
  Manassas City, VA                                                     
  Manassas Park City, VA                                                
  Prince William, VA                                                    
  Spotsylvania, VA                                                      
  Stafford, VA                                                          
  Warren, VA                                                            
  Berkeley, WV                                                          
  Jefferson, WV                                                         
8920  Waterloo-Cedar Falls, IA......................    0.8724    0.9108
  Black Hawk, IA                                                        
8940  Wausau, WI....................................    1.0347    1.0236
  Marathon, WI                                                          
8960  West Palm Beach-Boca Raton, FL................    1.0016    1.0036
  Palm Beach, FL                                                        
9000  Wheeling, OH-WV...............................    0.7580    0.8313
  Belmont, OH                                                           
  Marshall, WV                                                          
  Ohio, WV                                                              
9040  Wichita, KS...................................    0.9447    0.9618
  Butler, KS                                                            
  Harvey, KS                                                            
  Sedgwick, KS                                                          
9080  Wichita Falls, TX.............................    0.8070    0.8634
  Archer, TX                                                            
  Wichita, TX                                                           
9140  Williamsport, PA..............................    0.8487    0.8937
  Lycoming, PA                                                          
9160  Wilmington-Newark, DE-MD......................    1.1341    1.1063
  New Castle, DE                                                        
  Cecil, MD                                                             
9200  Wilmington, NC................................    0.9072    0.9355
  New Hanover, NC                                                       
  Brunswick, NC                                                         
9260  Yakima, WA....................................    1.0049    1.0034
  Yakima, WA                                                            
9270  Yolo, CA......................................    1.1470    1.0985
  Yolo, CA                                                              
9280  York, PA......................................    0.9124    0.9391
  York, PA                                                              
9320  Youngstown-Warren, OH.........................    0.9764    0.9838
  Columbiana, OH                                                        
  Mahoning, OH                                                          
  Trumbull, OH                                                          
9340  Yuba City, CA.................................    1.0437    1.0297
  Sutter, CA                                                            
  Yuba, CA                                                              
9360  Yuma, AZ......................................    0.9518    0.9667
  Yuma, AZ                                                              
------------------------------------------------------------------------
* Large Urban Area                                                      



Table 4b.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Rural Areas                              
------------------------------------------------------------------------
                                                        Wage            
                    Nonurban area                       index      GAF  
------------------------------------------------------------------------
Alabama.............................................    0.7160    0.7955
Alaska..............................................    1.2472    1.2550
Arizona.............................................    0.7946    0.8543
Arkansas............................................    0.7000    0.7833
California..........................................    0.9991    1.0010
Colorado............................................    0.8156    0.8697
Connecticut.........................................    1.2788    1.2189
Delaware............................................    0.9464    0.9630
Florida.............................................    0.8677    0.9084
Georgia.............................................    0.7659    0.8331
Hawaii..............................................    1.0268    1.0771
Idaho...............................................    0.8356    0.8843
Illinois............................................    0.7567    0.8286
Indiana.............................................    0.8119    0.8718
Iowa................................................    0.7394    0.8132
Kansas..............................................    0.7113    0.7922
Kentucky............................................    0.7772    0.8419
Louisiana...........................................    0.7284    0.8055
Maine...............................................    0.8335    0.8827
Maryland............................................    0.8446    0.8908
Massachusetts.......................................    1.0794    1.0537
Michigan............................................    0.8837    0.9188
Minnesota...........................................    0.8161    0.8704
Mississippi.........................................    0.6808    0.7685
Missouri............................................    0.7249    0.8044

[[Page 27528]]

                                                                        
Montana.............................................    0.8137    0.8683
Nebraska............................................    0.7245    0.8020
Nevada..............................................    0.8795    0.9158
New Hampshire.......................................    0.9776    0.9895
New Jersey \1\......................................  ........  ........
New Mexico..........................................    0.7873    0.8489
New York............................................    0.8565    0.8994
North Carolina......................................    0.7945    0.8565
North Dakota........................................    0.7370    0.8114
Ohio................................................    0.8349    0.8909
Oklahoma............................................    0.6963    0.7805
Oregon..............................................    0.9715    0.9813
Pennsylvania........................................    0.8480    0.8939
Puerto Rico.........................................    0.4182    0.5505
Rhode Island \1\....................................  ........  ........
South Carolina......................................    0.7679    0.8356
South Dakota........................................    0.7085    0.7898
Tennessee...........................................    0.7372    0.8116
Texas...............................................    0.7430    0.8166
Utah................................................    0.8854    0.9200
Vermont.............................................    0.8941    0.9287
Virginia............................................    0.7760    0.8422
Washington..........................................    0.9956    0.9978
West Virginia.......................................    0.7943    0.8541
Wisconsin...........................................    0.8449    0.8914
Wyoming.............................................    0.8202    0.8731
------------------------------------------------------------------------
\1\ All counties within the State are classified as urban.              



Table 4c.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                     Hospitals That are Reclassified                    
------------------------------------------------------------------------
                                                        Wage            
                Area reclassified to                    index      GAF  
------------------------------------------------------------------------
Abilene, TX.........................................    0.8055    0.8623
Albuquerque, NM.....................................    0.9390    0.9578
Alexandria, LA......................................    0.8213    0.8739
Amarillo, TX........................................    0.8557    0.8988
Anchorage, AK.......................................    1.3285    1.2147
Asheville, NC.......................................    0.9365    0.9561
Atlanta, GA.........................................    0.9986    0.9990
Bangor, ME..........................................    0.9412    0.9594
Baton Rouge, LA.....................................    0.8442    0.8905
Benton Harbor, MI...................................    0.8553    0.8985
Benton Harbor, MI (Rural Michigan Hosp.)............    0.8837    0.9188
Billings, MT........................................    0.8903    0.9235
Birmingham, AL......................................    0.9047    0.9337
Bismarck, ND........................................    0.7976    0.8565
Boise City, ID......................................    0.9269    0.9493
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH....    1.1639    1.1095
Caguas, PR..........................................    0.4661    0.5929
Champaign-Urbana, IL................................    0.8999    0.9303
Charleston-North Charleston, SC.....................    0.8984    0.9293
Charlotte-Gastonia-Rock Hill, NC-SC.................    0.9631    0.9746
Charlottesville, VA.................................    0.9006    0.9308
Chattanooga, TN-GA..................................    0.8867    0.9210
Chicago, IL.........................................    1.0653    1.0443
Cincinnati, OH-KY-IN................................    0.9477    0.9639
Cleveland-Lorain-Elyria, OH.........................    0.9908    0.9937
Columbia, MO........................................    0.8919    0.9246
Columbus, OH........................................    0.9699    0.9793
Dallas, TX..........................................    0.9530    0.9676
Davenport-Moline-Rock Island, IA-IL.................    0.8407    0.8880
Denver, CO..........................................    1.0291    1.0198
Des Moines, IA......................................    0.8772    0.9142
Duluth-Superior, MN-WI..............................    0.9437    0.9611
Dutchess County, NY.................................    1.0309    1.0211
Elkhart-Goshen, IN..................................    0.8820    0.9176
Eugene-Springfield, OR..............................    1.1503    1.1006
Fargo-Moorhead, ND-MN...............................    0.8860    0.9205
Fayetteville, NC....................................    0.8658    0.9060
Flagstaff, AR-UT....................................    0.8848    0.9196
Flint, MI...........................................    1.1273    1.0855
Florence, AL........................................    0.8157    0.8698
Florence, SC........................................    0.8614    0.9029
Fort Lauderdale, FL.................................    1.0968    1.0653
Fort Pierce-Port St. Lucie, FL......................    1.0049    1.0034
Fort Smith, AR-OK...................................    0.7885    0.8498
Fort Walton Beach, FL...............................    0.8978    0.9288
Fort Worth-Arlington, TX............................    1.0095    1.0065
Gadsden, AL.........................................    0.8901    0.9234
Gary, IN............................................    0.9176    0.9428
Grand Forks, ND-MN..................................    0.9228    0.9465
Grand Junction, CO..................................    0.8847    0.9195
Grand Rapids-Muskegon-Holland, MI...................    1.0088    1.0060
Great Falls, MT.....................................    0.9007    0.9309
Greeley, CO.........................................    0.9409    0.9591
Green Bay, WI.......................................    0.9387    0.9576
Greensboro-Winston-Salem-High Point, NC.............    0.9327    0.9534
Greenville-Spartanburg-Anderson, SC.................    0.8947    0.9266
Hartford, CT........................................    1.2218    1.1470
Honolulu, HI........................................    1.1487    1.0996
Houston, TX.........................................    0.9790    0.9856
Huntington-Ashland, WV-KY-OH........................    0.9194    0.9441
Huntsville, AL......................................    0.8040    0.8612
Indianapolis, IN....................................    0.9833    0.9885
Jackson, MS.........................................    0.7906    0.8514
Jacksonville, FL....................................    0.9018    0.9317
Johnson City-Kingsport-Bristol, TN-VA...............    0.8921    0.9248
Joplin, MO..........................................    0.7409    0.8144
Kalamazoo-Battlecreek, MI...........................    1.0462    1.0314
Kansas City, KS-MO..................................    0.9522    0.9670
Knoxville, TN.......................................    0.8520    0.8961
Lafayette, LA.......................................    0.8183    0.8717
Lansing-East Lansing, MI............................    1.0016    1.0011
Las Vegas, NV-AZ....................................    1.0894    1.0604
Lexington, KY.......................................    0.8387    0.8865
Lima, OH............................................    0.8752    0.9128
Lincoln, NE.........................................    0.9059    0.9346
Little Rock-North Little Rock, AR...................    0.8616    0.9030
Longview-Marshall, TX...............................    0.8495    0.8943
Los Angeles-Long Beach, CA..........................    1.2396    1.1585
Louisville, KY-IN...................................    0.9445    0.9617
Macon, GA...........................................    0.8460    0.8918
Madison, WI.........................................    1.0048    1.0033
Mansfield, OH.......................................    0.8543    0.8978
Medford-Ashland, OR.................................    1.0213    1.0145
Memphis, TN-AR-MS...................................    0.8185    0.8718
Middlesex-Somerset-Hunterdon, NJ....................    1.0777    1.0526
Milwaukee-Waukesha, WI..............................    0.9667    0.9771
Minneapolis-St. Paul, MN-WI.........................    1.0785    1.0531
Modesto, CA.........................................    1.0135    1.0092
Monmouth-Ocean, NJ..................................    1.0572    1.0388
Montgomery, AL......................................    0.7949    0.8545
Nashville, TN.......................................    0.9065    0.9350
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT.    1.2778    1.1828
New London-Norwich, CT..............................    1.2345    1.1552
New Orleans, LA.....................................    0.9434    0.9609
New York, NY........................................    1.4041    1.2616
Newark, NJ..........................................    1.0956    1.0645
Oakland, CA.........................................    1.5113    1.3268
Odessa-Midland, TX..................................    0.8552    0.8984
Oklahoma City, OK...................................    0.8463    0.8920
Omaha, NE-IA........................................    0.9425    0.9603
Orange County, CA...................................    1.1929    1.1284
Peoria-Pekin, IL....................................    0.8923    0.9249
Philadelphia, PA-NJ.................................    1.1197    1.0805
Pittsburgh, PA......................................    0.9564    0.9699
Portland, ME........................................    0.9615    0.9735
Portland-Vancouver, OR-WA...........................    1.1267    1.0851
Provo-Orem, UT......................................    1.0139    1.0095
Raleigh-Durham-Chapel Hill, NC......................    0.9615    0.9735
Rapid City, SD......................................    0.8493    0.8942
Roanoke, VA.........................................    0.8721    0.9105
Rochester, MN.......................................    1.0452    1.0307
Rockford, IL........................................    0.9015    0.9315
Sacramento, CA......................................    1.2382    1.1576
Saginaw-Bay City-Midland, MI........................    0.9605    0.9728
St. Cloud, MN.......................................    0.9478    0.9640
St. Louis, MO-IL....................................    0.8926    0.9251
Salt Lake City-Ogden, UT............................    0.9677    0.9778
San Diego, CA.......................................    1.2183    1.1448
San Francisco, CA...................................    1.4210    1.2720
San Jose, CA........................................    1.4435    1.2858
Santa Rosa, CA......................................    1.2430    1.1606
Sarasota-Bradenton, FL..............................    0.9770    0.9842
Seattle-Bellevue-Everett, WA........................    1.1410    1.0945
Sharon, PA..........................................    0.8764    0.9136
Sherman-Denison, TX.................................    0.8650    0.9055
Sioux Falls, SD.....................................    0.8606    0.9023
South Bend, IN......................................    0.9957    0.9971
Springfield, IL.....................................    0.8783    0.9150
Springfield, MO.....................................    0.7840    0.8465
Stockton-Lodi, CA...................................    1.1417    1.0950
Syracuse, NY........................................    0.9406    0.9589
Tacoma, WA..........................................    1.0891    1.0602
Tampa-St. Petersburg-Clearwater, FL.................    0.9322    0.9531

[[Page 27529]]

                                                                        
Texarkana, AR-Texarkana, TX.........................    0.8484    0.8935
Toledo, OH..........................................    1.0383    1.0261
Topeka, KS..........................................    0.9817    0.9874
Tucson, AZ..........................................    0.9050    0.9339
Tulsa, OK...........................................    0.8113    0.8666
Tyler, TX...........................................    0.9717    0.9805
Victoria, TX........................................    0.8259    0.8772
Washington, DC-MD-VA-WV.............................    1.0842    1.0569
Waterloo-Cedar Falls, IA............................    0.8601    0.9019
Wausau, WI..........................................    0.9720    0.9807
Wichita, KS.........................................    0.9282    0.9503
Rural Alabama.......................................    0.7160    0.7955
Rural Florida.......................................    0.8677    0.9074
Rural Kentucky......................................    0.7772    0.8415
Rural Louisiana.....................................    0.7284    0.8049
Rural Michigan......................................    0.8837    0.9188
Rural Minnesota.....................................    0.8161    0.8701
Rural New Hampshire.................................    0.9776    0.9846
Rural North Carolina................................    0.7945    0.8542
Rural Virginia......................................    0.7760    0.8406
Rural Washington....................................    0.9956    0.9970
Rural West Virginia.................................    0.7943    0.8541
Rural Wyoming.......................................    0.8202    0.8731
------------------------------------------------------------------------



             Table 4d.--Average Hourly Wage for Urban Areas             
------------------------------------------------------------------------
                                                                Average 
                          Urban area                             hourly 
                                                                  wage  
------------------------------------------------------------------------
Abilene, TX..................................................    15.4795
Aguadilla, PR................................................     8.6418
Akron, OH....................................................    19.2662
Albany, GA...................................................    16.2968
Albany-Schenectady-Troy, NY..................................    16.6016
Albuquerque, NM..............................................    18.3100
Alexandria, LA...............................................    15.8746
Allentown-Bethlehem-Easton, PA...............................    19.5376
Altoona, PA..................................................    18.5951
Amarillo, TX.................................................    16.6936
Anchorage, AK................................................    25.8567
Ann Arbor, MI................................................    22.8035
Anniston, AL.................................................    15.3104
Appleton-Oshkosh-Neenah, WI..................................    17.3835
Arecibo, PR..................................................     9.0343
Asheville, NC................................................    18.2517
Athens, GA...................................................    18.0640
Atlanta, GA..................................................    19.6832
Atlantic-Cape May, NJ........................................    21.6594
Augusta-Aiken, GA-SC.........................................    17.2642
Austin-San Marcos, TX........................................    18.0500
Bakersfield, CA..............................................    19.9031
Baltimore, MD................................................    19.1581
Bangor, ME...................................................    18.3630
Barnstable-Yarmouth, MA......................................    26.6928
Baton Rouge, LA..............................................    16.4700
Beaumont-Port Arthur, TX.....................................    16.7355
Bellingham, WA...............................................    22.1285
Benton Harbor, MI............................................    16.5971
Bergen-Passaic, NJ...........................................    22.8591
Billings, MT.................................................    17.3702
Biloxi-Gulfport-Pascagoula, MS...............................    16.7252
Binghamton, NY...............................................    17.2505
Birmingham, AL...............................................    17.6503
Bismarck, ND.................................................    15.0933
Bloomington, IN..............................................    16.8155
Bloomington-Normal, IL.......................................    17.4035
Boise City, ID...............................................    18.0695
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH.............    22.7069
Boulder-Longmont, CO.........................................    18.3061
Brazoria, TX.................................................    17.9908
Bremerton, WA................................................    21.3152
Brownsville-Harlingen-San Benito, TX.........................    16.7030
Bryan-College Station, TX....................................    17.0898
Buffalo-Niagara Falls, NY....................................    17.7977
Burlington, VT...............................................    17.8037
Caguas, PR...................................................     9.0488
Canton-Massillon, OH.........................................    16.9098
Casper, WY...................................................    17.2484
Cedar Rapids, IA.............................................    16.5386
Champaign-Urbana, IL.........................................    18.3634
Charleston-North Charleston, SC..............................    17.5265
Charleston, WV...............................................    18.6261
Charlotte-Gastonia-Rock Hill, NC-SC..........................    18.7900
Charlottesville, VA..........................................    17.9005
Chattanooga, TN-GA...........................................    17.2991
Cheyenne, WY.................................................    15.0126
Chicago, IL..................................................    20.9843
Chico-Paradise, CA...........................................    20.3689
Cincinnati, OH-KY-IN.........................................    18.4886
Clarksville-Hopkinsville, TN-KY..............................    15.0873
Cleveland-Lorain-Elyria, OH..................................    19.3306
Colorado Springs, CO.........................................    18.4479
Columbia, MO.................................................    17.4002
Columbia, SC.................................................    17.9066
Columbus, GA-AL..............................................    14.9336
Columbus, OH.................................................    18.9232
Corpus Christi, TX...........................................    16.8587
Cumberland, MD-WV............................................    16.8031
Dallas, TX...................................................    18.5928
Danville, VA.................................................    16.6152
Davenport-Moline-Rock Island, IA-IL..........................    16.4021
Dayton-Springfield, OH.......................................    18.6930
Daytona Beach, FL............................................    17.3459
Decatur, AL..................................................    16.3934
Decatur, IL..................................................    15.3452
Denver, CO...................................................    20.0780
Des Moines, IA...............................................    17.1139
Detroit, MI..................................................    20.9694
Dothan, AL...................................................    15.1351
Dover, DE....................................................    17.5916
Dubuque, IA..................................................    15.8987
Duluth-Superior, MN-WI.......................................    18.4105
Dutchess County, NY..........................................    20.6881
Eau Claire, WI...............................................    16.9692
El Paso, TX..................................................    18.5059
Elkhart-Goshen, IN...........................................    17.2083
Elmira, NY...................................................    16.4576
Enid, OK.....................................................    15.3724
Erie, PA.....................................................    17.8263
Eugene-Springfield, OR.......................................    22.0384
Evansville, Henderson, IN-KY.................................    17.5397
Fargo-Moorhead, ND-MN........................................    17.5775
Fayetteville, NC.............................................    17.6077
Fayetteville-Springdale-Rogers, AR...........................    14.1177
Flagstaff, AZ-UT.............................................    17.6344
Flint, MI....................................................    21.9933
Florence, AL.................................................    15.5886
Florence, SC.................................................    16.8047
Fort Collins-Loveland, CO....................................    20.7345
Fort Lauderdale, FL..........................................    20.5796
Fort Myers-Cape Coral, FL....................................    17.7400
Fort Pierce-Port St. Lucie, FL...............................    19.8836
Fort Smith, AR-OK............................................    15.3772
Fort Walton Beach, FL........................................    17.9217
Fort Wayne, IN...............................................    17.2046
Fort Worth-Arlington, TX.....................................    19.6953
Fresno, CA...................................................    21.8549
Gadsden, AL..................................................    17.3656
Gainesville, FL..............................................    18.4465
Galveston-Texas City, TX.....................................    21.5032
Gary, IN.....................................................    18.8135
Glens Falls, NY..............................................    16.6999
Goldsboro, NC................................................    16.4109
Grand Forks, ND-MN...........................................    17.6200
Grand Junction, CO...........................................    16.2899
Grand Rapids-Muskegon-Holland, MI............................    19.6810
Great Falls, MT..............................................    16.9748
Greeley, CO..................................................    18.9481
Green Bay, WI................................................    17.6730
Greensboro-Winston-Salem-High Point, NC......................    18.1974
Greenville, NC...............................................    17.7503
Greenville-Spartanburg-Anderson, SC..........................    17.4547
Hagerstown, MD...............................................    17.9394
Hamilton-Middletown, OH......................................    18.5631
Harrisburg-Lebanon-Carlisle, PA..............................    19.8630
Hartford, CT.................................................    24.1823
Hattiesburg, MS..............................................    14.1809
Hickory-Morganton-Lenoir, NC.................................    16.8672
Honolulu, HI.................................................    22.4099
Houma, LA....................................................    15.3009
Houston, TX..................................................    19.1004
Huntington-Ashland, WV-KY-OH.................................    17.9378
Huntsville, AL...............................................    15.8903
Indianapolis, IN.............................................    19.4109
Iowa City, IA................................................    18.3037
Jackson, MI..................................................    17.6864
Jackson, MS..................................................    15.3259
Jackson, TN..................................................    16.2704
Jacksonville, FL.............................................    17.5917
Jacksonville, NC.............................................    13.7955
Jamestown, NY................................................    14.9815
Janesville-Beloit, WI........................................    16.9030
Jersey City, NJ..............................................    22.2562
Johnson City-Kingsport-Bristol, TN-VA........................    17.3717
Johnstown, PA................................................    16.4213
Joplin, MO...................................................    14.3989
Kalamazoo-Battlecreek, MI....................................    20.6127
Kankakee, IL.................................................    17.5542
Kansas City, KS-MO...........................................    18.5772
Kenosha, WI..................................................    17.8819
Killeen-Temple, TX...........................................    20.3189
Knoxville, TN................................................    16.6222
Kokomo, IN...................................................    16.7962
La Crosse, WI-MN.............................................    16.8513
Lafayette, LA................................................    15.9607
Lafayette, IN................................................    17.1635
Lake Charles, LA.............................................    15.7084
Lakeland-Winter Haven, FL....................................    17.1559
Lancaster, PA................................................    18.7384
Lansing-East Lansing, MI.....................................    19.5408
Laredo, TX...................................................    13.8360
Las Cruces, NM...............................................    16.6145

[[Page 27530]]

                                                                        
Las Vegas, NV-AZ.............................................    21.2545
Lawrence, KS.................................................    16.8098
Lawton, OK...................................................    16.2681
Lewiston-Auburn, ME..........................................    18.3998
Lexington, KY................................................    16.3501
Lima, OH.....................................................    17.0746
Lincoln, NE..................................................    17.9352
Little Rock-North Little Rock, AR............................    16.8095
Longview-Marshall, TX........................................    16.8433
Los Angeles-Long Beach, CA...................................    24.1067
Louisville, KY-IN............................................    18.4271
Lubbock, TX..................................................    16.6316
Lynchburg, VA................................................    15.6776
Macon, GA....................................................    17.2388
Madison, WI..................................................    19.6027
Mansfield, OH................................................    16.6677
Mayaguez, PR.................................................     8.1673
McAllen-Edinburg-Mission, TX.................................    16.5870
Medford-Ashland, OR..........................................    19.6857
Melbourne-Titusville-Palm Bay, FL............................    17.7314
Memphis, TN-AR-MS............................................    15.9681
Merced, CA...................................................    20.8439
Miami, FL....................................................    19.3734
Middlesex-Somerset-Hunterdon, NJ.............................    21.0732
Milwaukee-Waukesha, WI.......................................    18.8591
Minneapolis-St. Paul, MN-WI..................................    21.0411
Mobile, AL...................................................    15.6052
Modesto, CA..................................................    20.7262
Monmouth-Ocean, NJ...........................................    21.1523
Monroe, LA...................................................    16.0633
Montgomery, AL...............................................    15.5087
Muncie, IN...................................................    18.9936
Myrtle Beach, SC.............................................    15.2138
Naples, FL...................................................    19.9423
Nashville, TN................................................    17.6844
Nassau-Suffolk, NY...........................................    26.4295
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..........    24.8405
New London-Norwich, CT.......................................    23.9754
New Orleans, LA..............................................    18.4047
New York, NY.................................................    27.3928
Newark, NJ...................................................    22.9650
Newburgh, NY-PA..............................................    21.1274
Norfolk-Virginia Beach-Newport News, VA-NC...................    16.2433
Oakland, CA..................................................    29.3295
Ocala, FL....................................................    17.5573
Odessa-Midland, TX...........................................    16.5854
Oklahoma City, OK............................................    16.5112
Olympia, WA..................................................    20.9003
Omaha, NE-IA.................................................    18.3867
Orange County, CA............................................    23.3969
Orlando, FL..................................................    18.5157
Owensboro, KY................................................    14.7838
Panama City, FL..............................................    15.7629
Parkersburg-Marietta, WV-OH..................................    15.4018
Pensacola, FL................................................    16.0203
Peoria-Pekin, IL.............................................    17.4092
Philadelphia, PA-NJ..........................................    21.8450
Phoenix-Mesa, AZ.............................................    19.1821
Pine Bluff, AR...............................................    15.4205
Pittsburgh, PA...............................................    18.9757
Pittsfield, MA...............................................    20.6216
Ponce, PR....................................................     8.7784
Portland, ME.................................................    18.7580
Portland-Vancouver, OR-WA....................................    21.9821
Providence-Warwick, RI.......................................    21.6876
Provo-Orem, UT...............................................    19.7809
Pueblo, CO...................................................    16.1970
Punta Gorda, FL..............................................    16.1612
Racine, WI...................................................    17.2751
Raleigh-Durham-Chapel Hill, NC...............................    19.0031
Rapid City, SD...............................................    16.5325
Reading, PA..................................................    18.4690
Redding, CA..................................................    22.6922
Reno, NV.....................................................    21.5443
Richland-Kennewick-Pasco, WA.................................    19.4956
Richmond-Petersburg, VA......................................    17.9271
Riverside-San Bernardino, CA.................................    22.2324
Roanoke, VA..................................................    17.0151
Rochester, MN................................................    20.3908
Rochester, NY................................................    18.7505
Rockford, IL.................................................    17.5872
Rocky Mount, NC..............................................    17.4626
Sacramento, CA...............................................    24.1558
Saginaw-Bay City-Midland, MI.................................    18.5818
St. Cloud, MN................................................    18.4907
St. Joseph, MO...............................................    16.7196
St. Louis, MO-IL.............................................    17.4144
Salem, OR....................................................    19.0205
Salinas, CA..................................................    26.9904
Salt Lake City-Ogden, UT.....................................    18.8799
San Angelo, TX...............................................    14.8158
San Antonio, TX..............................................    16.3206
San Diego, CA................................................    23.7299
San Francisco, CA............................................    27.8220
San Jose, CA.................................................    28.2911
San Juan-Bayamon, PR.........................................     9.0059
San Luis Obispo-Atascadero-Paso Robles, CA...................    22.6053
Santa Barbara-Santa Maria-Lompoc, CA.........................    21.9816
Santa Cruz-Watsonville, CA...................................    26.4364
Santa Fe, NM.................................................    21.1622
Santa Rosa, CA...............................................    24.4999
Sarasota-Bradenton, FL.......................................    19.0607
Savannah, GA.................................................    19.6834
Scranton-Wilkes Barre-Hazleton, PA...........................    17.1047
Seattle-Bellevue-Everett, WA.................................    22.2595
Sharon, PA...................................................    17.0979
Sheboygan, WI................................................    15.1817
Sherman-Denison, TX..........................................    16.8423
Shreveport-Bossier City, LA..................................    18.2987
Sioux City, IA-NE............................................    16.2539
Sioux Falls, SD..............................................    16.7892
South Bend, IN...............................................    19.4248
Spokane, WA..................................................    20.5788
Springfield, IL..............................................    17.1355
Springfield, MO..............................................    15.2957
Springfield, MA..............................................    20.6983
State College, PA............................................    17.3139
Steubenville-Weirton, OH-WV..................................    16.0839
Stockton-Lodi, CA............................................    22.1532
Sumter, SC...................................................    15.0540
Syracuse, NY.................................................    18.3462
Tacoma, WA...................................................    21.2353
Tallahassee, FL..............................................    16.2555
Tampa-St. Petersburg-Clearwater, FL..........................    18.0837
Terre Haute, IN..............................................    16.7989
Texarkana, AR-Texarkana, TX..................................    16.5261
Toledo, OH...................................................    20.2562
Topeka, KS...................................................    19.7210
Trenton, NJ..................................................    20.6250
Tucson, AZ...................................................    17.6383
Tulsa, OK....................................................    15.8281
Tuscaloosa, AL...............................................    15.0679
Tyler, TX....................................................    19.8177
Utica-Rome, NY...............................................    16.4296
Vallejo-Fairfield-Napa, CA...................................    27.2883
Ventura, CA..................................................    22.5369
Victoria, TX.................................................    16.5405
Vineland-Millville-Bridgeton, NJ.............................    19.5394
Visalia-Tulare-Porterville, CA...............................    19.8483
Waco, TX.....................................................    15.1959
Washington, DC-MD-VA-WV......................................    21.1518
Waterloo-Cedar Falls, IA.....................................    17.0208
Wausau, WI...................................................    20.1856
West Palm Beach-Boca Raton, FL...............................    19.9482
Wheeling, OH-WV..............................................    14.7877
Wichita, KS..................................................    18.4305
Wichita Falls, TX............................................    15.7442
Williamsport, PA.............................................    16.5567
Wilmington-Newark, DE-MD.....................................    22.1249
Wilmington, NC...............................................    17.6987
Yakima, WA...................................................    19.6049
Yolo, CA.....................................................    22.3769
York, PA.....................................................    17.8006
Youngstown-Warren, OH........................................    19.0484
Yuba City, CA................................................    20.3622
Yuma, AZ.....................................................    18.5693
------------------------------------------------------------------------



             Table 4e.--Average Hourly Wage for Rural Areas             
------------------------------------------------------------------------
                                                                Average 
                        Nonurban area                            hourly 
                                                                  wage  
------------------------------------------------------------------------
Alabama......................................................    13.9126
Alaska.......................................................    24.3314
Arizona......................................................    15.5017
Arkansas.....................................................    13.6566
California...................................................    19.4927
Colorado.....................................................    15.9126
Connecticut..................................................    24.9480
Delaware.....................................................    18.4636
Florida......................................................    16.9290
Georgia......................................................    14.9414
Hawaii.......................................................    20.0330
Idaho........................................................    16.3016
Illinois.....................................................    14.7630
Indiana......................................................    15.8402
Iowa.........................................................    14.4246
Kansas.......................................................    13.8771
Kentucky.....................................................    15.1633
Louisiana....................................................    14.1714
Maine........................................................    16.2618
Maryland.....................................................    16.4778
Massachusetts................................................    21.0582
Michigan.....................................................    17.2254
Minnesota....................................................    15.9225
Mississippi..................................................    13.2817
Missouri.....................................................    14.1433
Montana......................................................    15.8750
Nebraska.....................................................    14.1342
Nevada.......................................................    17.1588
New Hampshire................................................    19.0608
New Jersey \1\...............................................  .........
New Mexico...................................................    15.3596
New York.....................................................    16.7103
North Carolina...............................................    15.4962
North Dakota.................................................    14.3775
Ohio.........................................................    16.2883

[[Page 27531]]

                                                                        
Oklahoma.....................................................    13.5853
Oregon.......................................................    18.9527
Pennsylvania.................................................    16.5230
Puerto Rico..................................................     8.1591
Rhode Island \1\.............................................  .........
South Carolina...............................................    14.9812
South Dakota.................................................    13.8219
Tennessee....................................................    14.3822
Texas........................................................    14.4957
Utah.........................................................    17.2737
Vermont......................................................    17.4440
Virginia.....................................................    15.1073
Washington...................................................    19.4229
West Virginia................................................    15.4577
Wisconsin....................................................    16.4842
Wyoming......................................................    16.0015
------------------------------------------------------------------------
\1\ All counties within the State are classified as urban.              



  Table 5.--List of Diagnosis Related Groups (DRGS), Relative Weighting Factors, Geometric Mean Length of Stay, 
                 and Length of Stay Outlier Cutoff Points Used in the Prospective Payment System                
----------------------------------------------------------------------------------------------------------------
                                                                   Relative    Geometric  Arithmetic    Outlier 
                                                                    weights    mean LOS    mean LOS    threshold
----------------------------------------------------------------------------------------------------------------
1...........       01  SURG              CRANIOTOMY AGE >17           3.0445         7.7        11.1          32
                                          EXCEPT FOR TRAUMA.                                                    
2...........       01  SURG              CRANIOTOMY FOR TRAUMA        3.0241         8.4        11.5          32
                                          AGE >17.                                                              
3...........       01  SURG              *CRANIOTOMY AGE 0-17...      1.9159        12.7        12.7          37
4...........       01  SURG               SPINAL PROCEDURES.....      2.3330         5.9         9.1          30
5...........       01  SURG               EXTRACRANIAL VASCULAR       1.5149         3.3         4.4          26
                                          PROCEDURES.                                                           
6...........       01  SURG               CARPAL TUNNEL RELEASE.       .7359         2.4         3.4          25
7...........       01  SURG               PERIPH & CRANIAL NERVE      2.4935         8.2        12.6          32
                                          & OTHER NERV SYST PROC                                                
                                          W CC.                                                                 
8...........       01  SURG               PERIPH & CRANIAL NERVE      1.1419         2.8         4.1          27
                                          & OTHER NERV SYST PROC                                                
                                          W/O CC.                                                               
9...........       01  MED                SPINAL DISORDERS &          1.2522         5.4         7.7          29
                                          INJURIES.                                                             
10..........       01  MED                NERVOUS SYSTEM              1.2209         5.7         8.1          30
                                          NEOPLASMS W CC.                                                       
11..........       01  MED                NERVOUS SYSTEM               .8020         3.5         5.0          28
                                          NEOPLASMS W/O CC.                                                     
12..........       01  MED                DEGENERATIVE NERVOUS         .9435         5.4         7.6          29
                                          SYSTEM DISORDERS.                                                     
13..........       01  MED                MULTIPLE SCLEROSIS &         .7799         5.0         6.3          29
                                          CEREBELLAR ATAXIA.                                                    
14..........       01  MED                SPECIFIC                    1.2003         5.5         7.5          30
                                          CEREBROVASCULAR                                                       
                                          DISORDERS EXCEPT TIA.                                                 
15..........       01  MED                TRANSIENT ISCHEMIC           .7232         3.5         4.4          27
                                          ATTACK & PRECEREBRAL                                                  
                                          OCCLUSIONS.                                                           
16..........       01  MED                NONSPECIFIC                 1.0390         4.9         6.6          29
                                          CEREBROVASCULAR                                                       
                                          DISORDERS W CC.                                                       
17..........       01  MED                NONSPECIFIC                  .6308         3.0         4.0          26
                                          CEREBROVASCULAR                                                       
                                          DISORDERS W/O CC.                                                     
18..........       01  MED                CRANIAL & PERIPHERAL         .9345         4.8         6.4          29
                                          NERVE DISORDERS W CC.                                                 
19..........       01  MED                CRANIAL & PERIPHERAL         .6258         3.4         4.5          27
                                          NERVE DISORDERS W/O CC.                                               
20..........       01  MED                NERVOUS SYSTEM              2.4782         8.5        11.5          33
                                          INFECTION EXCEPT VIRAL                                                
                                          MENINGITIS.                                                           
21..........       01  MED                VIRAL MENINGITIS......      1.4972         5.8         7.9          30
22..........       01  MED                HYPERTENSIVE                 .8356         3.8         4.9          28
                                          ENCEPHALOPATHY.                                                       
23..........       01  MED                NONTRAUMATIC STUPOR &        .8053         3.6         5.1          28
                                          COMA.                                                                 
24..........       01  MED                SEIZURE & HEADACHE AGE       .9707         4.2         5.8          28
                                          >17 W CC.                                                             
25..........       01  MED                SEIZURE & HEADACHE AGE       .5791         3.0         3.9          24
                                          >17 W/O CC.                                                           
26..........       01  MED                SEIZURE & HEADACHE AGE       .7381         3.3         4.6          27
                                          0-17.                                                                 
27..........       01  MED                TRAUMATIC STUPOR &          1.3186         3.7         6.3          28
                                          COMA, COMA >1 HR.                                                     
28..........       01  MED                TRAUMATIC STUPOR &          1.2075         4.8         7.2          29
                                          COMA, COMA <1 HR AGE                                                  
                                          >17 W CC.                                                             
29..........       01  MED                TRAUMATIC STUPOR &           .6382         3.0         4.1          27
                                          COMA, COMA <1 HR AGE                                                  
                                          >17 W/O CC.                                                           
30..........       01  MED               *TRAUMATIC STUPOR &           .3240         2.0         2.0          17
                                          COMA, COMA <1 HR AGE 0-                                               
                                          17.                                                                   
31..........       01  MED                CONCUSSION AGE >17 W         .8367         3.7         5.4          28
                                          CC.                                                                   
32..........       01  MED                CONCUSSION AGE >17 W/O       .4887         2.3         3.2          21
                                          CC.                                                                   
33..........       01  MED               *CONCUSSION AGE 0-17...       .2036         1.6         1.6           9
34..........       01  MED                OTHER DISORDERS OF          1.0639         4.6         6.5          29
                                          NERVOUS SYSTEM W CC.                                                  
35..........       01  MED                OTHER DISORDERS OF           .6112         3.2         4.3          27
                                          NERVOUS SYSTEM.                                                       
                                         W/O CC.................                                                
36..........       02  SURG               RETINAL PROCEDURES....       .6156         1.3         1.6           6
37..........       02  SURG               ORBITAL PROCEDURES....       .9280         2.7         4.0          27
38..........       02  SURG               PRIMARY IRIS                 .4217         1.8         2.5          16
                                          PROCEDURES.                                                           
39..........       02  SURG               LENS PROCEDURES WITH         .5162         1.5         2.0          10
                                          OR WITHOUT VITRECTOMY.                                                
40..........       02  SURG               EXTRAOCULAR PROCEDURES       .7094         2.2         3.4          26
                                          EXCEPT ORBIT AGE >17.                                                 
41..........       02  SURG              *EXTRAOCULAR PROCEDURES       .3298         1.6         1.6           7
                                          EXCEPT ORBIT AGE 0-17.                                                
42..........       02  SURG               INTRAOCULAR PROCEDURES       .5821         1.6         2.2          13
                                          EXCEPT RETINA, IRIS &                                                 
                                          LENS.                                                                 
43..........       02  MED                HYPHEMA...............       .4448         3.2         4.1          27

[[Page 27532]]

                                                                                                                
44..........       02  MED                ACUTE MAJOR EYE              .6234         4.7         5.7          29
                                          INFECTIONS.                                                           
45..........       02  MED                NEUROLOGICAL EYE             .6514         3.1         3.8          22
                                          DISORDERS.                                                            
46..........       02  MED                OTHER DISORDERS OF THE       .7595         4.0         5.5          28
                                          EYE AGE >17 W CC.                                                     
47..........       02  MED                OTHER DISORDERS OF THE       .4703         2.8         3.8          27
                                          EYE AGE >17 W/O CC.                                                   
48..........       02  MED               *OTHER DISORDERS OF THE       .2906         2.9         2.9          27
                                          EYE AGE 0-17.                                                         
49..........       03  SURG               MAJOR HEAD & NECK           1.7253         4.1         5.6          28
                                          PROCEDURES.                                                           
50..........       03  SURG               SIALOADENECTOMY.......       .7677         1.7         2.1           9
51..........       03  SURG               SALIVARY GLAND               .7358         1.9         3.0          21
                                          PROCEDURES EXCEPT                                                     
                                          SIALOADENECTOMY.                                                      
52..........       03  SURG               CLEFT LIP & PALATE          1.0971         2.1         3.6          26
                                          REPAIR.                                                               
53..........       03  SURG               SINUS & MASTOID             1.0116         2.2         3.6          26
                                          PROCEDURES AGE >17.                                                   
54..........       03  SURG              *SINUS & MASTOID              .4711         3.2         3.2          22
                                          PROCEDURES AGE 0-17.                                                  
55..........       03  SURG               MISCELLANEOUS EAR,           .7844         1.9         3.0          22
                                          NOSE, MOUTH & THROAT                                                  
                                          PROCEDURES.                                                           
56..........       03  SURG               RHINOPLASTY...........       .8247         2.1         2.8          18
57..........       03  SURG               T&A PROC, EXCEPT             .9413         2.7         4.1          27
                                          TONSILLECTOMY &/OR                                                    
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE >17.                                                              
58..........       03  SURG              *T&A PROC, EXCEPT             .2674         1.5         1.5           4
                                          TONSILLECTOMY &/OR                                                    
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE 0-17.                                                             
59..........       03  SURG               TONSILLECTOMY &/OR           .7521         2.3         3.7          26
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE >17.                                                              
60..........       03  SURG              *TONSILLECTOMY &/OR           .2037         1.5         1.5           4
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE 0-17.                                                             
61..........       03  SURG               MYRINGOTOMY W TUBE          1.2155         2.7         5.3          27
                                          INSERTION AGE >17.                                                    
62..........       03  SURG              *MYRINGOTOMY W TUBE           .2884         1.3         1.3           5
                                          INSERTION AGE 0-17.                                                   
63..........       03  SURG               OTHER EAR, NOSE, MOUTH      1.2217         3.2         4.7          27
                                          & THROAT O.R.                                                         
                                          PROCEDURES.                                                           
64..........       03  MED                EAR, NOSE, MOUTH &          1.1699         4.7         7.5          29
                                          THROAT MALIGNANCY.                                                    
65..........       03  MED                DYSEQUILIBRIUM........       .5192         2.7         3.4          20
66..........       03  MED                EPISTAXIS.............       .5358         2.9         3.6          21
67..........       03  MED                EPIGLOTTITIS..........       .8452         3.4         4.2          24
68..........       03  MED                OTITIS MEDIA & URI AGE       .7075         3.8         4.8          27
                                          >17 W CC.                                                             
69..........       03  MED                OTITIS MEDIA & URI AGE       .5244         3.1         3.8          20
                                          >17 W/O CC.                                                           
70..........       03  MED                OTITIS MEDIA & URI AGE       .3839         2.6         3.1          15
                                          0-17.                                                                 
71..........       03  MED                LARYNGOTRACHEITIS.....       .7959         3.1         4.2          27
72..........       03  MED                NASAL TRAUMA &               .6466         3.1         4.4          27
                                          DEFORMITY.                                                            
73..........       03  MED                OTHER EAR, NOSE, MOUTH       .7483         3.7         5.0          28
                                          & THROAT DIAGNOSES AGE                                                
                                          >17.                                                                  
74..........       03  MED               *OTHER EAR, NOSE, MOUTH       .3276         2.1         2.1          20
                                          & THROAT DIAGNOSES AGE                                                
                                          0-17.                                                                 
75..........       04  SURG               MAJOR CHEST PROCEDURES      3.1904         8.8        11.1          33
76..........       04  SURG               OTHER RESP SYSTEM O.R.      2.6018         9.1        12.5          33
                                          PROCEDURES W CC.                                                      
77..........       04  SURG               OTHER RESP SYSTEM O.R.      1.1577         3.8         5.5          28
                                          PROCEDURES W/O CC.                                                    
78..........       04  MED                PULMONARY EMBOLISM....      1.4291         7.0         8.3          31
79..........       04  MED                RESPIRATORY INFECTIONS      1.6310         7.2         9.3          31
                                          & INFLAMMATIONS AGE                                                   
                                          >17 W CC.                                                             
80..........       04  MED                RESPIRATORY INFECTIONS       .9481         5.4         6.6          29
                                          & INFLAMMATIONS AGE                                                   
                                          >17 W/O CC.                                                           
81..........       04  MED               *RESPIRATORY INFECTIONS       .9716         6.1         6.1          30
                                          & INFLAMMATIONS AGE 0-                                                
                                          17.                                                                   
82..........       04  MED                RESPIRATORY NEOPLASMS.      1.3347         5.7         7.9          30
83..........       04  MED                MAJOR CHEST TRAUMA W         .9738         4.9         6.4          29
                                          CC.                                                                   
84..........       04  MED                MAJOR CHEST TRAUMA W/O       .5335         2.9         3.7          24
                                          CC.                                                                   
85..........       04  MED                PLEURAL EFFUSION W CC.      1.2229         5.6         7.4          30
86..........       04  MED                PLEURAL EFFUSION W/O         .7175         3.4         4.5          27
                                          CC.                                                                   
87..........       04  MED                PULMONARY EDEMA &           1.3587         5.1         6.8          29
                                          RESPIRATORY FAILURE.                                                  
88..........       04  MED                CHRONIC OBSTRUCTIVE          .9831         4.9         6.1          29
                                          PULMONARY DISEASE.                                                    
89..........       04  MED                SIMPLE PNEUMONIA &          1.1158         5.8         7.1          30
                                          PLEURISY AGE >17 W CC.                                                
90..........       04  MED                SIMPLE PNEUMONIA &           .6995         4.3         5.1          24
                                          PLEURISY AGE >17 W/O                                                  
                                          CC.                                                                   
91..........       04  MED                SIMPLE PNEUMONIA &           .7883         3.7         4.7          28
                                          PLEURISY AGE 0-17.                                                    
92..........       04  MED                INTERSTITIAL LUNG           1.2053         5.6         7.3          30
                                          DISEASE W CC.                                                         
93..........       04  MED                INTERSTITIAL LUNG            .7551         4.0         5.0          28
                                          DISEASE W/O CC.                                                       
94..........       04  MED                PNEUMOTHORAX W CC.....      1.1764         5.3         7.1          29
95..........       04  MED                PNEUMOTHORAX W/O CC...       .6035         3.3         4.1          25
96..........       04  MED                BRONCHITIS & ASTHMA          .8254         4.5         5.5          29
                                          AGE >17 W CC.                                                         
97..........       04  MED                BRONCHITIS & ASTHMA          .6013         3.6         4.3          22
                                          AGE >17 W/O CC.                                                       
98..........       04  MED                BRONCHITIS & ASTHMA          .8036         3.1         4.5          27
                                          AGE 0-17.                                                             
99..........       04  MED                RESPIRATORY SIGNS &          .6868         2.7         3.5          22
                                          SYMPTOMS W CC.                                                        
100.........       04  MED                RESPIRATORY SIGNS &          .5126         2.0         2.4          12
                                          SYMPTOMS W/O CC.                                                      
101.........       04  MED                OTHER RESPIRATORY            .8735         3.8         5.2          28
                                          SYSTEM DIAGNOSES W CC.                                                

[[Page 27533]]

                                                                                                                
102.........       04  MED                OTHER RESPIRATORY            .5330         2.4         3.1          20
                                          SYSTEM DIAGNOSES W/O                                                  
                                          CC.                                                                   
103.........       05  SURG               HEART TRANSPLANT......     15.2952        28.1        39.4          52
104.........       05  SURG               CARDIAC VALVE               7.3389        12.0        14.6          36
                                          PROCEDURES W CARDIAC                                                  
                                          CATH.                                                                 
105.........       05  SURG               CARDIAC VALVE               5.6012         9.0        10.9          33
                                          PROCEDURES W/O CARDIAC                                                
                                          CATH.                                                                 
106.........       05  SURG               CORONARY BYPASS W           5.5599        10.3        11.7          34
                                          CARDIAC CATH.                                                         
107.........       05  SURG               CORONARY BYPASS W/O         4.0741         7.8         8.8          32
                                          CARDIAC CATH.                                                         
108.........       05  SURG               OTHER CARDIOTHORACIC        5.9226         9.8        12.6          34
                                          PROCEDURES.                                                           
109.........  .......  ................  NO LONGER VALID........       .0000          .0          .0           0
110.........       05  SURG               MAJOR CARDIOVASCULAR        4.1674         8.2        10.9          32
                                          PROCEDURES W CC.                                                      
111.........       05  SURG               MAJOR CARDIOVASCULAR        2.2863         5.9         6.7          30
                                          PROCEDURES W/O CC.                                                    
112.........       05  SURG               PERCUTANEOUS                2.0962         3.5         4.7          27
                                          CARDIOVASCULAR                                                        
                                          PROCEDURES.                                                           
113.........       05  SURG               AMPUTATION FOR CIRC         2.6919        10.6        14.4          35
                                          SYSTEM DISORDERS                                                      
                                          EXCEPT UPPER LIMB &                                                   
                                          TOE.                                                                  
114.........       05  SURG               UPPER LIMB & TOE            1.5122         6.8         9.5          31
                                          AMPUTATION FOR CIRC                                                   
                                          SYSTEM DISORDERS.                                                     
115.........       05  SURG               PERM CARDIAC PACEMAKER      3.6844         9.1        11.4          33
                                          IMPLANT W AMI, HEART                                                  
                                          FAILURE OR SHOCK.                                                     
116.........       05  SURG               OTH PERM CARDIAC            2.4158         3.9         5.4          28
                                          PACEMAKER IMPLANT OR                                                  
                                          AICD LEAD OR GENERATOR                                                
                                          PROC.                                                                 
117.........       05  SURG               CARDIAC PACEMAKER           1.1774         2.7         4.1          27
                                          REVISION EXCEPT DEVICE                                                
                                          REPLACEMENT.                                                          
118.........       05  SURG               CARDIAC PACEMAKER           1.5782         2.1         3.2          25
                                          DEVICE REPLACEMENT.                                                   
119.........       05  SURG               VEIN LIGATION &             1.1378         3.3         5.5          27
                                          STRIPPING.                                                            
120.........       05  SURG               OTHER CIRCULATORY           1.9321         5.4         9.2          29
                                          SYSTEM O.R. PROCEDURES.                                               
121.........       05  MED                CIRCULATORY DISORDERS       1.6473         6.4         7.8          30
                                          W AMI & C.V. COMP                                                     
                                          DISCH ALIVE.                                                          
122.........       05  MED                CIRCULATORY DISORDERS       1.1617         4.4         5.3          28
                                          W AMI W/O C.V. COMP                                                   
                                          DISCH ALIVE.                                                          
123.........       05  MED                CIRCULATORY DISORDERS       1.4519         2.7         4.7          27
                                          W AMI, EXPIRED.                                                       
124.........       05  MED                CIRCULATORY DISORDERS       1.3264         3.8         5.0          28
                                          EXCEPT AMI, W CARD                                                    
                                          CATH & COMPLEX DIAG.                                                  
125.........       05  MED                CIRCULATORY DISORDERS        .9259         2.3         3.1          20
                                          EXCEPT AMI, W CARD                                                    
                                          CATH W/O COMPLEX DIAG.                                                
126.........       05  MED                ACUTE & SUBACUTE            2.5380        11.0        14.3          35
                                          ENDOCARDITIS.                                                         
127.........       05  MED                HEART FAILURE & SHOCK.      1.0268         4.8         6.2          29
128.........       05  MED                DEEP VEIN                    .7861         5.9         6.7          27
                                          THROMBOPHLEBITIS.                                                     
129.........       05  MED                CARDIAC ARREST,             1.1239         2.0         3.4          26
                                          UNEXPLAINED.                                                          
130.........       05  MED                PERIPHERAL VASCULAR          .9357         5.3         6.7          29
                                          DISORDERS W CC.                                                       
131.........       05  MED                PERIPHERAL VASCULAR          .6045         4.3         5.2          28
                                          DISORDERS W/O CC.                                                     
132.........       05  MED                ATHEROSCLEROSIS W CC..       .6834         2.9         3.6          20
133.........       05  MED                ATHEROSCLEROSIS W/O CC       .5543         2.3         2.9          16
134.........       05  MED                HYPERTENSION..........       .5799         3.0         3.9          23
135.........       05  MED                CARDIAC CONGENITAL &         .8797         3.7         5.0          28
                                          VALVULAR DISORDERS AGE                                                
                                          >17 W CC.                                                             
136.........       05  MED                CARDIAC CONGENITAL &         .5597         2.6         3.2          18
                                          VALVULAR DISORDERS AGE                                                
                                          >17 W/O CC.                                                           
137.........       05  MED               *CARDIAC CONGENITAL &         .7996         3.3         3.3          27
                                          VALVULAR DISORDERS AGE                                                
                                          0-17.                                                                 
138.........       05  MED                CARDIAC ARRHYTHMIA &         .8009         3.5         4.6          27
                                          CONDUCTION DISORDERS W                                                
                                          CC.                                                                   
139.........       05  MED                CARDIAC ARRHYTHMIA &         .4975         2.4         2.9          16
                                          CONDUCTION DISORDERS W/                                               
                                          O CC.                                                                 
140.........       05  MED                ANGINA PECTORIS.......       .6210         2.8         3.5          20
141.........       05  MED                SYNCOPE & COLLAPSE W         .7129         3.4         4.5          27
                                          CC.                                                                   
142.........       05  MED                SYNCOPE & COLLAPSE W/O       .5289         2.5         3.2          18
                                          CC.                                                                   
143.........       05  MED                CHEST PAIN............       .5233         2.1         2.6          14
144.........       05  MED                OTHER CIRCULATORY           1.0850         4.1         5.7          28
                                          SYSTEM DIAGNOSES W CC.                                                
145.........       05  MED                OTHER CIRCULATORY            .6217         2.5         3.3          20
                                          SYSTEM DIAGNOSES W/O                                                  
                                          CC.                                                                   
146.........       06  SURG               RECTAL RESECTION W CC.      2.6401         9.8        11.3          34
147.........       06  SURG               RECTAL RESECTION W/O        1.6115         6.7         7.4          27
                                          CC.                                                                   
148.........       06  SURG               MAJOR SMALL & LARGE         3.3693        11.2        13.4          35
                                          BOWEL PROCEDURES W CC.                                                
149.........       06  SURG               MAJOR SMALL & LARGE         1.6038         7.1         7.7          25
                                          BOWEL PROCEDURES W/O                                                  
                                          CC.                                                                   
150.........       06  SURG               PERITONEAL                  2.6786         9.5        11.7          34
                                          ADHESIOLYSIS W CC.                                                    
151.........       06  SURG               PERITONEAL                  1.2959         5.2         6.5          29
                                          ADHESIOLYSIS W/O CC.                                                  
152.........       06  SURG               MINOR SMALL & LARGE         1.9381         7.6         9.0          32
                                          BOWEL PROCEDURES W CC.                                                
153.........       06  SURG               MINOR SMALL & LARGE         1.1550         5.6         6.2          24
                                          BOWEL PROCEDURES W/O                                                  
                                          CC.                                                                   
154.........       06  SURG               STOMACH, ESOPHAGEAL &       4.1880        11.6        15.0          36
                                          DUODENAL PROCEDURES                                                   
                                          AGE >17 W CC.                                                         

[[Page 27534]]

                                                                                                                
155.........       06  SURG               STOMACH, ESOPHAGEAL &       1.4070         4.6         5.9          29
                                          DUODENAL PROCEDURES                                                   
                                          AGE >17 W/O CC.                                                       
156.........       06  SURG              *STOMACH, ESOPHAGEAL &        .8235         6.0         6.0          30
                                          DUODENAL PROCEDURES                                                   
                                          AGE 0-17.                                                             
157.........       06  SURG               ANAL & STOMAL               1.1331         4.2         5.8          28
                                          PROCEDURES W CC.                                                      
158.........       06  SURG               ANAL & STOMAL                .6106         2.3         2.9          18
                                          PROCEDURES W/O CC.                                                    
159.........       06  SURG               HERNIA PROCEDURES           1.2263         4.0         5.3          28
                                          EXCEPT INGUINAL &                                                     
                                          FEMORAL AGE >17 W CC.                                                 
160.........       06  SURG               HERNIA PROCEDURES            .7032         2.4         3.0          16
                                          EXCEPT INGUINAL &                                                     
                                          FEMORAL AGE >17 W/O CC.                                               
161.........       06  SURG               INGUINAL & FEMORAL          1.0089         3.0         4.4          27
                                          HERNIA PROCEDURES AGE                                                 
                                          >17 W CC.                                                             
162.........       06  SURG               INGUINAL & FEMORAL           .5710         1.7         2.2          11
                                          HERNIA PROCEDURES AGE                                                 
                                          >17 W/O CC.                                                           
163.........       06  SURG              *HERNIA PROCEDURES AGE        .7703         2.1         2.1          11
                                          0-17.                                                                 
164.........       06  SURG               APPENDECTOMY W              2.3299         8.0         9.3          32
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W CC.                                                            
165.........       06  SURG               APPENDECTOMY W              1.2576         5.1         5.8          25
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W/O CC.                                                          
166.........       06  SURG               APPENDECTOMY W/O            1.4512         4.5         5.7          29
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W CC.                                                            
167.........       06  SURG               APPENDECTOMY W/O             .8496         2.8         3.2          15
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W/O CC.                                                          
168.........       03  SURG               MOUTH PROCEDURES W CC.      1.0951         3.2         4.9          27
169.........       03  SURG               MOUTH PROCEDURES W/O         .6828         2.0         2.6          15
                                          CC.                                                                   
170.........       06  SURG               OTHER DIGESTIVE SYSTEM      2.7448         8.5        12.5          33
                                          O.R. PROCEDURES W CC.                                                 
171.........       06  SURG               OTHER DIGESTIVE SYSTEM      1.1297         4.0         5.4          28
                                          O.R. PROCEDURES W/O CC.                                               
172.........       06  MED                DIGESTIVE MALIGNANCY W      1.2934         5.7         8.2          30
                                          CC.                                                                   
173.........       06  MED                DIGESTIVE MALIGNANCY W/      .6736         3.0         4.3          27
                                          O CC.                                                                 
174.........       06  MED                G.I. HEMORRHAGE W CC..       .9962         4.4         5.6          28
175.........       06  MED                G.I. HEMORRHAGE W/O CC       .5492         2.9         3.5          17
176.........       06  MED                COMPLICATED PEPTIC          1.0874         4.7         6.2          29
                                          ULCER.                                                                
177.........       06  MED                UNCOMPLICATED PEPTIC         .8353         4.0         5.0          28
                                          ULCER W CC.                                                           
178.........       06  MED                UNCOMPLICATED PEPTIC         .6122         3.0         3.6          19
                                          ULCER W/O CC.                                                         
179.........       06  MED                INFLAMMATORY BOWEL          1.1219         5.5         7.2          30
                                          DISEASE.                                                              
180.........       06  MED                G.I. OBSTRUCTION W CC.       .9202         4.7         6.1          29
181.........       06  MED                G.I. OBSTRUCTION W/O         .5346         3.3         4.0          22
                                          CC.                                                                   
182.........       06  MED                ESOPHAGITIS, GASTROENT       .7791         3.8         5.0          28
                                          & MISC DIGEST                                                         
                                          DISORDERS AGE >17 W CC.                                               
183.........       06  MED                ESOPHAGITIS, GASTROENT       .5570         2.8         3.5          20
                                          & MISC DIGEST                                                         
                                          DISORDERS AGE >17 W/O                                                 
                                          CC.                                                                   
184.........       06  MED                ESOPHAGITIS, GASTROENT       .5366         2.7         3.8          26
                                          & MISC DIGEST                                                         
                                          DISORDERS AGE 0-17.                                                   
185.........       03  MED                DENTAL & ORAL DIS            .8467         3.7         5.2          28
                                          EXCEPT EXTRACTIONS &                                                  
                                          RESTORATIONS, AGE >17.                                                
186.........       03  MED               *DENTAL & ORAL DIS            .3139         2.9         2.9          23
                                          EXCEPT EXTRACTIONS &                                                  
                                          RESTORATIONS, AGE 0-17.                                               
187.........       03  MED                DENTAL EXTRACTIONS &         .7211         3.1         4.3          27
                                          RESTORATIONS.                                                         
188.........       06  MED                OTHER DIGESTIVE SYSTEM      1.0593         4.5         6.1          28
                                          DIAGNOSES AGE >17 W CC.                                               
189.........       06  MED                OTHER DIGESTIVE SYSTEM       .5629         2.7         3.7          27
                                          DIAGNOSES AGE >17 W/O                                                 
                                          CC.                                                                   
190.........       06  MED                OTHER DIGESTIVE SYSTEM       .8364         3.9         4.9          28
                                          DIAGNOSES AGE 0-17.                                                   
191.........       07  SURG               PANCREAS, LIVER &           4.4227        12.0        16.2          36
                                          SHUNT PROCEDURES W CC.                                                
192.........       07  SURG               PANCREAS, LIVER &           1.8016         6.2         8.0          30
                                          SHUNT PROCEDURES W/O                                                  
                                          CC.                                                                   
193.........       07  SURG               BILIARY TRACT PROC          3.2582        11.4        13.9          35
                                          EXCEPT ONLY CHOLECYST                                                 
                                          W OR W/O C.D.E. W CC.                                                 
194.........       07  SURG               BILIARY TRACT PROC          1.7596         6.8         8.4          31
                                          EXCEPT ONLY CHOLECYST                                                 
                                          W OR W/O C.D.E. W/O CC.                                               
195.........       07  SURG               CHOLECYSTECTOMY W           2.6806         8.8        10.5          33
                                          C.D.E. W CC.                                                          
196.........       07  SURG               CHOLECYSTECTOMY W           1.6252         5.9         6.8          30
                                          C.D.E. W/O CC.                                                        
197.........       07  SURG               CHOLECYSTECTOMY EXCEPT      2.2636         7.5         9.1          31
                                          BY LAPAROSCOPE W/O                                                    
                                          C.D.E. W CC.                                                          
198.........       07  SURG               CHOLECYSTECTOMY EXCEPT      1.1769         4.3         5.0          23
                                          BY LAPAROSCOPE W/O                                                    
                                          C.D.E. W/O CC.                                                        
199.........       07  SURG               HEPATOBILIARY               2.3744         8.3        11.1          32
                                          DIAGNOSTIC PROCEDURE                                                  
                                          FOR MALIGNANCY.                                                       
200.........       07  SURG               HEPATOBILIARY               2.9783         7.6        11.9          32
                                          DIAGNOSTIC PROCEDURE                                                  
                                          FOR NON-MALIGNANCY.                                                   

[[Page 27535]]

                                                                                                                
201.........       07  SURG               OTHER HEPATOBILIARY OR      3.6216        12.1        16.6          36
                                          PANCREAS O.R.                                                         
                                          PROCEDURES.                                                           
202.........       07  MED                CIRRHOSIS & ALCOHOLIC       1.3286         5.7         7.7          30
                                          HEPATITIS.                                                            
203.........       07  MED                MALIGNANCY OF               1.2511         5.5         7.7          30
                                          HEPATOBILIARY SYSTEM                                                  
                                          OR PANCREAS.                                                          
204.........       07  MED                DISORDERS OF PANCREAS       1.2003         5.1         6.7          29
                                          EXCEPT MALIGNANCY.                                                    
205.........       07  MED                DISORDERS OF LIVER          1.2099         5.3         7.3          29
                                          EXCEPT MALIG,CIRR,ALC                                                 
                                          HEPA W CC.                                                            
206.........       07  MED                DISORDERS OF LIVER           .7211         3.6         4.8          28
                                          EXCEPT MALIG,CIRR,ALC                                                 
                                          HEPA W/O CC.                                                          
207.........       07  MED                DISORDERS OF THE            1.0500         4.4         5.8          28
                                          BILIARY TRACT W CC.                                                   
208.........       07  MED                DISORDERS OF THE             .6053         2.6         3.5          21
                                          BILIARY TRACT W/O CC.                                                 
209.........       08  SURG               MAJOR JOINT & LIMB          2.2617         5.9         6.7          23
                                          REATTACHMENT                                                          
                                          PROCEDURES OF LOWER                                                   
                                          EXTREMITY.                                                            
210.........       08  SURG               HIP & FEMUR PROCEDURES      1.8458         7.2         8.5          31
                                          EXCEPT MAJOR JOINT AGE                                                
                                          >17 W CC.                                                             
211.........       08  SURG               HIP & FEMUR PROCEDURES      1.2747         5.6         6.3          23
                                          EXCEPT MAJOR JOINT AGE                                                
                                          >17 W/O CC.                                                           
212.........       08  SURG              *HIP & FEMUR PROCEDURES      1.1483        11.1        11.1          35
                                          EXCEPT MAJOR JOINT AGE                                                
                                          0-17.                                                                 
213.........       08  SURG               AMPUTATION FOR              1.7045         7.0         9.6          31
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONN TISSUE                                                         
                                          DISORDERS.                                                            
214.........       08  SURG               BACK & NECK PROCEDURES      1.9259         4.9         6.5          29
                                          W CC.                                                                 
215.........       08  SURG               BACK & NECK PROCEDURES      1.1135         3.0         3.7          20
                                          W/O CC.                                                               
216.........       08  SURG               BIOPSIES OF                 2.0775         7.9        11.1          32
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONNECTIVE TISSUE.                                                  
217.........       08  SURG               WND DEBRID & SKN GRFT       2.8715        10.2        15.3          34
                                          EXCEPT HAND,FOR                                                       
                                          MUSCSKELET & CONN TISS                                                
                                          DIS.                                                                  
218.........       08  SURG               LOWER EXTREM & HUMER        1.4562         4.8         6.2          29
                                          PROC EXCEPT HIP, FOOT,                                                
                                          FEMUR AGE >17 W CC.                                                   
219.........       08  SURG               LOWER EXTREM & HUMER         .9560         3.1         3.8          19
                                          PROC EXCEPT HIP, FOOT,                                                
                                          FEMUR AGE >17 W/O CC.                                                 
220.........       08  SURG              *LOWER EXTREM & HUMER         .5704         5.3         5.3          29
                                          PROC EXCEPT HIP, FOOT,                                                
                                          FEMUR AGE 0-17.                                                       
221.........       08  SURG               KNEE PROCEDURES W CC..      1.8379         5.8         8.2          30
222.........       08  SURG               KNEE PROCEDURES W/O CC      1.0223         3.1         4.1          27
223.........       08  SURG               MAJOR SHOULDER/ELBOW         .8726         2.2         2.9          16
                                          PROC, OR OTHER UPPER                                                  
                                          EXTREMITY PROC W CC.                                                  
224.........       08  SURG               SHOULDER,ELBOW OR            .7418         1.9         2.3          10
                                          FOREARM PROC,EXC MAJOR                                                
                                          JOINT PROC, W/O CC.                                                   
225.........       08  SURG               FOOT PROCEDURES.......      1.0019         3.3         5.0          27
226.........       08  SURG               SOFT TISSUE PROCEDURES      1.3708         4.4         6.7          28
                                          W CC.                                                                 
227.........       08  SURG               SOFT TISSUE PROCEDURES       .7458         2.3         3.0          18
                                          W/O CC.                                                               
228.........       08  SURG               MAJOR THUMB OR JOINT         .9381         2.3         3.6          26
                                          PROC, OR OTH HAND OR                                                  
                                          WRIST PROC W CC.                                                      
229.........       08  SURG               HAND OR WRIST PROC,          .6495         1.8         2.4          14
                                          EXCEPT MAJOR JOINT                                                    
                                          PROC, W/O CC.                                                         
230.........       08  SURG               LOCAL EXCISION &            1.0592         3.3         5.2          27
                                          REMOVAL OF INT FIX                                                    
                                          DEVICES OF HIP & FEMUR.                                               
231.........       08  SURG               LOCAL EXCISION &            1.2285         3.3         5.1          27
                                          REMOVAL OF INT FIX                                                    
                                          DEVICES EXCEPT HIP &                                                  
                                          FEMUR.                                                                
232.........       08  SURG               ARTHROSCOPY...........      1.0901         2.6         4.5          27
233.........       08  SURG               OTHER MUSCULOSKELET         1.9951         6.4         9.0          30
                                          SYS & CONN TISS O.R.                                                  
                                          PROC W CC.                                                            
234.........       08  SURG               OTHER MUSCULOSKELET         1.0684         3.1         4.2          27
                                          SYS & CONN TISS O.R.                                                  
                                          PROC W/O CC.                                                          
235.........       08  MED                FRACTURES OF FEMUR....       .8353         4.6         6.9          29
236.........       08  MED                FRACTURES OF HIP &           .7613         4.7         6.4          29
                                          PELVIS.                                                               
237.........       08  MED                SPRAINS, STRAINS, &          .5622         3.3         4.4          27
                                          DISLOCATIONS OF HIP,                                                  
                                          PELVIS & THIGH.                                                       
238.........       08  MED                OSTEOMYELITIS.........      1.3857         7.6        10.1          32
239.........       08  MED                PATHOLOGICAL FRACTURES      1.0096         5.8         7.6          30
                                          & MUSCULOSKELETAL &                                                   
                                          CONN TISS MALIGNANCY.                                                 
240.........       08  MED                CONNECTIVE TISSUE           1.2107         5.5         7.5          30
                                          DISORDERS W CC.                                                       
241.........       08  MED                CONNECTIVE TISSUE            .6063         3.5         4.6          28
                                          DISORDERS W/O CC.                                                     
242.........       08  MED                SEPTIC ARTHRITIS......      1.0535         5.8         7.7          30
243.........       08  MED                MEDICAL BACK PROBLEMS.       .7241         4.3         5.6          28
244.........       08  MED                BONE DISEASES &              .7221         4.3         5.8          28
                                          SPECIFIC ARTHROPATHIES                                                
                                          W CC.                                                                 
245.........       08  MED                BONE DISEASES &              .4965         3.2         4.2          27
                                          SPECIFIC ARTHROPATHIES                                                
                                          W/O CC.                                                               

[[Page 27536]]

                                                                                                                
246.........       08  MED                NON-SPECIFIC                 .5901         3.6         4.6          28
                                          ARTHROPATHIES.                                                        
247.........       08  MED                SIGNS & SYMPTOMS OF          .5539         2.9         4.0          27
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONN TISSUE.                                                        
248.........       08  MED                TENDONITIS, MYOSITIS &       .7363         3.9         5.3          28
                                          BURSITIS.                                                             
249.........       08  MED                AFTERCARE,                   .6514         2.9         4.3          27
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONNECTIVE TISSUE.                                                  
250.........       08  MED                FX, SPRN, STRN & DISL        .6808         3.5         4.9          28
                                          OF FOREARM, HAND, FOOT                                                
                                          AGE >17 W CC.                                                         
251.........       08  MED                FX, SPRN, STRN & DISL        .4625         2.5         3.3          22
                                          OF FOREARM, HAND, FOOT                                                
                                          AGE >17 W/O CC.                                                       
252.........       08  MED               *FX, SPRN, STRN & DISL        .2478         1.8         1.8          15
                                          OF FOREARM, HAND, FOOT                                                
                                          AGE 0-17.                                                             
253.........       08  MED               FX, SPRN, STRN & DISL         .7438         4.3         5.8          28
                                          OF UPARM, LOWLEG EX                                                   
                                          FOOT AGE >17 W CC.                                                    
254.........       08  MED                FX, SPRN, STRN & DISL        .4433         2.9         3.9          25
                                          OF UPARM, LOWLEG EX                                                   
                                          FOOT AGE >17 W/O CC.                                                  
255.........       08  MED               *FX, SPRN, STRN & DISL        .2885         2.9         2.9          27
                                          OF UPARM, LOWLEG EX                                                   
                                          FOOT AGE 0-17.                                                        
256.........       08  MED                OTHER MUSCULOSKELETAL        .7724         4.0         5.7          28
                                          SYSTEM & CONNECTIVE                                                   
                                          TISSUE DIAGNOSES.                                                     
257.........       09  SURG               TOTAL MASTECTOMY FOR         .9021         2.8         3.4          17
                                          MALIGNANCY W CC.                                                      
258.........       09  SURG               TOTAL MASTECTOMY FOR         .7099         2.2         2.5          10
                                          MALIGNANCY W/O CC.                                                    
259.........       09  SURG               SUBTOTAL MASTECTOMY          .8673         2.3         3.5          26
                                          FOR MALIGNANCY W CC.                                                  
260.........       09  SURG               SUBTOTAL MASTECTOMY          .6083         1.6         1.9           8
                                          FOR MALIGNANCY W/O CC.                                                
261.........       09  SURG               BREAST PROC FOR NON-         .8342         1.9         2.4          12
                                          MALIGNANCY EXCEPT                                                     
                                          BIOPSY & LOCAL                                                        
                                          EXCISION.                                                             
262.........       09  SURG               BREAST BIOPSY & LOCAL        .7694         2.7         3.9          27
                                          EXCISION FOR NON-                                                     
                                          MALIGNANCY.                                                           
263.........       09  SURG               SKIN GRAFT &/OR DEBRID      2.1157         9.8        13.9          34
                                          FOR SKN ULCER OR                                                      
                                          CELLULITIS W CC.                                                      
264.........       09  SURG               SKIN GRAFT &/OR DEBRID      1.1308         6.0         8.4          30
                                          FOR SKN ULCER OR                                                      
                                          CELLULITIS W/O CC.                                                    
265.........       09  SURG               SKIN GRAFT &/OR DEBRID      1.4949         4.8         7.7          29
                                          EXCEPT FOR SKIN ULCER                                                 
                                          OR CELLULITIS W CC.                                                   
266.........       09  SURG               SKIN GRAFT &/OR DEBRID       .7650         2.6         3.7          27
                                          EXCEPT FOR SKIN ULCER                                                 
                                          OR CELLULITIS W/O CC.                                                 
267.........       09  SURG               PERIANAL & PILONIDAL         .8086         2.7         4.1          27
                                          PROCEDURES.                                                           
268.........       09  SURG               SKIN, SUBCUTANEOUS           .9935         2.5         4.0          27
                                          TISSUE & BREAST                                                       
                                          PLASTIC PROCEDURES.                                                   
269.........       09  SURG               OTHER SKIN, SUBCUT          1.6361         6.2         9.1          30
                                          TISS & BREAST PROC W                                                  
                                          CC.                                                                   
270.........       09  SURG               OTHER SKIN, SUBCUT           .7016         2.4         3.4          26
                                          TISS & BREAST PROC W/O                                                
                                          CC.                                                                   
271.........       09  MED                SKIN ULCERS...........      1.0791         6.6         8.5          31
272.........       09  MED                MAJOR SKIN DISORDERS W      1.0212         5.6         7.5          30
                                          CC.                                                                   
273.........       09  MED                MAJOR SKIN DISORDERS W/      .6358         4.1         5.5          28
                                          O CC.                                                                 
274.........       09  MED                MALIGNANT BREAST            1.0713         5.3         7.8          29
                                          DISORDERS W CC.                                                       
275.........       09  MED                MALIGNANT BREAST             .4984         2.5         3.6          27
                                          DISORDERS W/O CC.                                                     
276.........       09  MED                NON-MALIGANT BREAST          .6443         3.9         5.1          28
                                          DISORDERS.                                                            
277.........       09  MED                CELLULITIS AGE >17 W         .8532         5.5         6.7          29
                                          CC.                                                                   
278.........       09  MED                CELLULITIS AGE >17 W/O       .5775         4.3         5.1          25
                                          CC.                                                                   
279.........       09  MED               *CELLULITIS AGE 0-17...       .7187         4.2         4.2          24
280.........       09  MED                TRAUMA TO THE SKIN,          .6765         3.7         5.1          28
                                          SUBCUT TISS & BREAST                                                  
                                          AGE >17 W CC.                                                         
281.........       09  MED                TRAUMA TO THE SKIN,          .4566         2.7         3.7          24
                                          SUBCUT TISS & BREAST                                                  
                                          AGE >17 W/O CC.                                                       
282.........       09  MED               *TRAUMA TO THE SKIN,          .2508         2.2         2.2          19
                                          SUBCUT TISS & BREAST                                                  
                                          AGE 0-17.                                                             
283.........       09  MED                MINOR SKIN DISORDERS W       .7034         4.1         5.5          28
                                          CC.                                                                   
284.........       09  MED                MINOR SKIN DISORDERS W/      .4375         2.9         3.9          27
                                          O CC.                                                                 
285.........       10  SURG               AMPUTAT OF LOWER LIMB       2.1948         9.5        13.5          34
                                          FOR ENDOCRINE, NUTRIT,                                                
                                          & METABOL DISORDERS.                                                  
286.........       10  SURG               ADRENAL & PITUITARY         2.3858         6.6         8.7          31
                                          PROCEDURES.                                                           
287.........       10  SURG               SKIN GRAFTS & WOUND         1.9722         9.4        13.4          33
                                          DEBRID FOR ENDOC,                                                     
                                          NUTRIT & METAB                                                        
                                          DISORDERS.                                                            
288.........       10  SURG               O.R. PROCEDURES FOR         2.0537         5.3         7.0          29
                                          OBESITY.                                                              
289.........       10  SURG               PARATHYROID PROCEDURES      1.0231         2.7         3.9          27
290.........       10  SURG               THYROID PROCEDURES....       .8827         2.1         2.8          15
291.........       10  SURG               THYROGLOSSAL                 .5221         1.4         1.8           8
                                          PROCEDURES.                                                           
292.........       10  SURG               OTHER ENDOCRINE,            2.6435         8.4        12.7          32
                                          NUTRIT & METAB O.R.                                                   
                                          PROC W CC.                                                            

[[Page 27537]]

                                                                                                                
293.........       10  SURG               OTHER ENDOCRINE,            1.2415         4.4         6.4          28
                                          NUTRIT & METAB O.R.                                                   
                                          PROC W/O CC.                                                          
294.........       10  MED               DIABETES AGE >35.......       .7604         4.3         5.7          28
295.........       10  MED               DIABETES AGE 0-35......       .7171         3.3         4.3          27
296.........       10  MED               NUTRITIONAL & MISC            .8939         4.7         6.4          29
                                          METABOLIC DISORDERS                                                   
                                          AGE >17 W CC.                                                         
297.........       10  MED               NUTRITIONAL & MISC            .5374         3.3         4.3          26
                                          METABOLIC DISORDERS                                                   
                                          AGE >17 W/O CC.                                                       
298.........       10  MED               NUTRITIONAL & MISC            .5036         2.3         3.0          19
                                          METABOLIC DISORDERS                                                   
                                          AGE 0-17.                                                             
299.........       10  MED               INBORN ERRORS OF              .8211         3.8         5.4          28
                                          METABOLISM.                                                           
300.........       10  MED               ENDOCRINE DISORDERS W        1.1005         5.5         7.3          30
                                          CC.                                                                   
301.........       10  MED               ENDOCRINE DISORDERS W/O       .6193         3.4         4.4          27
                                          CC.                                                                   
302.........       11  SURG              KIDNEY TRANSPLANT......      3.9210        10.4        12.3          34
303.........       11  SURG              KIDNEY, URETER & MAJOR       2.6364         8.4        10.2          32
                                          BLADDER PROCEDURES FOR                                                
                                          NEOPLASM.                                                             
304.........       11  SURG              KIDNEY, URETER & MAJOR       2.3744         7.5        10.3          31
                                          BLADDER PROC FOR NON-                                                 
                                          NEOPL W CC.                                                           
305.........       11  SURG               KIDNEY, URETER & MAJOR      1.1797         3.9         4.9          28
                                          BLADDER PROC FOR NON-                                                 
                                          NEOPL W/O CC.                                                         
306.........       11  SURG               PROSTATECTOMY W CC....      1.2243         4.3         6.2          28
307.........       11  SURG               PROSTATECTOMY W/O CC..       .6709         2.4         3.0          15
308.........       11  SURG               MINOR BLADDER               1.5260         4.6         7.0          29
                                          PROCEDURES W CC.                                                      
309.........       11  SURG               MINOR BLADDER                .8858         2.3         3.0          18
                                          PROCEDURES W/O CC.                                                    
310.........       11  SURG               TRANSURETHRAL               1.0013         3.1         4.6          27
                                          PROCEDURES W CC.                                                      
311.........       11  SURG               TRANSURETHRAL                .5663         1.8         2.2          11
                                          PROCEDURES W/O CC.                                                    
312.........       11  SURG               URETHRAL PROCEDURES,         .9118         3.1         4.8          27
                                          AGE >17 W CC.                                                         
313.........       11  SURG               URETHRAL PROCEDURES,         .5211         1.7         2.3          13
                                          AGE >17 W/O CC.                                                       
314.........       11  SURG              *URETHRAL PROCEDURES,         .4835         2.3         2.3          26
                                          AGE 0-17.                                                             
315.........       11  SURG               OTHER KIDNEY & URINARY      2.0606         5.3         9.3          29
                                          TRACT O.R. PROCEDURES.                                                
316.........       11  MED                RENAL FAILURE.........      1.3066         5.4         7.6          29
317.........       11  MED                ADMIT FOR RENAL              .4837         2.0         2.8          19
                                          DIALYSIS.                                                             
318.........       11  MED                KIDNEY & URINARY TRACT      1.1233         5.0         7.2          29
                                          NEOPLASMS W CC.                                                       
319.........       11  MED                KIDNEY & URINARY TRACT       .5801         2.3         3.2          24
                                          NEOPLASMS W/O CC.                                                     
320.........       11  MED                KIDNEY & URINARY TRACT       .9052         5.1         6.4          29
                                          INFECTIONS AGE >17 W                                                  
                                          CC.                                                                   
321.........       11  MED                KIDNEY & URINARY TRACT       .6094         3.9         4.7          24
                                          INFECTIONS AGE >17 W/O                                                
                                          CC.                                                                   
322.........       11  MED                KIDNEY & URINARY TRACT       .5265         3.6         4.4          24
                                          INFECTIONS AGE 0-17.                                                  
323.........       11  MED                URINARY STONES W CC, &/      .7490         2.7         3.6          24
                                          OR ESW LITHOTRIPSY.                                                   
324.........       11  MED                URINARY STONES W/O CC.       .4161         1.7         2.1          10
325.........       11  MED                KIDNEY & URINARY TRACT       .6397         3.4         4.6          27
                                          SIGNS & SYMPTOMS AGE                                                  
                                          >17 W CC.                                                             
326.........       11  MED                KIDNEY & URINARY TRACT       .4346         2.4         3.5          19
                                          SIGNS & SYMPTOMS AGE                                                  
                                          >17 W/O CC.                                                           
327.........       11  MED               *KIDNEY & URINARY TRACT       .2340         3.1         3.1          27
                                          SIGNS & SYMPTOMS AGE 0-                                               
                                          17.                                                                   
328.........       11  MED                URETHRAL STRICTURE AGE       .6929         3.1         4.3          27
                                          >17 W CC.                                                             
329.........       11  MED                URETHRAL STRICTURE AGE       .4536         2.1         2.8          16
                                          >17 W/O CC.                                                           
330.........       11  MED               *URETHRAL STRICTURE AGE       .3114         1.6         1.6           9
                                          0-17.                                                                 
331.........       11  MED                OTHER KIDNEY & URINARY       .9926         4.6         6.2          29
                                          TRACT DIAGNOSES AGE                                                   
                                          >17 W CC.                                                             
332.........       11  MED                OTHER KIDNEY & URINARY       .6170         2.8         3.9          27
                                          TRACT DIAGNOSES AGE                                                   
                                          >17 W/O CC.                                                           
333.........       11  MED                OTHER KIDNEY & URINARY       .8641         4.3         5.9          28
                                          TRACT DIAGNOSES AGE 0-                                                
                                          17.                                                                   
334.........       12  SURG               MAJOR MALE PELVIC           1.6656         5.3         6.0          23
                                          PROCEDURES W CC.                                                      
335.........       12  SURG               MAJOR MALE PELVIC           1.2596         4.1         4.6          17
                                          PROCEDURES W/O CC.                                                    
336.........       12  SURG               TRANSURETHRAL                .8859         3.2         4.1          24
                                          PROSTATECTOMY W CC.                                                   
337.........       12  SURG               TRANSURETHRAL                .6149         2.3         2.7          11
                                          PROSTATECTOMY W/O CC.                                                 
338.........       12  SURG               TESTES PROCEDURES, FOR      1.0534         3.5         5.3          27
                                          MALIGNANCY.                                                           
339.........       12  SURG               TESTES PROCEDURES, NON-     1.0213         3.1         4.9          27
                                          MALIGNANCY AGE >17.                                                   
340.........       12  SURG              *TESTES PROCEDURES, NON-      .2768         2.4         2.4          13
                                          MALIGNANCY AGE 0-17.                                                  
341.........       12  SURG               PENIS PROCEDURES......      1.0701         2.3         3.2          21
342.........       12  SURG               CIRCUMCISION AGE >17..       .7579         2.6         4.0          27
343.........       12  SURG              *CIRCUMCISION AGE 0-17.       .1503         1.7         1.7           6
344.........       12  SURG               OTHER MALE                  1.0086         2.3         3.5          25
                                          REPRODUCTIVE SYSTEM                                                   
                                          O.R. PROCEDURES FOR                                                   
                                          MALIGNANCY.                                                           
345.........       12  SURG               OTHER MALE                   .8396         2.7         4.0          27
                                          REPRODUCTIVE SYSTEM                                                   
                                          O.R. PROC EXCEPT FOR                                                  
                                          MALIGNANCY.                                                           

[[Page 27538]]

                                                                                                                
346.........       12  MED                MALIGNANCY, MALE             .9564         4.8         6.8          29
                                          REPRODUCTIVE SYSTEM, W                                                
                                          CC.                                                                   
347.........       12  MED                MALIGNANCY, MALE             .5161         2.4         3.4          26
                                          REPRODUCTIVE SYSTEM, W/                                               
                                          O CC.                                                                 
348.........       12  MED                BENIGN PROSTATIC             .7102         3.5         4.9          28
                                          HYPERTROPHY W CC.                                                     
349.........       12  MED                BENIGN PROSTATIC             .4048         2.2         3.0          21
                                          HYPERTROPHY W/O CC.                                                   
350.........       12  MED                INFLAMMATION OF THE          .6631         3.9         4.8          24
                                          MALE REPRODUCTIVE                                                     
                                          SYSTEM.                                                               
351.........       12  MED               *STERILIZATION, MALE...       .2309         1.3         1.3           5
352.........       12  MED                OTHER MALE                   .5889         2.8         4.0          27
                                          REPRODUCTIVE SYSTEM                                                   
                                          DIAGNOSES.                                                            
353.........       13  SURG              PELVIC EVISCERATION,         1.9266         6.7         8.4          31
                                          RADICAL HYSTERECTOMY &                                                
                                          RADICAL VULVECTOMY.                                                   
354.........       13  SURG              UTERINE, ADNEXA PROC         1.4646         5.2         6.3          28
                                          FOR NON-OVARIAN/                                                      
                                          ADNEXAL MALIG W CC.                                                   
355.........       13  SURG              UTERINE, ADNEXA PROC          .9065         3.6         3.9          11
                                          FOR NON-OVARIAN/                                                      
                                          ADNEXAL MALIG W/O CC.                                                 
356.........       13  SURG              FEMALE REPRODUCTIVE           .7377         2.6         3.0          12
                                          SYSTEM RECONSTRUCTIVE                                                 
                                          PROCEDURES.                                                           
357.........       13  SURG              UTERINE & ADNEXA PROC        2.3847         8.0         9.8          32
                                          FOR OVARIAN OR ADNEXAL                                                
                                          MALIGNANCY.                                                           
358.........       13  SURG              UTERINE & ADNEXA PROC        1.1713         4.0         4.7          19
                                          FOR NON-MALIGNANCY W                                                  
                                          CC.                                                                   
359.........       13  SURG              UTERINE & ADNEXA PROC         .8289         3.0         3.3          10
                                          FOR NON-MALIGNANCY W/O                                                
                                          CC.                                                                   
360.........       13  SURG               VAGINA, CERVIX & VULVA       .8470         2.9         3.5          17
                                          PROCEDURES.                                                           
361.........       13  SURG               LAPAROSCOPY &               1.1284         2.5         3.5          23
                                          INCISIONAL TUBAL                                                      
                                          INTERRUPTION.                                                         
362.........       13  SURG              *ENDOSCOPIC TUBAL             .2950         1.4         1.4           5
                                          INTERRUPTION.                                                         
363.........       13  SURG               D&C, CONIZATION &            .6887         2.6         3.5          20
                                          RADIO-IMPLANT, FOR                                                    
                                          MALIGNANCY.                                                           
364.........       13  SURG               D&C, CONIZATION EXCEPT       .6823         2.6         3.6          27
                                          FOR MALIGNANCY.                                                       
365.........       13  SURG               OTHER FEMALE                1.7253         5.3         8.1          29
                                          REPRODUCTIVE SYSTEM                                                   
                                          O.R. PROCEDURES.                                                      
366.........       13  MED                MALIGNANCY, FEMALE          1.1948         5.3         7.7          29
                                          REPRODUCTIVE SYSTEM W                                                 
                                          CC.                                                                   
367.........       13  MED                MALIGNANCY, FEMALE           .5173         2.3         3.3          24
                                          REPRODUCTIVE SYSTEM W/                                                
                                          O CC.                                                                 
368.........       13  MED                INFECTIONS, FEMALE          1.0303         5.3         6.9          29
                                          REPRODUCTIVE SYSTEM.                                                  
369.........       13  MED                MENSTRUAL & OTHER            .5504         2.6         3.8          27
                                          FEMALE REPRODUCTIVE                                                   
                                          SYSTEM DISORDERS.                                                     
370.........       14  SURG               CESAREAN SECTION W CC.      1.0444         4.3         5.6          26
371.........       14  SURG               CESAREAN SECTION W/O         .6865         3.2         3.6          11
                                          CC.                                                                   
372.........       14  MED                VAGINAL DELIVERY W           .5471         2.4         3.3          19
                                          COMPLICATING DIAGNOSES.                                               
373.........       14  MED                VAGINAL DELIVERY W/O         .3584         1.6         1.9           7
                                          COMPLICATING DIAGNOSES.                                               
374.........       14  SURG               VAGINAL DELIVERY W           .6083         2.0         2.4           9
                                          STERILIZATION &/OR D&C.                                               
375.........       14  SURG              *VAGINAL DELIVERY W           .6696         4.4         4.4          28
                                          O.R. PROC EXCEPT                                                      
                                          STERIL &/OR D&C.                                                      
376.........       14  MED                POSTPARTUM & POST            .5972         2.4         3.5          26
                                          ABORTION DIAGNOSES W/O                                                
                                          O.R. PROCEDURE.                                                       
377.........       14  SURG               POSTPARTUM & POST            .8078         2.0         3.2          26
                                          ABORTION DIAGNOSES W                                                  
                                          O.R. PROCEDURE.                                                       
378.........       14  MED                ECTOPIC PREGNANCY.....       .8157         2.5         3.0          15
379.........       14  MED                THREATENED ABORTION...       .3573         2.0         2.9          20
380.........       14  MED                ABORTION W/O D&C......       .4988         1.8         2.3          13
381.........       14  SURG               ABORTION W D&C,              .5212         1.6         2.3          14
                                          ASPIRATION CURETTAGE                                                  
                                          OR HYSTEROTOMY.                                                       
382.........       14  MED                FALSE LABOR...........       .2100         1.3         1.7           7
383.........       14  MED                OTHER ANTEPARTUM             .4672         2.8         4.1          27
                                          DIAGNOSES W MEDICAL                                                   
                                          COMPLICATIONS.                                                        
384.........       14  MED                OTHER ANTEPARTUM             .4140         1.9         3.3          24
                                          DIAGNOSES W/O MEDICAL                                                 
                                          COMPLICATIONS.                                                        
385.........       15  ................  *NEONATES, DIED OR           1.3437         1.8         1.8          26
                                          TRANSFERRED TO ANOTHER                                                
                                          ACUTE CARE FACILITY.                                                  
386.........       15  ................  *EXTREME IMMATURITY OR       4.4311        17.9        17.9          42
                                          RESPIRATORY DISTRESS                                                  
                                          SYNDROME, NEONATE.                                                    
387.........       15  ................  *PREMATURITY W MAJOR         3.0264        13.3        13.3          37
                                          PROBLEMS.                                                             
388.........       15  ................  *PREMATURITY W/O MAJOR       1.8261         8.6         8.6          33
                                          PROBLEMS.                                                             
389.........       15                    FULL TERM NEONATE W          2.2247         8.0        10.7          32
                                          MAJOR PROBLEMS.                                                       
390.........       15                    NEONATE W OTHER              1.4188         3.8         5.0          28
                                          SIGNIFICANT PROBLEMS.                                                 
391.........       15  ................  *NORMAL NEWBORN........       .1489         3.1         3.1          11
392.........       16  SURG               SPLENECTOMY AGE >17...      3.2602         8.9        11.7          33
393.........       16  SURG              *SPLENECTOMY AGE 0-17..      1.3163         9.1         9.1          33

[[Page 27539]]

                                                                                                                
394.........       16  SURG               OTHER O.R. PROCEDURES       1.5902         4.5         7.9          28
                                          OF THE BLOOD AND BLOOD                                                
                                          FORMING ORGANS.                                                       
395.........       16  MED                RED BLOOD CELL               .8360         3.9         5.4          28
                                          DISORDERS AGE >17.                                                    
396.........       16  MED                RED BLOOD CELL               .7226         2.8         3.9          27
                                          DISORDERS AGE 0-17.                                                   
397.........       16  MED                COAGULATION DISORDERS.      1.2574         4.4         6.1          28
398.........       16  MED                RETICULOENDOTHELIAL &       1.2106         5.2         6.6          29
                                          IMMUNITY DISORDERS W                                                  
                                          CC.                                                                   
399.........       16  MED                RETICULOENDOTHELIAL &        .7061         3.5         4.4          27
                                          IMMUNITY DISORDERS W/O                                                
                                          CC.                                                                   
400.........       17  SURG               LYMPHOMA & LEUKEMIA W       2.5606         6.6        10.3          31
                                          MAJOR O.R. PROCEDURE.                                                 
401.........       17  SURG               LYMPHOMA & NON-ACUTE        2.4945         8.5        12.4          32
                                          LEUKEMIA W OTHER O.R.                                                 
                                          PROC W CC.                                                            
402.........       17  SURG               LYMPHOMA & NON-ACUTE        1.0299         3.1         4.7          27
                                          LEUKEMIA W OTHER O.R.                                                 
                                          PROC W/O CC.                                                          
403.........       17  MED                LYMPHOMA & NON-ACUTE        1.6925         6.5         9.3          30
                                          LEUKEMIA W CC.                                                        
404.........       17  MED                LYMPHOMA & NON-ACUTE         .8070         3.7         5.1          28
                                          LEUKEMIA W/O CC.                                                      
405.........       17  ................  *ACUTE LEUKEMIA W/O          1.8661         4.9         4.9          29
                                          MAJOR O.R. PROCEDURE                                                  
                                          AGE 0-17.                                                             
406.........       17  SURG               MYELOPROLIF DISORD OR       2.6923         8.1        11.2          32
                                          POORLY DIFF NEOPL W                                                   
                                          MAJ O.R. PROC W CC.                                                   
407.........       17  SURG               MYELOPROLIF DISORD OR       1.1822         3.8         4.9          28
                                          POORLY DIFF NEOPL W                                                   
                                          MAJ O.R. PROC W/O CC.                                                 
408.........       17  SURG               MYELOPROLIF DISORD OR       1.7412         5.0         8.2          29
                                          POORLY DIFF NEOPL W                                                   
                                          OTHER O.R. PROC.                                                      
409.........       17  MED                RADIOTHERAPY..........       .9708         4.7         6.7          29
410.........       17  MED                CHEMOTHERAPY W/O ACUTE       .7524         2.6         3.4          20
                                          LEUKEMIA AS SECONDARY                                                 
                                          DIAGNOSIS.                                                            
411.........       17  MED                HISTORY OF MALIGNANCY        .3780         2.1         2.6          14
                                          W/O ENDOSCOPY.                                                        
412.........       17  MED                HISTORY OF MALIGNANCY        .4133         2.2         3.1          24
                                          W ENDOSCOPY.                                                          
413.........       17  MED                OTHER MYELOPROLIF DIS       1.3263         5.9         8.3          30
                                          OR POORLY DIFF NEOPL                                                  
                                          DIAG W CC.                                                            
414.........       17  MED                OTHER MYELOPROLIF DIS        .7442         3.8         5.2          28
                                          OR POORLY DIFF NEOPL                                                  
                                          DIAG W/O CC.                                                          
415.........       18  SURG               O.R. PROCEDURE FOR          3.4473        11.4        15.7          35
                                          INFECTIOUS & PARASITIC                                                
                                          DISEASES.                                                             
416.........       18  MED                SEPTICEMIA AGE >17....      1.4862         6.2         8.2          30
417.........       18  MED                SEPTICEMIA AGE 0-17...       .7936         3.7         4.7          28
418.........       18  MED                POSTOPERATIVE & POST-        .9678         5.3         6.8          29
                                          TRAUMATIC INFECTIONS.                                                 
419.........       18  MED                FEVER OF UNKNOWN             .8993         4.4         5.7          28
                                          ORIGIN AGE >17 W CC.                                                  
420.........       18  MED                FEVER OF UNKNOWN             .6253         3.5         4.3          24
                                          ORIGIN AGE >17 W/O CC.                                                
421.........       18  MED                VIRAL ILLNESS AGE >17.       .7157         3.6         4.6          28
422.........       18  MED                VIRAL ILLNESS & FEVER        .5217         2.9         3.7          23
                                          OF UNKNOWN ORIGIN AGE                                                 
                                          0-17.                                                                 
423.........       18  MED                OTHER INFECTIOUS &          1.5864         6.3         8.7          30
                                          PARASITIC DISEASES                                                    
                                          DIAGNOSES.                                                            
424.........       19  SURG               O.R. PROCEDURE W            2.3596        10.9        17.8          35
                                          PRINCIPAL DIAGNOSES OF                                                
                                          MENTAL ILLNESS.                                                       
425.........       19  MED                ACUTE ADJUST REACT &         .7078         3.5         4.9          27
                                          DISTURBANCES OF                                                       
                                          PSYCHOSOCIAL                                                          
                                          DYSFUNCTION.                                                          
426.........       19  MED                DEPRESSIVE NEUROSES...       .5715         4.0         5.5          28
427.........       19  MED                NEUROSES EXCEPT              .5544         3.7         5.3          28
                                          DEPRESSIVE.                                                           
428.........       19  MED                DISORDERS OF                 .7352         5.2         8.5          29
                                          PERSONALITY & IMPULSE                                                 
                                          CONTROL.                                                              
429.........       19  MED                ORGANIC DISTURBANCES &       .9063         5.9         8.9          30
                                          MENTAL RETARDATION.                                                   
430.........       19  MED                PSYCHOSES.............       .8422         6.9         9.8          31
431.........       19  MED                CHILDHOOD MENTAL             .6694         5.0         7.5          29
                                          DISORDERS.                                                            
432.........       19  MED                OTHER MENTAL DISORDER        .7228         3.9         6.3          28
                                          DIAGNOSES.                                                            
433.........       20  ................  ALCOHOL/DRUG ABUSE OR         .3007         2.5         3.4          24
                                          DEPENDENCE, LEFT AMA.                                                 
434.........       20  ................  ALC/DRUG ABUSE OR             .7152         4.4         5.8          28
                                          DEPEND, DETOX OR OTH                                                  
                                          SYMPT TREAT W CC.                                                     
435.........       20  ................  ALC/DRUG ABUSE OR             .4178         3.8         4.8          28
                                          DEPEND, DETOX OR OTH                                                  
                                          SYMPT TREAT W/O CC.                                                   
436.........       20  ................  ALC/DRUG DEPENDENCE W         .8199        12.1        14.8          36
                                          REHABILITATION THERAPY.                                               
437.........       20  ................  ALC/DRUG DEPENDENCE,          .7714         9.2        10.9          33
                                          COMBINED REHAB & DETOX                                                
                                          THERAPY.                                                              
438.........  .......  ................  NO LONGER VALID........       .0000          .0          .0           0
439.........       21  SURG               SKIN GRAFTS FOR             1.6153         5.8         8.9          30
                                          INJURIES.                                                             
440.........       21  SURG               WOUND DEBRIDEMENTS FOR      1.7631         6.3         9.8          30
                                          INJURIES.                                                             
441.........       21  SURG               HAND PROCEDURES FOR          .9344         2.4         4.4          26
                                          INJURIES.                                                             
442.........       21  SURG               OTHER O.R. PROCEDURES       2.1659         5.6         8.7          30
                                          FOR INJURIES W CC.                                                    

[[Page 27540]]

                                                                                                                
443.........       21  SURG               OTHER O.R. PROCEDURES        .8851         2.5         3.5          26
                                          FOR INJURIES W/O CC.                                                  
444.........       21  MED                TRAUMATIC INJURY AGE         .7310         4.0         5.3          28
                                          >17 W CC.                                                             
445.........       21  MED                TRAUMATIC INJURY AGE         .4754         2.8         3.8          24
                                          >17 W/O CC.                                                           
446.........       21  MED               *TRAUMATIC INJURY AGE 0-      .2893         2.4         2.4          22
                                          17.                                                                   
447.........       21  MED                ALLERGIC REACTIONS AGE       .4908         2.1         2.8          17
                                          >17.                                                                  
448.........       21  MED                ALLERGIC REACTIONS AGE       .0759         1.0         1.0           1
                                          0-17.                                                                 
449.........       21  MED                POISONING & TOXIC            .7907         3.0         4.4          27
                                          EFFECTS OF DRUGS AGE                                                  
                                          >17 W CC.                                                             
450.........       21  MED                POISONING & TOXIC            .4276         1.8         2.3          13
                                          EFFECTS OF DRUGS AGE                                                  
                                          >17 W/O CC.                                                           
451.........       21  MED               *POISONING & TOXIC            .2569         2.1         2.1          17
                                          EFFECTS OF DRUGS AGE 0-                                               
                                          17.                                                                   
452.........       21  MED                COMPLICATIONS OF             .9448         3.8         5.4          28
                                          TREATMENT W CC.                                                       
453.........       21  MED                COMPLICATIONS OF             .4853         2.4         3.2          20
                                          TREATMENT W/O CC.                                                     
454.........       21  MED                OTHER INJURY,                .8536         3.4         5.1          27
                                          POISONING & TOXIC                                                     
                                          EFFECT DIAG W CC.                                                     
455.........       21  MED                OTHER INJURY,                .4445         2.1         2.8          18
                                          POISONING & TOXIC                                                     
                                          EFFECT DIAG W/O CC.                                                   
456.........       22  ................  BURNS, TRANSFERRED TO        1.8816         4.0         8.4          28
                                          ANOTHER ACUTE CARE                                                    
                                          FACILITY.                                                             
457.........       22  MED                EXTENSIVE BURNS W/O         1.4446         2.4         4.8          26
                                          O.R. PROCEDURE.                                                       
458.........       22  SURG               NON-EXTENSIVE BURNS W       3.5465        12.0        17.0          36
                                          SKIN GRAFT.                                                           
459.........       22  SURG               NON-EXTENSIVE BURNS W       1.6693         6.7        10.3          31
                                          WOUND DEBRIDEMENT OR                                                  
                                          OTHER O.R. PROC.                                                      
460.........       22  MED                NON-EXTENSIVE BURNS W/       .9554         4.6         6.6          29
                                          O O.R. PROCEDURE.                                                     
461.........       23  SURG               O.R. PROC W DIAGNOSES        .9981         2.5         4.9          27
                                          OF OTHER CONTACT W                                                    
                                          HEALTH SERVICES.                                                      
462.........       23  MED                REHABILITATION........      1.4294        11.0        14.0          35
463.........       23  MED                SIGNS & SYMPTOMS W CC.       .7074         3.8         5.2          28
464.........       23  MED                SIGNS & SYMPTOMS W/O         .5040         2.8         3.7          24
                                          CC.                                                                   
465.........       23  MED                AFTERCARE W HISTORY OF       .5611         2.3         3.9          26
                                          MALIGNANCY AS                                                         
                                          SECONDARY DIAGNOSIS.                                                  
466.........       23  MED                AFTERCARE W/O HISTORY        .5728         2.5         4.7          27
                                          OF MALIGNANCY AS                                                      
                                          SECONDARY DIAGNOSIS.                                                  
467.........       23  MED                OTHER FACTORS                .4588         2.4         4.1          26
                                          INFLUENCING HEALTH                                                    
                                          STATUS.                                                               
468.........  .......  ................  EXTENSIVE O.R.               3.5858        10.6        15.3          35
                                          PROCEDURE UNRELATED TO                                                
                                          PRINCIPAL DIAGNOSIS.                                                  
469.........  .......  ................  **PRINCIPAL DIAGNOSIS         .0000          .0          .0           0
                                          INVALID AS DISCHARGE                                                  
                                          DIAGNOSIS.                                                            
470.........  .......  ................  **UNGROUPABLE..........       .0000          .0          .0           0
471.........       08  SURG               BILATERAL OR MULTIPLE       3.6043         6.8         8.0          31
                                          MAJOR JOINT PROCS OF                                                  
                                          LOWER EXTREMITY.                                                      
472.........       22  SURG               EXTENSIVE BURNS W O.R.     11.1357        17.3        30.7          41
                                          PROCEDURE.                                                            
473.........       17  ................  ACUTE LEUKEMIA W/O           3.5669         8.5        14.7          32
                                          MAJOR O.R. PROCEDURE                                                  
                                          AGE >17.                                                              
474.........  .......  ................  NO LONGER VALID........       .0000          .0          .0           0
475.........       04  MED                RESPIRATORY SYSTEM          3.6736         8.6        12.3          33
                                          DIAGNOSIS WITH                                                        
                                          VENTILATOR SUPPORT.                                                   
476.........  .......  SURG              PROSTATIC O.R.               2.2362        10.3        13.8          34
                                          PROCEDURE UNRELATED TO                                                
                                          PRINCIPAL DIAGNOSIS.                                                  
477.........  .......  SURG              NON-EXTENSIVE O.R.           1.7153         5.8         9.2          30
                                          PROCEDURE UNRELATED TO                                                
                                          PRINCIPAL DIAGNOSIS.                                                  
478.........       05  SURG              OTHER VASCULAR               2.2890         5.6         8.3          30
                                          PROCEDURES W CC.                                                      
479.........       05  SURG              OTHER VASCULAR               1.4113         3.5         4.6          27
                                          PROCEDURES W/O CC.                                                    
480.........  .......  SURG              LIVER TRANSPLANT.......     12.8388        22.5        29.7          47
481.........  .......  SURG              BONE MARROW TRANSPLANT.     11.2985        29.1        32.1          53
482.........  .......  SURG              TRACHEOSTOMY FOR FACE,       3.6598        11.4        15.0          35
                                          MOUTH & NECK DIAGNOSES.                                               
483.........  .......  SURG              TRACHEOSTOMY EXCEPT FOR     16.0114        35.9        46.2          60
                                          FACE, MOUTH & NECK                                                    
                                          DIAGNOSES.                                                            
484.........       24  SURG               CRANIOTOMY FOR              5.5711        10.4        15.5          34
                                          MULTIPLE SIGNIFICANT                                                  
                                          TRAUMA.                                                               
485.........       24  SURG               LIMB REATTACHMENT, HIP      3.1619         9.1        11.6          33
                                          AND FEMUR PROC FOR                                                    
                                          MULTIPLE SIGNIFICANT                                                  
                                          TR.                                                                   
486.........       24  SURG               OTHER O.R. PROCEDURES       4.8009         9.0        13.5          33
                                          FOR MULTIPLE                                                          
                                          SIGNIFICANT TRAUMA.                                                   
487.........       24  MED                OTHER MULTIPLE              1.9999         6.1         9.0          30
                                          SIGNIFICANT TRAUMA.                                                   
488.........       25  SURG               HIV W EXTENSIVE O.R.        4.2773        12.9        17.6          37
                                          PROCEDURE.                                                            
489.........       25  MED                HIV W MAJOR RELATED         1.7436         7.0        10.4          31
                                          CONDITION.                                                            
490.........       25  MED                HIV W OR W/O OTHER          1.0106         4.4         6.6          28
                                          RELATED CONDITION.                                                    
491.........       08  SURG               MAJOR JOINT & LIMB          1.6358         3.6         4.3          19
                                          REATTACHMENT                                                          
                                          PROCEDURES OF UPPER                                                   
                                          EXTREMITY.                                                            

[[Page 27541]]

                                                                                                                
492.........       17  MED                CHEMOTHERAPY W ACUTE        4.0624        11.2        17.4          35
                                          LEUKEMIA AS SECONDARY                                                 
                                          DIAGNOSIS.                                                            
493.........       07  SURG               LAPAROSCOPIC                1.7085         4.2         5.9          28
                                          CHOLECYSTECTOMY W/O                                                   
                                          C.D.E. W CC.                                                          
494.........       07  SURG               LAPAROSCOPIC                 .9186         1.8         2.4          15
                                          CHOLECYSTECTOMY W/O                                                   
                                          C.D.E. W/O CC.                                                        
495.........  .......  SURG              LUNG TRANSPLANT........      9.8070        18.4        23.8          42
----------------------------------------------------------------------------------------------------------------
*Medicare data have been supplemented by data from 19 states for low volume DRGS.                               
**DRGS 469 and 470 contain cases which could not be assigned to valid DRGS.                                     
Note: Geometric mean is used only to determine payment for transfer cases.                                      
Note: Arithmetic mean is used only to determine payment for outlier cases.                                      
Note: relative weights are based on Medicare patient data and may not be appropriate for other patients.        



                                         Table 6a.--New Diagnosis Codes                                         
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
    code               Description                   CC               MDC                     DRG               
----------------------------------------------------------------------------------------------------------------
079.6.......  Respiratory syncytial virus   N                             15  387\1\, 389 \1\                   
               (RSV).                                                                                           
                                                                          18  421, 422                          
291.81......  Alcohol withdrawal..........  Y                             20  434, 435, 436, 437                
291.89......  Other specified alcoholic     Y                             20  434, 435, 436, 437                
               psychosis, not elsewhere                                                                         
               classified.                                                                                      
293.84......  Organic anxiety syndrome....  Y                             19  429                               
300.82......  Undifferentiated somatoform   N                             19  427                               
               disorder.                                                                                        
315.32......  Receptive language disorder   N                             19  431                               
               (mixed).                                                                                         
414.04......  Coronary atherosclerosis of   N                              5   132, 133                         
               artery bypass graft.                                                                             
414.05......  Coronary atherosclerosis of   N                              5   132, 133                         
               unspecified type of bypass                                                                       
               graft.                                                                                           
466.11......  Acute bronchiolitis due to    N                              4  96, 97, 98                        
               respiratory syncytial virus                                                                      
               (RSV).                                                                                           
466.19......  Acute bronchiolitis due to    N                              4  96, 97, 98                        
               other infectious organisms.                                                                      
483.1.......  Pneumonia due to Chlamydia..  Y                              4  89, 90, 91                        
                                                                          15  387,\1\ 389\1\                    
574.60......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct with acute                                                                             
               cholecystitis without                                                                            
               mention of obstruction.                                                                          
574.61......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct with acute                                                                             
               cholecystitis with                                                                               
               obstruction.                                                                                     
574.70......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct with other                                                                             
               cholecystitis without                                                                            
               mention of obstruction.                                                                          
574.71......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct with other                                                                             
               cholecystitis with                                                                               
               obstruction.                                                                                     
574.80......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct with acute and                                                                         
               chronic cholecystitis                                                                            
               without mention of                                                                               
               obstruction.                                                                                     
574.81......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct with acute and                                                                         
               chronic cholecystitis with                                                                       
               obstruction.                                                                                     
574.90......  Calculus of gallbladder and   Y                              7   207, 208                         
               bile duct without                                                                                
               cholecystitis without                                                                            
               mention of obstruction.                                                                          
574.91......  Calculus of gallbladder and   Y                              7  207, 208                          
               bile duct without                                                                                
               cholecystitis with                                                                               
               obstruction.                                                                                     
575.10......  Cholecystitis, unspecified..  N                              7   207, 208                         
575.11......  Chronic cholecystitis.......  N                              7   207, 208                         
575.12......  Acute and chronic             Y                              7   207, 208                         
               cholecystitis.                                                                                   
752.51......  Undescended testis..........  N                             12  352                               
752.52......  Retractile testis...........  N                             12  352                               
752.61......  Hypospadias.................  N                             12  352                               
752.62......  Epispadias..................  N                             12  352                               
752.63......  Congenital chordee..........  N                             12  352                               
752.64......  Micropenis..................  N                             12  352                               
752.65......  Hidden penis................  N                             12  352                               
752.69......  Other penile anomalies......  N                             12  352                               
753.20......  Unspecified obstructive       N                             11  331, 332, 333                     
               defect of renal pelvis and                                                                       
               ureter.                                                                                          
753.21......  Congenital obstruction of     N                             11  331, 332, 333                     
               ureteropelvic junction.                                                                          
753.22......  Congenital obstruction of     N                             11  331, 332, 333                     
               ureterovesical junction.                                                                         
753.23......  Congenital ureterocele......  N                             11  331, 332, 333                     
753.29......  Obstructive defects of renal  N                             11  331, 332, 333                     
               pelvis and ureter, not                                                                           
               elsewhere classifed.                                                                             
758.81......  Other conditions due to sex   N                             12  352                               
               chromosome anomalies.                                                                            
                                                                          13  358, 359, 369                     
758.89......  Other conditions due to       N                             12  352                               
               chromosome anomalies, not                                                                        
               elsewhere classified.                                                                            
                                                                          13  358, 359, 369                     
922.31......  Back contusion..............  N                              9  280, 281, 282                     
922.32......  Buttock contusion...........  N                              9  280, 281, 282                     
922.33......  Interscapular region          N                              9  280, 281, 282                     
               contusion.                                                                                       
995.50......  Child abuse, unspecified....  N                             21  454, 455                          
995.51......  Child emotional/              N                             21  454, 455                          
               psychological abuse.                                                                             

[[Page 27542]]

                                                                                                                
995.52......  Child neglect (nutritional).  N                             21  454, 455                          
995.53......  Child sexual abuse..........  N                             21  454, 455                          
995.54......  Child physical abuse........  N                             21  454, 455                          
995.55......  Shaken infant syndrome......  N                             21  454, 455                          
995.59......  Child maltreatment syndrome,  N                             21  454, 455                          
               not elsewhere classified.                                                                        
995.80......  Adult maltreatment,           N                             21  454, 455                          
               unspecified.                                                                                     
995.82......  Adult emotional/              N                             21  454, 455                          
               psychological abuse.                                                                             
995.83......  Adult sexual abuse..........  N                             21  454, 455                          
995.84......  Adult neglect (nutritional).  N                             21  454, 455                          
995.85......  Other adult abuse and         N                             21  454, 455                          
               neglect.                                                                                         
998.11......  Hemorrhage complicating a     Y                             21  452, 453                          
               procedure.                                                                                       
998.12......  Hematoma complicating a       Y                             21  452, 453                          
               procedure.                                                                                       
998.13......  Seroma complicating a         Y                             21  452, 453                          
               procedure.                                                                                       
998.51......  Infected postoperative        Y                             18  418                               
               seroma.                                                                                          
998.59......  Other postoperative           Y                             18  418                               
               infection.                                                                                       
998.83......  Non-healing surgical wound..  Y                             21  452, 453                          
V15.41......  History of physical abuse...  N                             23  467                               
V15.42......  History of emotional abuse..  N                             23  467                               
V15.49......  Psychological trauma, not     N                             23  467                               
               elsewhere classified.                                                                            
V61.10......  Counseling for marital and    N                             23  467                               
               partner problems,                                                                                
               unspecified.                                                                                     
V61.11......  Counseling for victim of      N                             23  467                               
               spousal and partner abuse.                                                                       
V61.12......  Counseling for perpetrator    N                             23  467                               
               of spousal and partner                                                                           
               abuse.                                                                                           
V61.22......  Counseling for perpetrator    N                             23  467                               
               of parental child abuse.                                                                         
V62.83......  Counseling for perpetrator    N                             23  467                               
               of physical/sexual abuse.                                                                        
V66.7.......  Encounter for palliative      N                             23  467                               
               care.                                                                                            
----------------------------------------------------------------------------------------------------------------
\1\ Diagnosis code is classified as a ``major problem'' in these DRGs.                                          



                                         Table 6b.--New Procedure Codes                                         
----------------------------------------------------------------------------------------------------------------
 Procedure                                                                                                      
    code              Description                    OR               MDC                     DRG               
----------------------------------------------------------------------------------------------------------------
36.17......  Abdominal-coronary artery      Y                              5  106, 107                          
              bypass.                                                                                           
39.90......  Insertion of non-coronary      N                     ..........  ..................................
              artery stent or stents.                                                                           
47.01......  Laparoscopic appendectomy....  Y                              6  164, 165, 166, 167                
47.09......  Other appendectomy...........  Y                              6  164, 165, 166, 167                
47.11......  Laparoscopic incidental        Y                             13  365                               
              appendectomy.                                                                                     
                                                                          21  442, 443                          
                                                                          24  486                               
47.19......  Other incidental appendectomy  Y                             13  365                               
                                                                          21  442, 443                          
                                                                          24  486                               
51.21......  Other partial cholecystectomy  Y                              7   193, 194                         
                                                                          17  400, 406,                         
                                                                          17  407                               
                                                                          21  442, 443                          
                                                                          24  486                               
51.24......  Laparoscopic partial           Y                              7   193, 194                         
              cholecystectomy.                                                                                  
                                                                          17  400, 406,                         
                                                                          17  407,                              
                                                                          21  442, 443                          
                                                                          24  486                               
52.84......  Autotransplantation of cells   N                     ..........  ..................................
              of Islets of Langerhans.                                                                          
52.85......  Allotransplantation of cells   N                     ..........  ..................................
              of Islets of Langerhans.                                                                          
52.86......  Transplantation of cells of    N                     ..........  ..................................
              Islets of Langerhans, not                                                                         
              otherwise specified.                                                                              
54.51......  Laparoscopic lysis of          Y                              6   150, 151                         
              peritoneal adhesions.                                        7  201                               
                                                                          13  365                               
                                                                          21  442, 443                          
                                                                          24  486                               
54.59......  Other lysis of peritoneal      Y                              6   150, 151                         
              adhesions.                                                                                        
                                                                           7  201                               
                                                                          13  365                               
                                                                          21  442, 443                          
                                                                          24  486                               
59.03......  Laparoscopic lysis of          Y                             11  303, 304, 305                     
              perirenal or periureteral                                   12  344, 345                          
              adhesions.                                                                                        
                                                                          13  365                               
                                                                          17  400                               
                                                                          17  406, 407                          

[[Page 27543]]

                                                                                                                
                                                                          21  442, 443                          
                                                                          24  486                               
59.12......  Laparoscopic lysis of          Y                             11  308, 309                          
              perivesical adhesions.                                      12  344, 345                          
                                                                          13  365                               
                                                                          17  400                               
                                                                          17  406, 407                          
                                                                          21  442, 443                          
                                                                          24  486                               
65.01......  Laparoscopic oophorotomy.....  Y                             13  354, 355, 357, 358, 359           
65.09......  Other oophorotomy............  Y                             13  354, 355, 357, 358, 359           
65.13......  Laparoscopic biopsy of ovary.  Y                             13  354, 355, 357, 358, 359           
65.14......  Other laparoscopic diagnostic  Y                             13  354, 355, 357, 358, 359           
              procedures on ovaries.                                                                            
65.23......  Laparoscopic marsupialization  Y                             13  354, 355, 357, 358, 359           
              of ovarian cyst.                                                                                  
65.24......  Laparoscopic wedge resection   Y                             10  292, 293                          
              of ovary.                                                                                         
                                                                          13  354, 355, 357, 358, 359           
65.25......  Other laparoscopic local       Y                             13   354, 355, 357, 358, 359          
              excision or destruction of                                                                        
              ovary.                                                                                            
65.31......  Laparoscopic unilateral        Y                             13  354, 355, 357, 358, 359           
              oophorectomy.                                                                                     
65.39......  Other unilateral oophorectomy  Y                             13  354, 355, 357, 358, 359           
65.41......  Laparoscopic unilateral        Y                             13  354, 355, 357, 358, 359           
              salpingo-oophorectomy.                                                                            
65.49......  Other unilateral salpingo-     Y                             13  354, 355, 357, 358, 359           
              oophorectomy.                                                                                     
65.53......  Laparoscopic removal of both   Y                              9  269, 270                          
              ovaries at same operative                                                                         
              episode.                                                                                          
                                                                          13  354, 355,                         
                                                                          13  357, 358, 359                     
65.54......  Laparoscopic removal of        Y                              9  269, 270                          
              remaining ovary.                                                                                  
                                                                          13  354, 355,                         
                                                                          13  357, 358, 359                     
65.63......  Laparoscopic removal of both   Y                              9  269, 270                          
              ovaries and tubes at same                                                                         
              operative episode.                                                                                
                                                                          13  354, 355,                         
                                                                          13  357, 358, 359                     
65.64......  Laparoscopic removal of        Y                             13  354, 355, 357, 358, 359           
              remaining ovary and tube.                                                                         
65.74......  Laparoscopic simple suture of  Y                             13  354, 355,                         
              ovary.                                                                                            
                                                                          13  357, 358,                         
                                                                          21  359                               
                                                                          24  442, 443, 486                     
65.75......  Laparoscopic reimplantation    Y                             13  354, 355,                         
              of ovary.                                                                                         
                                                                          13  357, 358,                         
                                                                          21  359                               
                                                                          24  442, 443, 486                     
65.76......  Laparoscopic salpingo-         Y                             13  354, 355,                         
              oophoroplasty.                                                                                    
                                                                          13  357, 358,                         
                                                                          21  359                               
                                                                          24  442, 443, 486                     
65.81......  Laparoscopic lysis of          Y                             13  354, 355,                         
              adhesions of ovary and                                      13  357, 358,                         
              fallopian tube.                                             21  359                               
                                                                          24  442, 443, 486                     
65.89......  Other lysis of adhesions of    Y                             13  354, 355,                         
              ovary and fallopian tube.                                                                         
                                                                          13  357, 358,                         
                                                                          21  359                               
                                                                          24  442, 443, 486                     
68.23......  Endometrial ablation.........  Y                             13  354, 355, 357, 358, 359           
68.51......  Laparoscopically assisted      Y                             13  354, 355,                         
              vaginal hysterectomy (LAVH).                                13  357, 358,                         
                                                                          14  359, 375                          
68.59......  Other vaginal hysterectomy...  Y                             13  354, 355,                         
                                                                          13  357, 358,                         
                                                                          14  359, 375                          
----------------------------------------------------------------------------------------------------------------



[[Page 27544]]



                                        Table 6c.--Table Diagnosis Codes                                        
----------------------------------------------------------------------------------------------------------------
Diagnosis code           Description                   CC              MDC                    DRG               
----------------------------------------------------------------------------------------------------------------
291.8.........  Other specified alcoholic     Y                            20  434, 435, 436, 437               
                 psychosis.                                                                                     
466.1.........  Acute bronchiolitis.........  N                             4  96, 97, 98                       
575.1.........  Other cholecystitis.........  N                             7  207, 208                         
752.5.........  Undescended testicle........  N                            12  352                              
752.6.........  Hypospadias and epispadias..  N                            12  352                              
753.2.........  Obstructive defects of renal  N                            11  331, 332, 333                    
                 pelvis and ureter.                                                                             
758.8.........  Other conditions due to sex   N                            12  352                              
                 chromosome anomalies.                                     13  358, 359, 369                    
922.3.........  Contusion of back...........  N                             9  280, 281,                        
                                                                            9  282                              
                                              ...................          24  484, 486, 487                    
995.5.........  Child maltreatment syndrome.  N                            21  454, 455                         
                                                                                                                
998.1.........  Hemorrhage or hematoma        Y                            15  387 \1\, 389 \1\                 
                 complicating a procedure.                                                                      
                                                                           21  452, 453                         
998.5.........  Postoperative infection.....  Y                            15  387 \1\, 389 \1\                 
                                                                           18  418                              
V15.4.........  Psychological trauma........  N                            23  467                              
V61.1.........  Marital problems............  N                            23  467                              
----------------------------------------------------------------------------------------------------------------
\1\ Diagnosis code is classified as a ``major problem'' in these DRGs.                                          


                                       Table 6d.--Invalid Procedure Codes                                       
----------------------------------------------------------------------------------------------------------------
Procedure code           Description                   OR              MDC                    DRG               
----------------------------------------------------------------------------------------------------------------
47.0..........  Appendectomy................  Y                             6  164, 165, 166, 167               
47.1..........  Incidental appendectomy.....  Y                            13  365,                             
                                                                           21  442, 443,                        
                                                                           24  486                              
54.5..........  Lysis of peritoneal           Y                             6  150, 151                         
                 adhesions.                                                                                     
                                                                            7  201                              
                                                                           13  365                              
                                                                           21  442, 443                         
                                                                           24   486                             
59.01.........  Ureterolysis with freeing or  Y                            11  303, 304,                        
                 repositioning of ureter for                                                                    
                 retroperitoneal fibrosis.                                                                      
                                                                           11  305                              
                                                                           12  344, 345                         
                                                                           13  365                              
                                                                           17  400, 406,                        
                                                                           17  407                              
                                                                           21  442, 443                         
                                                                           24  486                              
65.0..........  Oophorotomy.................  Y                            13  354, 355, 357, 358, 359          
65.3..........  Unilateral oophorectomy.....   Y                           13  354, 355, 357, 358, 359          
65.4..........  Unilateral salpingo-          Y                            13  354, 355, 357, 358, 359          
                 oophorectomy.                                                                                  
65.8..........  Lysis of adhesions of ovary   Y                            13  354, 355,                        
                 and fallopian tube.                                                                            
                                                                           13  357, 358,                        
                                                                           21  359                              
                                                                           24  442, 443, 486                    
68.5..........  Vaginal hysterectomy........  Y                            13  354, 355,                        
                                                                           13  357, 358,                        
                                                                           13  359                              
                                                                           14  375                              
----------------------------------------------------------------------------------------------------------------


                                    Table 6e.--Revised Diagnosis Code Titles                                    
----------------------------------------------------------------------------------------------------------------
Diagnosis                                                                                                       
   code             Description                     CC               MDC                     DRG                
----------------------------------------------------------------------------------------------------------------
414.00...  Coronary atherosclerosis of    N                               5  132, 133                           
            unspecified type of vessel,                                                                         
            native or graft.                                                                                    
995.81...  Adult physical abuse.........  N                              21  454, 455                           
997.60...  Amputation stump               N                               8  256                                
            complication, unspecified                                                                           
            complication.                                                                                       
997.61...  Amputation stump               N                               8  256                                
            complication, neuroma of                                                                            
            amputation stump.                                                                                   
997.62...  Amputation stump               Y                               8  256                                
            complication, infection                                                                             
            (chronic).                                                                                          
997.69...  Amputation stump               N                               8  256                                
            complication, not elsewhere                                                                         
            classified.                                                                                         

[[Page 27545]]

                                                                                                                
V61.20...  Counseling for parent-child    N                              23  467                                
            problem, unspecified.                                                                               
V61.21...  Counseling for victim of       N                              23  467                                
            child abuse.                                                                                        
V67.4....  Follow-up examination,         N                              23  465, 466                           
            following treatment of                                                                              
            healed fracture.                                                                                    
----------------------------------------------------------------------------------------------------------------



                                    Table 6f.--Revised Procedure Code Titles                                    
----------------------------------------------------------------------------------------------------------------
 Procedure                                                                                                      
    code              Description                    OR               MDC                     DRG               
----------------------------------------------------------------------------------------------------------------
59.11......  Other lysis of perivesical     Y                             11  308, 309                          
              adhesions.                                                  12  344, 345                          
                                                                          13  365                               
                                                                          17  400, 406,                         
                                                                          17  407                               
                                                                          21  442, 443                          
                                                                          24  486                               
65.51......  Other removal of both ovaries  Y                              9  269, 270                          
              at same operative episode.                                  13  354, 355                          
                                                                          13  357, 358, 359                     
65.52......  Other removal of remaining     Y                              9  269, 270                          
              ovary.                                                      13  354, 355                          
                                                                          13  357, 358, 359                     
65.61......  Other removal of both ovaries  Y                              9  269, 270                          
              and tubes at same operative                                 13  354, 355,                         
              episode.                                                    13  357, 358, 359                     
65.62......  Other removal of remaining     Y                             13  354, 355, 357, 358, 359           
              ovary and tube.                                                                                   
65.71......  Other simple suture of ovary.  Y                             13  354, 355,                         
                                                                          13  357, 358,                         
                                                                          13   359                              
                                                                          21  442, 443                          
                                                                          24   486                              
65.72......  Other reimplantation of ovary  Y                             13  354, 355,                         
                                                                          13  357, 358,                         
                                                                          21   359                              
                                                                          24  442, 443, 486                     
65.73......  Other salpingo-oophoroplasty.  Y                             11  308, 309,                         
                                                                          12  344, 345                          
                                                                          13  365                               
                                                                          17  400, 406,                         
                                                                          17  407                               
                                                                          21  442, 443                          
                                                                          24  486                               
----------------------------------------------------------------------------------------------------------------


[[Page 27546]]



             Table 6g.--Additions to the CC Exclusions List             
                            Page 1 of 5 Pages                           
   CCs that are added to the list are in Table 6G--Additions to the CC  
    Exclusions List. Each of the principal diagnoses is shown with an   
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*0011       00844   *00800     00844  *0085      00844  *01133   *01182 
  00841     00845     00841    00845    00841    00845    4831     4831 
  00842     00846     00842    00846    00842    00846  *01134   *01183 
  00843     00847     00843    00847    00843    00847    4831     4831 
  00844   *0061       00844  *00841     00844  *0088    *01135   *01184 
  00845     00841     00845    00841    00845    00841    4831     4831 
  00846     00842     00846    00842    00846    00842  *01136   *01185 
  00847     00843     00847    00843    00847    00843    4831     4831 
*0020       00844   *00801     00844  *00861     00844  *01140   *01186 
  00841     00845     00841    00845    00841    00845    4831     4831 
  00842     00846     00842    00846    00842    00846  *01141   *01190 
  00843     00847     00843    00847    00843    00847    4831     4831 
  00844   *0062       00844  *00842     00844  *0090    *01142   *01191 
  00845     00841     00845    00841    00845    00841    4831     4831 
  00846     00842     00846    00842    00846    00842  *01143   *01192 
  00847     00843     00847    00843    00847    00843    4831     4831 
*0029       00844   *00802     00844  *00862     00844  *01144   *01193 
  00841     00845     00841    00845    00841    00845    4831     4831 
  00842     00846     00842    00846    00842    00846  *01145   *01194 
  00843     00847     00843    00847    00843    00847    4831     4831 
  00844   *0069       00844  *00843     00844  *01100   *01146   *01195 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01101   *01150   *01196 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0030       00844   *00803     00844  *00863   *01102   *01151   *01200 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01103   *01152   *01201 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0071       00844  *00844     00844  *01104   *01153   *01202 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01105   *01154   *01203 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0049       00844   *00804     00844  *00864   *01106   *01155   *01204 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01110   *01156   *01205 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0072       00844  *00845     00844  *01111   *01160   *01206 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01112   *01161   *01210 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0050       00844   *00809     00844  *00865   *01113   *01162   *01211 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01114   *01163   *01212 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0073       00844  *00846     00844  *01115   *01164   *01213 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01116   *01165   *01214 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0051       00844   *0081      00844  *00866   *01120   *01166   *01215 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01121   *01170   *01216 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0078       00844  *00847     00844  *01122   *01171   *01280 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01123   *01172   *01281 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0052       00844   *0082      00844  *00867   *01124   *01173   *01282 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01125   *01174   *01283 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0079       00844  *00849     00844  *01126   *01175   *01284 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01130   *01176   *01285 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0060       00844   *0083      00844  *00869   *01131   *01180   *01286 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01132   *01181   *01480 
  00843     00847     00843    00847    00843    4831     4831   00841  
------------------------------------------------------------------------


[[Page 27547]]



                            Page 2 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  00842     4831      29382    29284  *29212     29383    29614    29181
  00843   *11285      29383    29289    29181    29384    29634    29189
  00844     00841     29384    2929     29189    7105     29644    29384
  00845     00842     30300    29381    29384  *29389     29654  *30420 
  00846     00843     30301    29382  *2922      29181    29664    29181
  00847     00844     30302    29383    29181    29189    2980     29189
*01481      00845     30390    29384    29189    29384    2983     29384
  00841     00846     30391    30300    29384  *2939      2984   *30421 
  00842     00847     30392    30301  *29281     29181    29900    29181
  00843   *11505      30400    30302    29181    29189    29910    29189
  00844     4831      30401    30390    29189    29384    29980    29384
  00845   *11515      30402    30391    29384  *2940      29990  *30422 
  00846     4831      30410    30392  *29282     29181  *30300     29181
  00847   *11595      30411    30400    29181    29189    29181    29189
*01482      4831      30412    30401    29189    29384    29189    29384
  00841   *1221       30420    30402    29384  *2941      29384  *30423 
  00842     4831      30421    30410  *29283     29181  *30301     29181
  00843   *129                 30411    29181    29189    29181    29189
                     30422                                              
  00844     00841     30440    30412    29189    29384    29189    29384
  00845     00842     30441    30420    29384  *2948      29384  *30430 
  00846     00843     30442    30421  *29284     29181  *30302     29181
  00847     00844     30450    30422    29181    29189    29181    29189
*01483      00845     30451    30440    29189    29384    29189    29384
  00841     00846     30452    30441    29384  *2949      29384  *30431 
  00842     00847     30460    30442  *29289     29181  *30303     29181
  00843   *1304       30461    30450    29181    29189    29181    29189
  00844     4831      30462    30451    29189    29384    29189    29384
  00845   *1363       30470    30452    29384  *30082     29384  *30432 
  00846     4831      30471    30460  *2929      29500  *30390     29181
  00847   *2910       30472    30461    29181    29501    29181    29189
*01484      29181     30480    30462    29189    29502    29189    29384
  00841     29189     30481    30470    29384    29503    29384  *30433 
  00842     29384     30482    30471  *2930      29504  *30391     29181
  00843   *2911       30490    30472    29181    29510    29181    29189
  00844     29181     30491    30480    29189    29511    29189    29384
  00845     29189     30492    30481    29384    29512    29384  *30440 
  00846     29384     30500    30482  *2931      29513  *30392     29181
  00847   *2912       30501    30490    29181    29514    29181    29189
*01485      29181     30502    30491    29189    29521    29189    29384
  00841     29189     30530    30492    29384    29522    29384  *30441 
  00842     29384     30531    30500  *29381     29523  *30393     29181
  00843   *2913       30532    30501    29181    29524    29181    29189
  00844     29181     30540    30502    29189    29530    29189    29384
  00845     29189     30541    30530    29384    29531    29384  *30442 
  00846     29384     30542    30531  *29382     29532  *30400     29181
  00847   *2914       30550    30532    29181    29533    29181    29189
*01486      29181     30551    30540    29189    29534    29189    29384
  00841     29189     30552    30541    29384    29540    29384  *30443 
  00842     29384     30560    30542  *29383     29541  *30401     29181
  00843   *2915       30561    30550    29181    29542    29181    29189
  00844     29181     30562    30551    29189    29543    29189    29384
  00845     29189     30570    30552    29384    29544    29384  *30450 
  00846     29384     30571    30560  *29384     29560  *30402     29181
  00847   *29181      30572    30561    2910     29561    29181    29189
*01790      2910      30590    30562    2911     29562    29189    29384
  4831      2911      30591    30570    2912     29563    29384  *30451 
*01791      2912      30592    30571    2913     29564  *30403     29181
  4831      2913    *29189     30572    2914     29570    29181    29189
*01792      2914      2910     30590    29181    29571    29189    29384
  4831      29181     2911     30591    29189    29572    29384  *30452 
*01793      29189     2912     30592    2919     29573  *30410     29181
  4831      2919      2913   *2919      2920     29574    29181    29189
*01794      2920      2914     29181    29211    29580    29189    29384
  4831      29211     29181    29189    29212    29581    29384  *30453 
*01795      29212     29189    29384    2922     29582  *30411     29181
  4831      2922      2919   *2920      29281    29583    29181    29189
*01796      29281     2920     29181    29282    29584    29189    29384
  4831      29282     29211    29189    29283    29590    29384  *30460 
*0212       29283     29212    29384    29284    29591  *30412     29181
  4831      29284     2922   *29211     29289    29592    29181    29189
*0310       29289     29281    29181    2929     29593    29189    29384
  4831      2929      29282    29189    29381    29594    29384  *30461 
*0391       29381     29283    29384    29382    29604  *30413     29181
------------------------------------------------------------------------


[[Page 27548]]



                            Page 3 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  29189     29384   *30562     29532  *48239     01180    5078     4831 
  29384   *30520      29181    29533    4831     01181    5080   *5062  
*30462      29181     29189    29534  *4824      01182    5081     4831 
  29181     29189     29384    29540    4831     01183    5171   *5063  
  29189     29384   *30563     29541  *48281     01184  *4838      4831 
  29384   *30521      29181    29542    4831     01185    4831   *5064  
*30463      29181     29189    29543  *48282     01186  *4841      4831 
  29181     29189     29384    29544    4831     01190    4831   *5069  
  29189     29384   *30570     29560  *48283     01191  *4843      4831 
  29384   *30522      29181    29561    4831     01192    4831   *5070  
*30470      29181     29189    29562  *48289     01193  *4845      4831 
  29181     29189     29384    29563    4831     01194    4831   *5071  
  29189     29384   *30571     29564  *4829      01195  *4846      4831 
  29384   *30523      29181    29570    4831     01196    4831   *5078  
*30471      29181     29189    29571  *4830      01200  *4847      4831 
  29181     29189     29384    29572    4831     01201    4831   *5080  
  29189     29384   *30572     29573  *4831      01202  *4848      4831 
  29384   *30530      29181    29574    01100    01203    4831   *5081  
*30472      29181     29189    29580    01101    01204  *485        4831
  29181     29189     29384    29581    01102    01205    4831   *5088  
  29189     29384   *30573     29582    01103    01206  *486        4831
  29384   *30531      29181    29583    01104    01210    4831   *5089  
*30473      29181     29189    29584    01105    01211  *4870      4831 
  29181     29189     29384    29590    01106    01212    4831   *5171  
  29189     29384   *30580     29591    01110    01213  *4871      4831 
  29384   *30532      29181    29592    01111    01214    4831   *5178  
*30480      29181     29189    29593    01112    01215  *4878      4831 
  29181     29189     29384    29594    01113    01216    00841  *51889 
  29189     29384   *30581     29604    01114    0310     00842    4831 
  29384   *30533      29181    29614    01115    11505    00843  *5198  
*30481      29181     29189    29634    01116    11515    00844    4831 
  29181     29189     29384    29644    01120    1304     00845  *5199  
  29189     29384   *30582     29654    01121    1363     00846    4831 
  29384   *30540      29181    29664    01122    481      00847  *53081 
*30482      29181     29189    2980     01123    4820   *494            
                                                                  99811 
  29181     29189     29384    2983     01124    4821     4831     99812
  29189     29384   *30583     2984     01125    4822   *4950      99813
  29384   *30541      29181    29900    01126    48230    4831   *53082 
*30483      29181     29189    29910    01130    48231  *4951      99811
  29181     29189     29384    29980    01131    48232    4831     99812
  29189     29384   *30590     29990    01132    48239  *4952      99813
  29384   *30542      29181  *4560      01133    4824     4831   *53083 
*30490      29181     29189    99811    01134    48281  *4953      99811
  29181     29189     29384    99812    01135    48282    4831     99812
  29189     29384   *30591     99813    01136    48283  *4954      99813
  29384   *30543      29181  *45620     01140    48289    4831   *53089 
*30491      29181     29189    99811    01141    4829   *4955      99811
  29181     29189     29384    99812    01142    4830     4831     99812
  29189     29384   *30592     99813    01143    4831   *4956      99813
  29384   *30550      29181  *4800      01144    4838     4831   *53100 
*30492      29181     29189    4831     01145    4841   *4957      99811
  29181     29189     29384  *4801      01146    4843     4831     99812
  29189     29384   *30593     4831     01150    4845   *4958      99813
  29384   *30551      29181  *4802      01151    4846     4831   *53101 
*30493      29181     29189    4831     01152    4847   *4959      99811
  29181     29189     29384  *4808      01153    4848     4831     99812
  29189     29384   *31532     4831     01154    485    *496            
                                                                  99813 
  29384   *30552      29500  *4809      01155    486      4831   *53120 
*30500      29181     29501    4831     01156    4870   *500            
                                                                  99811 
  29181     29189     29502  *481                4950     4831     99812
                                       01160                            
  29189     29384     29503    4831     01161    4951   *501            
                                                                  99813 
  29384   *30553      29504  *4820      01162    4952     4831   *53121 
*30501      29181     29510    4831     01163    4953   *502            
                                                                  99811 
  29181     29189     29511  *4821      01164    4954     4831     99812
  29189     29384     29512    4831     01165    4955   *503            
                                                                  99813 
  29384   *30560      29513  *4822      01166    4956     4831   *53140 
*30502      29181     29514    4831     01170    4957   *504            
                                                                  99811 
  29181     29189     29521  *48230     01171    4958     4831     99812
  29189     29384     29522    4831     01172    4959   *505            
                                                                  99813 
  29384   *30561      29523  *48231     01173    5060     4831   *53141 
*30503      29181     29524    4831     01174    5061   *5060      99811
  29181     29189     29530  *48232     01175    5070     4831     99812
  29189     29384     29531    4831     01176    5071   *5061      99813
------------------------------------------------------------------------


[[Page 27549]]



                            Page 4 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*53160      99811     00846    00843    00844    57431    57400    57400
  99811     99812     00847    00844    00845    57440    57401    57401
  99812     99813   *53783     00845    00846    57441    57410    57410
  99813   *53401      99811    00846    00847    57450    57411    57411
*53161      99811     99812    00847  *56202     57451    57421    57421
  99811     99812     99813  *5565      99811    57460    57430    57430
  99812     99813   *5550      00841    99812    57461    57431    57431
  99813   *53420      00841    00842    99813    57470    57440    57440
*53200      99811     00842    00843  *56203     57471    57441    57441
  99811     99812     00843    00844    99811    57490    57450    57450
  99812     99813     00844    00845    99812    57491    57451    57451
  99813   *53421      00845    00846    99813    5750     57470    57460
*53201      99811     00846    00847  *56212   *57461     57471    57461
  99811     99812     00847  *5566      99811    57400    57480    57470
  99812     99813   *5551      00841    99812    57401    57481    57471
  99813   *53440      00841    00842    99813    57410    57490    57480
*53220      99811     00842    00843  *56213     57411    57491    57481
  99811     99812     00843    00844    99811    57421    5750     57490
  99812     99813     00844    00845    99812    57430  *57490     57491
  99813   *53441      00845    00846    99813    57431    57430    5750 
*53221      99811     00846    00847  *5641      57440    57431    57512
  99811     99812     00847  *5568      00841    57441    57440  *57512 
  99812     99813   *5552      00841    00842    57450    57441    57400
  99813   *53460      00841    00842    00843    57451    57450    57401
*53240      99811     00842    00843    00844    57460    57451    57410
  99811     99812     00843    00844    00845    57461    57470    57411
  99812     99813     00844    00845    00846    57470    57471    57421
  99813   *53461      00845    00846    00847    57471    57490    57430
*53241      99811     00846    00847  *5693      57490    57491    57431
  99811     99812     00847  *5569      99811    57491  *57491     57440
  99812     99813   *5559      00841    99812    5750     57430    57441
  99813   *53501      00841    00842    99813  *57470     57431    57450
*53260      99811     00842    00843  *56985     57430    57440    57451
  99811     99812     00843    00844    99811    57431    57441    57460
  99812     99813     00844    00845    99812    57440    57450    57461
  99813   *53511      00845    00846    99813    57441    57451    57470
*53261      99811     00846    00847  *57430     57450    57470    57471
  99811     99812     00847  *5570      57470    57451    57471    57480
  99812     99813   *5560      00841    57471    57470    57490    57481
  99813   *53521      00841    00842    57490    57471    57491    57490
*53300      99811     00842    00843    57491    57490  *5750      57491
  99811     99812     00843    00844  *57431     57491    57460    5750 
  99812     99813     00844    00845    57470  *57471     57461    57512
  99813   *53531      00845    00846    57471    57430    57470  *5759  
*53301      99811     00846    00847    57490    57431    57471    57460
  99811     99812     00847  *5571      57491    57440    57480    57461
  99812     99813   *5561      00841  *57440     57441    57481    57480
  99813   *53541      00841    00842    57470    57450    57490    57481
*53320      99811     00842    00843    57471    57451    57491    57512
  99811     99812     00843    00844    57490    57470    57512  *5768  
  99812     99813     00844    00845    57491    57471  *57510     57460
  99813   *53551      00845    00846  *57441     57490    57400    57461
*53321      99811     00846    00847    57470    57491    57401    57470
  99811     99812     00847  *5579      57471  *57480     57410    57471
  99812     99813   *5562      00841    57490    57400    57411    57480
  99813   *53561      00841    00842    57491    57401    57421    57481
*53340      99811     00842    00843  *57450     57410    57430    57490
  99811     99812     00843    00844    57470    57411    57431    57491
  99812     99813     00844    00845    57471    57421    57440    57512
  99813   *5363       00845    00846    57490    57430    57441  *5769  
*53341      00841     00846    00847    57491    57431    57450    57460
  99811     00842     00847  *5582    *57451     57440    57451    57461
  99812     00843   *5563      00841    57470    57441    57460    57470
  99813     00844     00841    00842    57471    57450    57461    57471
*53360      00845     00842    00843    57490    57451    57470    57480
  99811     00846     00843    00844    57491    57470    57471    57481
  99812     00847     00844    00845  *57460     57471    57480    57490
  99813   *5368       00845    00846    57400    57480    57481    57491
*53361      00841     00846    00847    57401    57481    57490    57512
  99811     00842     00847  *5589      57410    57490    57491  *5780  
  99812     00843   *5564      00841    57411    57491    5750     99811
  99813     00844     00841    00842    57421    5750     57512    99812
*53400      00845     00842    00843    57430  *57481   *57511     99813
------------------------------------------------------------------------


[[Page 27550]]



                            Page 5 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*5781       5996      00841    99812    9971                            
  99811     78820     00842    99813    9972                            
  99812     78829     00843  *99813     9973                            
  99813   *75329      00844    9585     9974                            
*5789       5845      00845    9954     9975                            
  99811     5846      00846    9980     99762                           
  99812     5847      00847    99811    99799                           
  99813     5849    *7758      99812    9980                            
*74861      585       00841    99813    9982                            
  4831      5996      00842  *99851     9983                            
*75261      78820     00843    99851    9984                            
  5970      78829     00844    99859    9986                            
  5981    *7724       00845  *99859     9987                            
  5982      99811     00846    99851    99883                           
  5994      99812     00847    99859    99889                           
*75262      99813   *7759    *99881     9989                            
  5970    *7750       00841    99811  *99889                            
  5981      00841     00842    99812    99811                           
  5982      00842     00843    99813    99812                           
  5994      00843     00844    99851    99813                           
*75263      00844     00845    99859    99851                           
  5970      00845     00846    99883    99859                           
  5981      00846     00847  *99883     99883                           
  5982      00847   *7775      9580   *9989                             
  5994    *7751       00841    9581     99811                           
*75264      00841     00842    9582     99812                           
  5970      00842     00843    9583     99813                           
  5981      00843     00844    9584     99851                           
  5982      00844     00845    9585     99859                           
  5994      00845     00846    9587     99883                           
*75265      00846     00847    9954                                     
  5970      00847   *7778      99600                                    
  5981    *7752       00841    99601                                    
  5982      00841     00842    99602                                    
  5994      00842     00843    99603                                    
*75269      00843     00844    99604                                    
  5970      00844     00845    99609                                    
  5981      00845     00846    9961                                     
  5982      00846     00847    9962                                     
  5994      00847   *7903      99630                                    
*75320    *7753       29181    99639                                    
  5845      00841     29189    9964                                     
  5846      00842     29384    99660                                    
  5847      00843   *99791     99661                                    
  5849      00844     99811    99662                                    
  585       00845     99812    99663                                    
  5996      00846     99813    99664                                    
  78820     00847     99851    99665                                    
  78829   *7754       99859    99666                                    
*75321      00841     99883    99667                                    
  5845      00842   *99799     99669                                    
  5846      00843     99811    99670                                    
  5847      00844     99812    99671                                    
  5849      00845     99813    99672                                    
  585       00846     99851    99673                                    
  5996      00847     99859    99674                                    
  78820   *7755       99883    99675                                    
  78829     00841   *9980      99676                                    
*75322      00842     99811    99677                                    
  5845      00843     99812    99678                                    
  5846      00844     99813    99679                                    
  5847      00845   *99811     99690                                    
  5849      00846     9585     99691                                    
  585       00847     9954     99692                                    
  5996    *7756       9980     99693                                    
  78820     00841     99811    99694                                    
  78829     00842     99812    99695                                    
*75323      00843     99813    99696                                    
  5845      00844   *99812     99699                                    
  5846      00845     9585     99700                                    
  5847      00846     9954     99701                                    
  5849      00847     9980     99702                                    
  585     *7757       99811    99709                                    
------------------------------------------------------------------------


[[Page 27551]]



             Table 6h.--Deletions to the CC Exclusions List             
                            Page 1 of 1 Page                            
 CCs that are deleted from the list are in Table 6H--Deletions to the CC
    Exclusions List. Each of the principal diagnoses is shown with an   
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*2910       30502     2918     2918     2918     9981     57421         
  2918      30530   *30303   *30471   *30563   *53261     57430         
*2911       30531     2918     2918     2918     9981     57431         
  2918      30532   *30390   *30472   *30570   *53300     57440         
*2912       30540     2918     2918     2918     9981     57441         
  2918      30541   *30391   *30473   *30571   *53301     57450         
*2913       30542     2918     2918     2918     9981     57451         
  2918      30550   *30392   *30480   *30572   *53320     5750          
*2914       30551     2918     2918     2918     9981   *5780           
  2918      30552   *30393   *30481   *30573   *53321     9981          
*2915       30560     2918     2918     2918     9981   *5781           
  2918      30561   *30400   *30482   *30580   *53340     9981          
*2918       30562     2918     2918     2918     9981   *5789           
  2910      30570   *30401   *30483   *30581   *53341     9981          
  2911      30571     2918     2918     2918     9981   *7526           
  2912      30572   *30402   *30490   *30582   *53360     5970          
  2913      30590     2918     2918     2918     9981     5981          
  2914      30591   *30403   *30491   *30583   *53361     5982          
  2918      30592     2918     2918     2918     9981     5994          
  2919    *2919     *30410   *30492   *30590   *53400   *7532           
  2920      2918      2918     2918     2918     9981     5845          
  29211   *2920     *30411   *30493   *30591   *53401     5846          
  29212     2918      2918     2918     2918     9981     5847          
  2922    *29211    *30412   *30500   *30592   *53420     5849          
  29281     2918      2918     2918     2918     9981     585           
  29282   *29212    *30413   *30501   *30593   *53421     5996          
  29283     2918      2918     2918     2918     9981     78820         
  29284   *2922     *30420   *30502   *4560    *53440     78829         
  29289     2918      2918     2918     9981     9981   *7724           
  2929    *29281    *30421   *30503   *45620   *53441     9981          
  29381     2918      2918     2918     9981     9981   *7903           
  29382   *29282    *30422   *30520   *53081   *53460     2918          
  29383     2918      2918     2918     9981     9981   *99791          
  30300   *29283    *30423   *30521   *53082   *53461     9981          
  30301     2918      2918     2918     9981     9981     9985          
  30302   *29284    *30430   *30522   *53083   *53501   *99799          
  30390     2918      2918     2918     9981     9981     9981          
  30391   *29289    *30431   *30523   *53089   *53511     9985          
  30392     2918      2918     2918     9981     9981   *9980           
  30400   *2929     *30432   *30530   *53100   *53521     9981          
  30401     2918      2918     2918     9981     9981   *9981           
  30402   *2930     *30433   *30531   *53101   *53531     9585          
  30410     2918      2918     2918     9981     9981     9954          
  30411   *2931     *30440   *30532   *53120   *53541     9980          
  30412     2918      2918     2918     9981     9981     9981          
  30420   *29381    *30441   *30533   *53121   *53551   *9985           
  30421     2918      2918     2918     9981     9981     9985          
  30422   *29382    *30442   *30540   *53140   *53561   *99881          
  30440     2918      2918     2918     9981     9981     9981          
  30441   *29383    *30443   *30541   *53141   *53783     9985          
  30442     2918      2918     2918     9981     9981   *99889          
  30450   *29389    *30450   *30542   *53160   *56202     9981          
  30451     2918      2918     2918     9981     9981     9985          
  30452   *2939     *30451   *30543   *53161   *56203   *9989           
  30460     2918      2918     2918     9981     9981     9981          
  30461   *2940     *30452   *30550   *53200   *56212     9985          
  30462     2918      2918     2918     9981     9981                   
  30470   *2941     30453    *30551   *53201   *56213                   
  30471     2918      2918     2918     9981     9981                   
  30472   *2948     *30460   *30552   *53220   *5693                    
  30480     2918      2918     2918     9981     9981                   
  30481   *2949     *30461   *30553   *53221   *56985                   
  30482     2918      2918     2918     9981     9981                   
  30490   *30300    *30462   *30560   *53240   *5751                    
  30491     2918      2918     2918     9981     57400                  
  30492   *30301    *30463   *30561   *53241     57401                  
  30500     2918      2918     2918     9981     57410                  
  30501   *30302    *30470   *30562   *53260     57411                  
------------------------------------------------------------------------


[[Page 27552]]



                                   Table 7a.--Medicare Prospective Payment System Selected Percentile Lengths of Stay                                   
                                                        [FY95 MEDPAR Update 12/95 Grouper V13.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           32723         11.0372               3               4               8              14              23
2.......................................            6165         11.5178               3               5               8              14              23
3.......................................               1         10.0000              10              10              10              10              10
4.......................................            5866          9.1202               2               3               6              11              20
5.......................................           95896          4.4060               2               2               3               5               9
6.......................................             444          3.3581               1               1               2               4               7
7.......................................           10526         12.5752               3               5               8              14              25
8.......................................            2248          4.1348               1               1               3               5               9
9.......................................            1655          7.5287               2               3               5               9              16
10......................................           19194          7.9610               2               3               6              10              16
11......................................            2866          4.9215               1               2               4               6              10
12......................................           23355          7.5868               2               3               5               9              14
13......................................            5969          6.2406               2               4               5               7              11
14......................................          351205          7.4178               2               3               6               9              14
15......................................          138882          4.4367               1               2               3               5               8
16......................................           11877          6.5858               2               3               5               8              12
17......................................            3217          4.0258               1               2               3               5               7
18......................................           22783          6.3682               2               3               5               8              12
19......................................            7433          4.5271               1               2               4               6               8
20......................................            5990         11.2129               3               5               9              15              22
21......................................            1114          7.8905               2               3               6              10              16
22......................................            2585          4.8584               2               2               4               6               9
23......................................            5720          5.0336               1               2               4               6              10
24......................................           53620          5.8059               2               3               4               7              11
25......................................           21830          3.8592               1               2               3               5               7
26......................................              46          4.6087               1               2               3               6              10
27......................................            3475          6.2774               1               1               4               7              15
28......................................           11179          7.0945               1               3               5               9              14
29......................................            3684          4.0581               1               2               3               5               8
31......................................            3167          5.4436               1               2               4               6              10
32......................................            1723          3.1573               1               1               2               4               6
34......................................           16272          6.4700               2               3               5               8              12
35......................................            3648          4.2928               1               2               3               5               8
36......................................            9010          1.5970               1               1               1               2               3
37......................................            1878          4.0213               1               1               3               5               8
38......................................             234          2.5385               1               1               2               3               5
39......................................            3289          1.9663               1               1               1               2               4
40......................................            2779          3.3843               1               1               2               4               7
42......................................            7351          2.2049               1               1               1               2               5
43......................................              97          4.0928               1               2               3               5               8
44......................................            1614          5.7038               2               3               5               7              10
45......................................            2412          3.8163               1               2               3               5               7
46......................................            2952          5.4814               1               2               4               7              10
47......................................            1333          3.7802               1               2               3               5               7
49......................................            2139          5.6396               1               2               4               7              11
50......................................            3347          2.1138               1               1               2               2               3
51......................................             308          2.9870               1               1               1               3               7
52......................................              78          3.6282               1               1               2               3               8
53......................................            3340          3.5548               1               1               2               4               8
54......................................               1          1.0000               1               1               1               1               1
55......................................            1924          2.9569               1               1               2               3               6
56......................................             704          2.7514               1               1               2               3               6
57......................................             637          4.0973               1               1               3               5               8
59......................................              88          3.7045               1               1               2               4               7
60......................................               3          1.0000               1               1               1               1               1
61......................................             217          5.2535               1               1               2               7              14
62......................................               1          2.0000               2               2               2               2               2
63......................................            3996          4.6652               1               2               3               5              10
64......................................            3351          7.5067               1               2               5               9              16
65......................................           29525          3.4147               1               2               3               4               6
66......................................            6479          3.5658               1               2               3               4               6
67......................................             510          4.2039               2               2               3               5               8
68......................................            9443          4.7605               2               3               4               6               9
69......................................            3062          3.7606               1               2               3               5               7
70......................................              30          3.0667               1               2               3               3               5
71......................................              90          4.1556               1               2               3               5               8
72......................................             561          4.3529               1               2               3               5               9
73......................................            6017          4.9493               1               2               4               6               9
75......................................           39401         11.1088               4               6               8              14              21
76......................................           38785         12.4555               3               6              10              15              24

[[Page 27553]]

                                                                                                                                                        
77......................................            2331          5.5268               1               2               4               8              12
78......................................           28979          8.2306               4               5               7              10              13
79......................................          207606          9.2488               3               5               7              11              17
80......................................            8932          6.6160               2               4               5               8              12
81......................................               9          7.2222               1               2               6              11              12
82......................................           68573          7.8881               2               3               6              10              16
83......................................            6976          6.3817               2               3               5               8              12
84......................................            1430          3.7217               1               2               3               5               7
85......................................           18398          7.3317               2               3               6               9              14
86......................................            1372          4.5117               1               2               4               6               9
87......................................           58612          6.7959               1               3               6               9              13
88......................................          345365          6.0658               2               3               5               7              11
89......................................          415072          7.0754               3               4               6               9              12
90......................................           40306          5.1392               2               3               4               6               9
91......................................              50          4.5800               2               2               3               6               8
92......................................           11849          7.2524               2               4               6               9              13
93......................................            1262          4.9374               1               3               4               6               9
94......................................           12531          7.0527               2               3               5               9              14
95......................................            1365          4.1341               1               2               3               5               8
96......................................           60887          5.5101               2               3               5               7              10
97......................................           25835          4.2614               2               2               4               5               7
98......................................              19          4.4737               1               1               3               6              10
99......................................           25241          3.4914               1               2               3               4               7
100.....................................           10191          2.4244               1               1               2               3               4
101.....................................           19810          5.1725               1               2               4               7              10
102.....................................            4399          3.1298               1               1               2               4               6
103.....................................             445         39.3528              10              15              29              53              80
104.....................................           22854         14.5510               6               8              12              18              26
105.....................................           19821         10.9286               5               7               9              13              19
106.....................................           96166         11.7202               6               8              10              14              19
107.....................................           61255          8.8314               5               6               7              10              14
108.....................................            6560         12.5834               4               7              10              15              23
110.....................................           59173         10.7795               3               6               9              13              20
111.....................................            5800          6.6512               3               5               6               8              10
112.....................................          191511          4.6987               1               2               4               6               9
113.....................................           45003         14.3320               4               6              10              17              28
114.....................................            8788          9.4467               2               4               7              12              18
115.....................................           10395         11.3715               4               6               9              14              20
116.....................................           81298          5.4177               1               2               4               7              11
117.....................................            4482          4.1142               1               1               2               5               8
118.....................................            6687          3.1952               1               1               2               4               7
119.....................................            1705          5.4985               1               1               3               7              13
120.....................................           40465          9.1860               1               2               6              12              21
121.....................................          158928          7.4120               2               4               6               9              13
122.....................................           87089          5.0036               1               3               5               6               9
123.....................................           46281          4.6510               1               1               2               6              11
124.....................................          138564          4.8885               1               2               4               6               9
125.....................................           59232          3.0694               1               1               2               4               6
126.....................................            4619         13.9985               4               7              11              17              29
127.....................................          670461          6.2113               2               3               5               8              12
128.....................................           19612          6.7259               3               4               6               8              11
129.....................................            4584          3.4271               1               1               1               4               9
130.....................................           91826          6.6818               2               4               6               8              12
131.....................................           25592          5.1808               1               3               5               7               8
132.....................................          127274          3.5716               1               2               3               4               6
133.....................................            5813          2.9696               1               1               2               4               5
134.....................................           28493          3.9142               1               2               3               5               7
135.....................................            7141          4.9779               1               2               4               6               9
136.....................................            1014          3.2209               1               2               3               4               6
138.....................................          195932          4.5466               1               2               3               6               8
139.....................................           67345          2.9337               1               1               2               4               5
140.....................................          175930          3.4831               1               2               3               4               6
141.....................................           76111          4.4923               1               2               3               5               8
142.....................................           35701          3.1999               1               2               2               4               6
143.....................................          132318          2.6077               1               1               2               3               5
144.....................................           66761          5.6816               1               2               4               7              11
145.....................................            6735          3.2413               1               1               2               4               6
146.....................................            8626         11.2570               6               7               9              13              18
147.....................................            1624          7.3651               4               6               7               9              11
148.....................................          140141         13.4097               6               8              11              16              24

[[Page 27554]]

                                                                                                                                                        
149.....................................           15769          7.7194               4               6               7               9              11
150.....................................           22516         11.6884               4               7              10              14              21
151.....................................            4518          6.4748               2               4               6               8              11
152.....................................            4469          9.0257               4               6               8              10              15
153.....................................            1710          6.1655               3               4               6               8               9
154.....................................           35661         14.9524               5               8              12              18              28
155.....................................            4557          5.8824               2               3               5               8              10
156.....................................               4         15.7500               4               4              10              22              27
157.....................................           11419          5.7824               1               2               4               7              11
158.....................................            5082          2.9124               1               1               2               4               6
159.....................................           17132          5.3155               1               2               4               7              10
160.....................................            9971          2.9553               1               1               2               4               5
161.....................................           14786          4.3655               1               2               3               5               9
162.....................................            7990          2.1914               1               1               2               3               4
163.....................................               5          2.2000               1               1               1               3               5
164.....................................            4995          9.2993               4               6               8              11              16
165.....................................            1674          5.7575               3               4               5               7               9
166.....................................            3283          5.7286               2               3               4               7              10
167.....................................            2284          3.2439               1               2               3               4               6
168.....................................            1739          4.8562               1               2               3               6              10
169.....................................            1025          2.5473               1               1               2               3               5
170.....................................           12463         12.4436               2               5               9              15              25
171.....................................            1157          5.4105               1               2               4               7              11
172.....................................           30820          8.1481               2               3               6              10              16
173.....................................            2188          4.2870               1               2               3               5               9
174.....................................          231782          5.5456               2               3               4               7              10
175.....................................           23071          3.5073               1               2               3               4               6
176.....................................           16011          6.1346               2               3               5               7              11
177.....................................           11991          4.9873               2               3               4               6               9
178.....................................            4174          3.6195               1               2               3               5               7
179.....................................           11198          7.1657               2               4               6               9              14
180.....................................           79145          6.0471               2               3               5               7              11
181.....................................           22152          3.9606               1               2               3               5               7
182.....................................          226099          4.9591               2               2               4               6               9
183.....................................           72147          3.4552               1               2               3               4               6
184.....................................              67          3.7463               1               2               2               4               6
185.....................................            3804          5.1966               1               2               4               6              10
186.....................................               1          2.0000               2               2               2               2               2
187.....................................             832          4.2524               1               2               3               6               8
188.....................................           61112          6.1262               2               3               5               8              12
189.....................................            7787          3.6773               1               1               3               5               7
190.....................................              62          4.8548               1               3               4               6              10
191.....................................           10459         16.1606               5               8              12              20              32
192.....................................             880          7.9625               2               4               7               9              14
193.....................................            8477         13.8662               5               8              11              17              25
194.....................................             805          8.4348               3               5               7              10              15
195.....................................            9196         10.4533               4               6               9              12              18
196.....................................             796          6.7651               3               4               6               8              11
197.....................................           28016          9.1380               4               5               7              11              16
198.....................................            7906          4.9586               2               3               4               6               8
199.....................................            2208         11.1005               3               5               9              14              22
200.....................................            1525         11.8413               2               4               8              14              25
201.....................................            1466         16.5750               4               7              13              21              34
202.....................................           25094          7.6794               2               3               6               9              15
203.....................................           28743          7.6566               2               3               6              10              15
204.....................................           49035          6.6942               2               3               5               8              13
205.....................................           21512          7.2152               2               3               5               9              14
206.....................................            1692          4.7305               1               2               4               6              10
207.....................................           35330          5.7193               2               3               4               7              11
208.....................................           10251          3.4474               1               2               3               4               6
209.....................................          328015          6.6569               3               4               6               7              10
210.....................................          131592          8.5557               4               5               7              10              14
211.....................................           25325          6.2610               3               4               6               7              10
212.....................................               9          5.0000               2               3               4               5               8
213.....................................            6788          9.6117               3               4               7              12              19
214.....................................           51282          6.4551               2               3               5               8              12
215.....................................           41115          3.6816               1               2               3               5               7
216.....................................            6435         11.0449               2               5               8              14              22
217.....................................           19341         15.2991               3               6              10              18              31
218.....................................           21844          6.2064               2               3               5               7              11

[[Page 27555]]

                                                                                                                                                        
219.....................................           17973          3.7492               1               2               3               5               6
220.....................................               2          5.5000               5               5               6               6               6
221.....................................            4962          8.1475               2               4               6              10              16
222.....................................            3560          4.0573               1               2               3               5               8
223.....................................           18306          2.8650               1               1               2               3               5
224.....................................            7946          2.2699               1               1               2               3               4
225.....................................            6199          5.0045               1               2               3               6              11
226.....................................            5349          6.7080               1               2               4               8              14
227.....................................            4604          2.9622               1               1               2               4               6
228.....................................            3014          3.5551               1               1               2               4               7
229.....................................            1345          2.4007               1               1               2               3               5
230.....................................            2455          5.1548               1               2               3               6              11
231.....................................           10331          5.0624               1               2               3               6              11
232.....................................             576          4.5017               1               1               2               5              10
233.....................................            4538          8.9595               2               4               7              11              18
234.....................................            2220          4.1730               1               2               3               5               8
235.....................................            5543          6.7231               1               3               4               7              13
236.....................................           37803          6.2862               2               3               5               7              12
237.....................................            1510          4.4139               1               2               3               5               8
238.....................................            7538         10.0649               3               5               7              12              19
239.....................................           59581          7.6027               2               4               6               9              14
240.....................................           12047          7.4987               2               3               5               9              15
241.....................................            3019          4.6277               1               2               4               6               9
242.....................................            2528          7.6606               2               4               6               9              15
243.....................................           79979          5.6107               2               3               4               7              10
244.....................................           11456          5.8092               2               3               4               7              11
245.....................................            4259          4.2158               1               2               3               5               8
246.....................................            1312          4.5899               1               2               4               6               9
247.....................................           10591          3.9716               1               2               3               5               8
248.....................................            6767          5.2815               1               2               4               6              10
249.....................................           10077          4.2995               1               2               3               5               9
250.....................................            3178          4.9091               1               2               3               6               9
251.....................................            2090          3.2933               1               1               3               4               6
252.....................................               1          1.0000               1               1               1               1               1
253.....................................           17469          5.8164               2               3               4               7              11
254.....................................            9208          3.8588               1               2               3               5               7
255.....................................               1          2.0000               2               2               2               2               2
256.....................................            4600          5.7178               1               2               4               7              11
257.....................................           23640          3.4239               1               2               3               4               6
258.....................................           18784          2.4905               1               2               2               3               4
259.....................................            4010          3.5077               1               1               2               3               7
260.....................................            4868          1.8683               1               1               1               2               3
261.....................................            2334          2.3500               1               1               2               3               4
262.....................................             712          3.9284               1               1               2               5               8
263.....................................           29088         13.8669               4               6              10              16              28
264.....................................            3559          8.3442               2               4               6              10              17
265.....................................            4274          7.6467               1               2               5               9              16
266.....................................            2712          3.6855               1               1               3               5               7
267.....................................             222          4.0811               1               1               3               5               9
268.....................................             891          4.0000               1               1               2               4               9
269.....................................           10173          9.1218               2               3               7              12              18
270.....................................            3456          3.3958               1               1               2               4               8
271.....................................           21515          8.4984               3               4               7              10              15
272.....................................            5863          7.4481               2               3               6               9              14
273.....................................            1426          5.5035               2               2               4               7              11
274.....................................            2526          7.7458               2               3               5               9              15
275.....................................             250          3.5040               1               1               2               4               8
276.....................................             889          5.0472               1               2               4               6               9
277.....................................           79054          6.7240               3               4               5               8              12
278.....................................           26008          5.1420               2               3               4               6               9
279.....................................               5          4.8000               2               2               3               4              12
280.....................................           13098          5.1142               1               2               4               6               9
281.....................................            5890          3.6448               1               2               3               4               7
283.....................................            5233          5.4888               2               2               4               7              10
284.....................................            1755          3.8632               1               2               3               5               7
285.....................................            4886         13.5014               3               6              10              16              26
286.....................................            1918          8.7195               3               4               6               9              16
287.....................................            6284         13.3908               3               6               9              16              26
288.....................................             957          7.0449               2               4               5               7              11
289.....................................            4992          3.9732               1               2               2               4               8

[[Page 27556]]

                                                                                                                                                        
290.....................................            8514          2.8404               1               1               2               3               5
291.....................................              86          1.7558               1               1               1               2               3
292.....................................            5046         12.6958               2               5               9              16              25
293.....................................             294          6.4456               1               3               5               8              14
294.....................................           86024          5.6681               2               3               4               7              10
295.....................................            3712          4.2826               1               2               3               5               8
296.....................................          218940          6.3561               2               3               5               8              12
297.....................................           31455          4.2781               1               2               3               5               8
298.....................................              95          3.0211               1               1               2               4               5
299.....................................             868          5.3652               1               2               4               7              10
300.....................................           14115          7.3032               2               3               6               9              14
301.....................................            2146          4.3877               1               2               3               6               9
302.....................................            7567         12.3190               6               7               9              14              21
303.....................................           18462         10.1938               4               6               8              12              18
304.....................................           12867         10.2970               3               5               7              13              21
305.....................................            2526          4.9097               1               3               4               6               9
306.....................................           11305          6.2204               2               2               4               8              13
307.....................................            2596          2.9819               1               2               2               3               5
308.....................................            9137          7.0113               1               2               5               9              15
309.....................................            3371          3.0009               1               1               2               4               6
310.....................................           28549          4.6077               1               2               3               6               9
311.....................................            9697          2.1734               1               1               2               3               4
312.....................................            1995          4.7895               1               2               3               6              10
313.....................................             745          2.2644               1               1               2               3               5
314.....................................               1          5.0000               5               5               5               5               5
315.....................................           27722          9.2695               1               2               6              12              20
316.....................................           69941          7.4958               2               3               6               9              15
317.....................................             779          2.8434               1               1               2               3               6
318.....................................            5981          7.1195               2               3               5               9              14
319.....................................             506          3.2174               1               1               2               4               7
320.....................................          169078          6.4297               2               3               5               8              11
321.....................................           25512          4.7020               2               3               4               6               8
322.....................................              81          4.3580               2               2               4               6               8
323.....................................           17690          3.5573               1               2               3               4               7
324.....................................            8755          2.0870               1               1               2               3               4
325.....................................            7381          4.5898               1               2               3               5               9
326.....................................            2186          3.4492               1               1               2               4               6
327.....................................               8          3.1250               1               2               2               2               4
328.....................................             817          4.2742               1               2               3               5               9
329.....................................             109          2.7523               1               1               2               3               5
330.....................................               1          1.0000               1               1               1               1               1
331.....................................           38181          6.1753               2               3               5               8              12
332.....................................            4687          3.8835               1               2               3               5               8
333.....................................             357          5.8319               1               3               4               7              13
334.....................................           19011          6.0503               3               4               5               7               9
335.....................................            9821          4.5786               2               3               4               6               7
336.....................................           60748          4.1251               1               2               3               5               8
337.....................................           38538          2.6717               1               2               2               3               4
338.....................................            4813          5.2703               1               2               3               6              11
339.....................................            2302          4.9392               1               2               3               6              10
340.....................................               2          3.0000               1               1               5               5               5
341.....................................            6427          3.2367               1               1               2               4               6
342.....................................             224          4.0089               1               1               2               5               8
344.....................................            3820          3.4652               1               1               2               4               7
345.....................................            1355          3.9734               1               2               3               4               9
346.....................................            5343          6.7477               1               3               5               8              14
347.....................................             418          3.3349               1               1               2               4               7
348.....................................            3021          4.8875               1               2               4               6               9
349.....................................             684          2.9956               1               1               2               4               6
350.....................................            6884          4.7451               2               3               4               6               8
352.....................................             576          3.9392               1               2               3               5               8
353.....................................            2621          8.3564               3               5               6              10              15
354.....................................            9693          6.3330               3               4               5               7              11
355.....................................            5607          3.8639               2               3               4               4               6
356.....................................           28647          3.0247               1               2               3               4               5
357.....................................            6526          9.8462               4               5               8              12              18
358.....................................           26797          4.7425               2               3               4               5               8
359.....................................           27392          3.2715               2               3               3               4               5
360.....................................           16717          3.5393               1               2               3               4               6
361.....................................             618          3.4644               1               1               2               4               7

[[Page 27557]]

                                                                                                                                                        
363.....................................            4355          3.4953               1               2               2               3               6
364.....................................            1778          3.6310               1               1               2               5               8
365.....................................            2396          8.1123               2               3               5              10              18
366.....................................            4470          7.6707               2               3               5              10              16
367.....................................             544          3.3107               1               1               2               4               7
368.....................................            2285          6.9190               2               3               5               9              13
369.....................................            2409          3.7410               1               1               3               5               7
370.....................................            1083          5.5568               3               3               4               5               9
371.....................................             950          3.5874               2               3               3               4               5
372.....................................             809          3.3498               1               2               2               3               6
373.....................................            3637          1.9249               1               1               2               2               3
374.....................................             116          2.3621               1               2               2               2               3
375.....................................               5          2.2000               1               1               2               3               4
376.....................................             151          3.4834               1               1               2               4               8
377.....................................              26          3.2308               1               1               1               3               8
378.....................................             163          2.9755               1               2               3               3               5
379.....................................             309          2.9256               1               1               2               3               5
380.....................................              71          2.3239               1               1               2               3               4
381.....................................             194          2.2835               1               1               1               2               5
382.....................................              47          1.6596               1               1               1               1               3
383.....................................            1455          4.0460               1               2               3               5               8
384.....................................             123          3.3496               1               1               1               3               7
385.....................................               3         17.0000               1               1               1              49              49
389.....................................              24         10.6667               3               4               8              10              18
390.....................................              10          5.0000               1               2               3               6               9
392.....................................            2467         11.6700               4               6               8              15              24
394.....................................            1642          7.8831               1               2               5               9              16
395.....................................           65671          5.3672               1               2               4               7              10
396.....................................              18          3.9444               1               1               3               7               8
397.....................................           15421          6.0683               2               3               4               7              12
398.....................................           16602          6.5798               2               3               5               8              12
399.....................................            1424          4.4347               1               2               4               6               8
400.....................................            7470         10.3424               2               4               7              13              23
401.....................................            6368         12.3990               2               5               9              16              25
402.....................................            1542          4.6984               1               1               3               6              10
403.....................................           34812          9.2838               2               4               7              12              19
404.....................................            3946          5.0867               1               2               4               7              10
406.....................................            3264         11.1468               3               5               8              14              23
407.....................................             723          4.9267               1               2               4               6               9
408.....................................            2949          8.2035               1               2               5              10              18
409.....................................            5649          6.6516               2               3               4               6              14
410.....................................           85873          3.3544               1               2               3               4               5
411.....................................              50          2.5600               1               1               2               3               7
412.....................................              35          3.0857               1               1               2               4               8
413.....................................            8421          8.2956               2               3               6              10              17
414.....................................             797          5.2070               1               2               4               7              11
415.....................................           38804         15.6974               4               7              12              19              31
416.....................................          192133          8.2122               2               4               7              10              15
417.....................................              45          4.6222               1               2               4               7              10
418.....................................           18663          6.7433               2               3               5               8              13
419.....................................           15677          5.6580               2               3               4               7              10
420.....................................            2871          4.3006               2               2               4               5               8
421.....................................           11386          4.6473               2               2               4               6               8
422.....................................              89          3.6854               1               2               3               4               7
423.....................................            9118          8.6534               2               4               6              10              18
424.....................................            1990         17.7397               3               6              12              20              34
425.....................................           15247          4.8955               1               2               3               6              10
426.....................................            4721          5.4938               1               2               4               7              11
427.....................................            1773          5.2775               1               2               4               7              11
428.....................................             904          8.4303               1               3               5              10              18
429.....................................           38861          8.9079               2               3               6              10              17
430.....................................           53430          9.7495               2               4               7              12              19
431.....................................             190          7.4632               1               3               5               9              14
432.....................................             430          6.3395               1               2               4               6              11
433.....................................            7843          3.4051               1               1               2               4               7
434.....................................           20810          5.8148               2               3               4               7              11
435.....................................           15477          4.8166               1               3               4               6               8
436.....................................            2915         14.5413               4               8              14              21              28
437.....................................           14205         10.8943               4               6              10              14              20
439.....................................             867          8.9262               2               3               6              11              18

[[Page 27558]]

                                                                                                                                                        
440.....................................            4751          9.7838               2               3               6              12              21
441.....................................             611          4.4386               1               1               2               4               7
442.....................................           13818          8.7372               1               3               6              11              18
443.....................................            3299          3.5335               1               1               2               5               7
444.....................................            3319          5.3203               1               3               4               6              10
445.....................................            1321          3.7858               1               2               3               5               7
446.....................................               1          1.0000               1               1               1               1               1
447.....................................            3816          2.7953               1               1               2               3               5
448.....................................              84          1.0000               1               1               1               1               1
449.....................................           28775          4.4101               1               2               3               5               9
450.....................................            6807          2.3364               1               1               2               3               5
451.....................................               7          6.1429               2               3               4               5               7
452.....................................           19382          5.4066               1               2               4               6              11
453.....................................            3636          3.1876               1               1               2               4               6
454.....................................            5132          5.1046               1               2               3               6              10
455.....................................            1092          2.8333               1               1               2               3               5
456.....................................             194          8.3711               1               1               4               9              21
457.....................................             127          4.7953               1               1               2               5              10
458.....................................            1550         16.9387               4               7              13              22              35
459.....................................             533         10.3471               2               4               7              13              22
460.....................................            2303          6.6309               1               3               5               8              13
461.....................................            3040          4.8862               1               1               2               5              12
462.....................................            9360         13.7955               5               6              12              18              26
463.....................................           11987          5.1410               1               2               4               6              10
464.....................................            3079          3.7347               1               2               3               5               7
465.....................................             197          3.9086               1               1               2               4               7
466.....................................            1838          4.6366               1               1               2               4              10
467.....................................            1722          4.1057               1               1               2               4               8
468.....................................           58649         15.1829               3               7              12              19              30
471.....................................            9111          8.0289               4               5               6               9              13
472.....................................             150         30.6667               2               9              28              41              62
473.....................................            8217         14.3113               2               4               8              21              35
475.....................................           89514         12.1394               2               5              10              16              24
476.....................................            6875         13.7876               3               7              11              17              25
477.....................................           28128          8.8453               1               3               6              11              18
478.....................................          117755          8.2916               1               3               6              10              17
479.....................................           17758          4.5591               1               2               4               6               9
480.....................................             359         29.7159              10              13              22              37              61
481.....................................             119         35.0000              21              23              30              39              59
482.....................................            6754         14.9011               5               8              11              17              28
483.....................................           36200         45.7958              15              23              37              56              84
484.....................................             327         15.3364               2               6              11              21              32
485.....................................            3165         11.5893               4               6               9              13              21
486.....................................            2045         13.3482               1               6              11              18              28
487.....................................            3765          8.8770               1               3               7              11              17
488.....................................            1593         17.5267               5               8              13              22              35
489.....................................           17612         10.3989               2               4               7              13              22
490.....................................            4999          6.5719               1               2               4               8              14
491.....................................            9441          4.2777               2               3               3               5               7
492.....................................            2029         17.3834               3               5              10              28              37
493.....................................           52260          5.8809               1               2               5               8              11
494.....................................           27127          2.4245               1               1               2               3               5
495.....................................             107         23.7944              10              13              18              29              41
                                         ================                                                                                               
                                                10571233                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------



                                   Table 7b.--Medicare Prospective Payment System Selected Percentile Lengths of Stay                                   
                                                        [FY95 MEDPAR Update 12/95 Grouper V14.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           32723         11.0372               3               4               8              14              23
2.......................................            6165         11.5178               3               5               8              14              23
3.......................................               1         10.0000              10              10              10              10              10
4.......................................            5866          9.1202               2               3               6              11              20
5.......................................           95896          4.4060               2               2               3               5               9
6.......................................             444          3.3581               1               1               2               4               7
7.......................................           10526         12.5752               3               5               8              14              25

[[Page 27559]]

                                                                                                                                                        
8.......................................            2248          4.1348               1               1               3               5               9
9.......................................            1655          7.5287               2               3               5               9              16
10......................................           19194          7.9610               2               3               6              10              16
11......................................            2866          4.9215               1               2               4               6              10
12......................................           23355          7.5868               2               3               5               9              14
13......................................            5969          6.2406               2               4               5               7              11
14......................................          351205          7.4178               2               3               6               9              14
15......................................          138882          4.4367               1               2               3               5               8
16......................................           11877          6.5858               2               3               5               8              12
17......................................            3217          4.0258               1               2               3               5               7
18......................................           22783          6.3682               2               3               5               8              12
19......................................            7433          4.5271               1               2               4               6               8
20......................................            5990         11.2129               3               5               9              15              22
21......................................            1114          7.8905               2               3               6              10              16
22......................................            2585          4.8584               2               2               4               6               9
23......................................            5720          5.0336               1               2               4               6              10
24......................................           53620          5.8059               2               3               4               7              11
25......................................           21830          3.8592               1               2               3               5               7
26......................................              46          4.6087               1               2               3               6              10
27......................................            3475          6.2774               1               1               4               7              15
28......................................           11179          7.0945               1               3               5               9              14
29......................................            3684          4.0581               1               2               3               5               8
31......................................            3167          5.4436               1               2               4               6              10
32......................................            1723          3.1573               1               1               2               4               6
34......................................           16272          6.4700               2               3               5               8              12
35......................................            3648          4.2928               1               2               3               5               8
36......................................            9010          1.5970               1               1               1               2               3
37......................................            1878          4.0213               1               1               3               5               8
38......................................             234          2.5385               1               1               2               3               5
39......................................            3289          1.9663               1               1               1               2               4
40......................................            2779          3.3843               1               1               2               4               7
42......................................            7351          2.2049               1               1               1               2               5
43......................................              97          4.0928               1               2               3               5               8
44......................................            1614          5.7038               2               3               5               7              10
45......................................            2412          3.8163               1               2               3               5               7
46......................................            2952          5.4814               1               2               4               7              10
47......................................            1333          3.7802               1               2               3               5               7
49......................................            2139          5.6396               1               2               4               7              11
50......................................            3347          2.1138               1               1               2               2               3
51......................................             308          2.9870               1               1               1               3               7
52......................................              78          3.6282               1               1               2               3               8
53......................................            3340          3.5548               1               1               2               4               8
54......................................               1          1.0000               1               1               1               1               1
55......................................            1924          2.9569               1               1               2               3               6
56......................................             704          2.7514               1               1               2               3               6
57......................................             637          4.0973               1               1               3               5               8
59......................................              88          3.7045               1               1               2               4               7
60......................................               3          1.0000               1               1               1               1               1
61......................................             217          5.2535               1               1               2               7              14
62......................................               1          2.0000               2               2               2               2               2
63......................................            3996          4.6652               1               2               3               5              10
64......................................            3351          7.5067               1               2               5               9              16
65......................................           29525          3.4147               1               2               3               4               6
66......................................            6479          3.5658               1               2               3               4               6
67......................................             510          4.2039               2               2               3               5               8
68......................................            9443          4.7605               2               3               4               6               9
69......................................            3062          3.7606               1               2               3               5               7
70......................................              30          3.0667               1               2               3               3               5
71......................................              90          4.1556               1               2               3               5               8
72......................................             561          4.3529               1               2               3               5               9
73......................................            6017          4.9493               1               2               4               6               9
75......................................           39401         11.1088               4               6               8              14              21
76......................................           38785         12.4555               3               6              10              15              24
77......................................            2331          5.5268               1               2               4               8              12
78......................................           28979          8.2306               4               5               7              10              13
79......................................          207606          9.2488               3               5               7              11              17
80......................................            8932          6.6160               2               4               5               8              12
81......................................               9          7.2222               1               2               6              11              12
82......................................           68573          7.8881               2               3               6              10              16
83......................................            6976          6.3817               2               3               5               8              12

[[Page 27560]]

                                                                                                                                                        
84......................................            1430          3.7217               1               2               3               5               7
85......................................           18398          7.3317               2               3               6               9              14
86......................................            1372          4.5117               1               2               4               6               9
87......................................           58612          6.7959               1               3               6               9              13
88......................................          345365          6.0658               2               3               5               7              11
89......................................          415072          7.0754               3               4               6               9              12
90......................................           40306          5.1392               2               3               4               6               9
91......................................              50          4.5800               2               2               3               6               8
92......................................           11849          7.2524               2               4               6               9              13
93......................................            1262          4.9374               1               3               4               6               9
94......................................           12531          7.0527               2               3               5               9              14
95......................................            1365          4.1341               1               2               3               5               8
96......................................           60887          5.5101               2               3               5               7              10
97......................................           25835          4.2614               2               2               4               5               7
98......................................              19          4.4737               1               1               3               6              10
99......................................           25241          3.4914               1               2               3               4               7
100.....................................           10191          2.4244               1               1               2               3               4
101.....................................           19810          5.1725               1               2               4               7              10
102.....................................            4399          3.1298               1               1               2               4               6
103.....................................             445         39.3528              10              15              29              53              80
104.....................................           22854         14.5510               6               8              12              18              26
105.....................................           19821         10.9286               5               7               9              13              19
106.....................................           96166         11.7202               6               8              10              14              19
107.....................................           61255          8.8314               5               6               7              10              14
108.....................................            6560         12.5834               4               7              10              15              23
110.....................................           59173         10.7795               3               6               9              13              20
111.....................................            5800          6.6512               3               5               6               8              10
112.....................................          191511          4.6987               1               2               4               6               9
113.....................................           45003         14.3320               4               6              10              17              28
114.....................................            8788          9.4467               2               4               7              12              18
115.....................................           10395         11.3715               4               6               9              14              20
116.....................................           81298          5.4177               1               2               4               7              11
117.....................................            4482          4.1142               1               1               2               5               8
118.....................................            6687          3.1952               1               1               2               4               7
119.....................................            1705          5.4985               1               1               3               7              13
120.....................................           40465          9.1860               1               2               6              12              21
121.....................................          158928          7.4120               2               4               6               9              13
122.....................................           87089          5.0036               1               3               5               6               9
123.....................................           46281          4.6510               1               1               2               6              11
124.....................................          138564          4.8885               1               2               4               6               9
125.....................................           59232          3.0694               1               1               2               4               6
126.....................................            4619         13.9985               4               7              11              17              29
127.....................................          670461          6.2113               2               3               5               8              12
128.....................................           19612          6.7259               3               4               6               8              11
129.....................................            4584          3.4271               1               1               1               4               9
130.....................................           91826          6.6818               2               4               6               8              12
131.....................................           25592          5.1808               1               3               5               7               8
132.....................................          127274          3.5716               1               2               3               4               6
133.....................................            5813          2.9696               1               1               2               4               5
134.....................................           28493          3.9142               1               2               3               5               7
135.....................................            7141          4.9779               1               2               4               6               9
136.....................................            1014          3.2209               1               2               3               4               6
138.....................................          195932          4.5466               1               2               3               6               8
139.....................................           67345          2.9337               1               1               2               4               5
140.....................................          175930          3.4831               1               2               3               4               6
141.....................................           76111          4.4923               1               2               3               5               8
142.....................................           35701          3.1999               1               2               2               4               6
143.....................................          132318          2.6077               1               1               2               3               5
144.....................................           66761          5.6816               1               2               4               7              11
145.....................................            6735          3.2413               1               1               2               4               6
146.....................................            8626         11.2570               6               7               9              13              18
147.....................................            1624          7.3651               4               6               7               9              11
148.....................................          140141         13.4097               6               8              11              16              24
149.....................................           15769          7.7194               4               6               7               9              11
150.....................................           22516         11.6884               4               7              10              14              21
151.....................................            4518          6.4748               2               4               6               8              11
152.....................................            4469          9.0257               4               6               8              10              15
153.....................................            1710          6.1655               3               4               6               8               9
154.....................................           35661         14.9524               5               8              12              18              28
155.....................................            4557          5.8824               2               3               5               8              10

[[Page 27561]]

                                                                                                                                                        
156.....................................               4         15.7500               4               4              10              22              27
157.....................................           11419          5.7824               1               2               4               7              11
158.....................................            5082          2.9124               1               1               2               4               6
159.....................................           17132          5.3155               1               2               4               7              10
160.....................................            9971          2.9553               1               1               2               4               5
161.....................................           14786          4.3655               1               2               3               5               9
162.....................................            7990          2.1914               1               1               2               3               4
163.....................................               5          2.2000               1               1               1               3               5
164.....................................            4995          9.2993               4               6               8              11              16
165.....................................            1674          5.7575               3               4               5               7               9
166.....................................            3283          5.7286               2               3               4               7              10
167.....................................            2284          3.2439               1               2               3               4               6
168.....................................            1739          4.8562               1               2               3               6              10
169.....................................            1025          2.5473               1               1               2               3               5
170.....................................           12463         12.4436               2               5               9              15              25
171.....................................            1157          5.4105               1               2               4               7              11
172.....................................           30820          8.1481               2               3               6              10              16
173.....................................            2188          4.2870               1               2               3               5               9
174.....................................          231782          5.5456               2               3               4               7              10
175.....................................           23071          3.5073               1               2               3               4               6
176.....................................           16011          6.1346               2               3               5               7              11
177.....................................           11991          4.9873               2               3               4               6               9
178.....................................            4174          3.6195               1               2               3               5               7
179.....................................           11198          7.1657               2               4               6               9              14
180.....................................           79145          6.0471               2               3               5               7              11
181.....................................           22152          3.9606               1               2               3               5               7
182.....................................          226099          4.9591               2               2               4               6               9
183.....................................           72147          3.4552               1               2               3               4               6
184.....................................              67          3.7463               1               2               2               4               6
185.....................................            3804          5.1966               1               2               4               6              10
186.....................................               1          2.0000               2               2               2               2               2
187.....................................             832          4.2524               1               2               3               6               8
188.....................................           61112          6.1262               2               3               5               8              12
189.....................................            7787          3.6773               1               1               3               5               7
190.....................................              62          4.8548               1               3               4               6              10
191.....................................           10459         16.1606               5               8              12              20              32
192.....................................             880          7.9625               2               4               7               9              14
193.....................................            8477         13.8662               5               8              11              17              25
194.....................................             805          8.4348               3               5               7              10              15
195.....................................            9196         10.4533               4               6               9              12              18
196.....................................             796          6.7651               3               4               6               8              11
197.....................................           28016          9.1380               4               5               7              11              16
198.....................................            7906          4.9586               2               3               4               6               8
199.....................................            2208         11.1005               3               5               9              14              22
200.....................................            1525         11.8413               2               4               8              14              25
201.....................................            1466         16.5750               4               7              13              21              34
202.....................................           25094          7.6794               2               3               6               9              15
203.....................................           28743          7.6566               2               3               6              10              15
204.....................................           49035          6.6942               2               3               5               8              13
205.....................................           21512          7.2152               2               3               5               9              14
206.....................................            1692          4.7305               1               2               4               6              10
207.....................................           35330          5.7193               2               3               4               7              11
208.....................................           10251          3.4474               1               2               3               4               6
209.....................................          328015          6.6569               3               4               6               7              10
210.....................................          131592          8.5557               4               5               7              10              14
211.....................................           25325          6.2610               3               4               6               7              10
212.....................................               9          5.0000               2               3               4               5               8
213.....................................            6789          9.6170               3               4               7              12              19
214.....................................           51282          6.4551               2               3               5               8              12
215.....................................           41115          3.6816               1               2               3               5               7
216.....................................            6435         11.0449               2               5               8              14              22
217.....................................           19341         15.2991               3               6              10              18              31
218.....................................           21844          6.2064               2               3               5               7              11
219.....................................           17973          3.7492               1               2               3               5               6
220.....................................               2          5.5000               5               5               6               6               6
221.....................................            4962          8.1475               2               4               6              10              16
222.....................................            3560          4.0573               1               2               3               5               8
223.....................................           18306          2.8650               1               1               2               3               5
224.....................................            7946          2.2699               1               1               2               3               4
225.....................................            6199          5.0045               1               2               3               6              11

[[Page 27562]]

                                                                                                                                                        
226.....................................            5349          6.7080               1               2               4               8              14
227.....................................            4604          2.9622               1               1               2               4               6
228.....................................            3014          3.5551               1               1               2               4               7
229.....................................            1345          2.4007               1               1               2               3               5
230.....................................            2455          5.1548               1               2               3               6              11
231.....................................           10331          5.0624               1               2               3               6              11
232.....................................             576          4.5017               1               1               2               5              10
233.....................................            4538          8.9595               2               4               7              11              18
234.....................................            2220          4.1730               1               2               3               5               8
235.....................................            5543          6.7231               1               3               4               7              13
236.....................................           37803          6.2862               2               3               5               7              12
237.....................................            1510          4.4139               1               2               3               5               8
238.....................................            7538         10.0649               3               5               7              12              19
239.....................................           59580          7.6024               2               4               6               9              14
240.....................................           12047          7.4987               2               3               5               9              15
241.....................................            3019          4.6277               1               2               4               6               9
242.....................................            2528          7.6606               2               4               6               9              15
243.....................................           79979          5.6107               2               3               4               7              10
244.....................................           11456          5.8092               2               3               4               7              11
245.....................................            4259          4.2158               1               2               3               5               8
246.....................................            1312          4.5899               1               2               4               6               9
247.....................................           10591          3.9716               1               2               3               5               8
248.....................................            6767          5.2815               1               2               4               6              10
249.....................................           10077          4.2995               1               2               3               5               9
250.....................................            3178          4.9091               1               2               3               6               9
251.....................................            2090          3.2933               1               1               3               4               6
252.....................................               1          1.0000               1               1               1               1               1
253.....................................           17469          5.8164               2               3               4               7              11
254.....................................            9208          3.8588               1               2               3               5               7
255.....................................               1          2.0000               2               2               2               2               2
256.....................................            4600          5.7178               1               2               4               7              11
257.....................................           23640          3.4239               1               2               3               4               6
258.....................................           18784          2.4905               1               2               2               3               4
259.....................................            4010          3.5077               1               1               2               3               7
260.....................................            4868          1.8683               1               1               1               2               3
261.....................................            2334          2.3500               1               1               2               3               4
262.....................................             712          3.9284               1               1               2               5               8
263.....................................           29088         13.8669               4               6              10              16              28
264.....................................            3559          8.3442               2               4               6              10              17
265.....................................            4274          7.6467               1               2               5               9              16
266.....................................            2712          3.6855               1               1               3               5               7
267.....................................             222          4.0811               1               1               3               5               9
268.....................................             891          4.0000               1               1               2               4               9
269.....................................           10174          9.1235               2               3               7              12              18
270.....................................            3456          3.3958               1               1               2               4               8
271.....................................           21515          8.4984               3               4               7              10              15
272.....................................            5863          7.4481               2               3               6               9              14
273.....................................            1426          5.5035               2               2               4               7              11
274.....................................            2526          7.7458               2               3               5               9              15
275.....................................             250          3.5040               1               1               2               4               8
276.....................................             889          5.0472               1               2               4               6               9
277.....................................           79054          6.7240               3               4               5               8              12
278.....................................           26008          5.1420               2               3               4               6               9
279.....................................               5          4.8000               2               2               3               4              12
280.....................................           13098          5.1142               1               2               4               6               9
281.....................................            5890          3.6448               1               2               3               4               7
283.....................................            5233          5.4888               2               2               4               7              10
284.....................................            1755          3.8632               1               2               3               5               7
285.....................................            4886         13.5014               3               6              10              16              26
286.....................................            1918          8.7195               3               4               6               9              16
287.....................................            6284         13.3908               3               6               9              16              26
288.....................................             957          7.0449               2               4               5               7              11
289.....................................            4992          3.9732               1               2               2               4               8
290.....................................            8514          2.8404               1               1               2               3               5
291.....................................              86          1.7558               1               1               1               2               3
292.....................................            5046         12.6958               2               5               9              16              25
293.....................................             294          6.4456               1               3               5               8              14
294.....................................           86024          5.6681               2               3               4               7              10
295.....................................            3712          4.2826               1               2               3               5               8
296.....................................          218940          6.3561               2               3               5               8              12

[[Page 27563]]

                                                                                                                                                        
297.....................................           31455          4.2781               1               2               3               5               8
298.....................................              95          3.0211               1               1               2               4               5
299.....................................             868          5.3652               1               2               4               7              10
300.....................................           14115          7.3032               2               3               6               9              14
301.....................................            2146          4.3877               1               2               3               6               9
302.....................................            7567         12.3190               6               7               9              14              21
303.....................................           18462         10.1938               4               6               8              12              18
304.....................................           12867         10.2970               3               5               7              13              21
305.....................................            2526          4.9097               1               3               4               6               9
306.....................................           11305          6.2204               2               2               4               8              13
307.....................................            2596          2.9819               1               2               2               3               5
308.....................................            9137          7.0113               1               2               5               9              15
309.....................................            3371          3.0009               1               1               2               4               6
310.....................................           28549          4.6077               1               2               3               6               9
311.....................................            9697          2.1734               1               1               2               3               4
312.....................................            1995          4.7895               1               2               3               6              10
313.....................................             745          2.2644               1               1               2               3               5
314.....................................               1          5.0000               5               5               5               5               5
315.....................................           27722          9.2695               1               2               6              12              20
316.....................................           69941          7.4958               2               3               6               9              15
317.....................................             779          2.8434               1               1               2               3               6
318.....................................            5981          7.1195               2               3               5               9              14
319.....................................             506          3.2174               1               1               2               4               7
320.....................................          169078          6.4297               2               3               5               8              11
321.....................................           25512          4.7020               2               3               4               6               8
322.....................................              81          4.3580               2               2               4               6               8
323.....................................           17690          3.5573               1               2               3               4               7
324.....................................            8755          2.0870               1               1               2               3               4
325.....................................            7381          4.5898               1               2               3               5               9
326.....................................            2186          3.4492               1               1               2               4               6
327.....................................               8          3.1250               1               2               2               2               4
328.....................................             817          4.2742               1               2               3               5               9
329.....................................             109          2.7523               1               1               2               3               5
330.....................................               1          1.0000               1               1               1               1               1
331.....................................           38181          6.1753               2               3               5               8              12
332.....................................            4687          3.8835               1               2               3               5               8
333.....................................             357          5.8319               1               3               4               7              13
334.....................................           19011          6.0503               3               4               5               7               9
335.....................................            9821          4.5786               2               3               4               6               7
336.....................................           60748          4.1251               1               2               3               5               8
337.....................................           38538          2.6717               1               2               2               3               4
338.....................................            4813          5.2703               1               2               3               6              11
339.....................................            2302          4.9392               1               2               3               6              10
340.....................................               2          3.0000               1               1               5               5               5
341.....................................            6427          3.2367               1               1               2               4               6
342.....................................             224          4.0089               1               1               2               5               8
344.....................................            3820          3.4652               1               1               2               4               7
345.....................................            1355          3.9734               1               2               3               4               9
346.....................................            5344          6.7500               1               3               5               8              14
347.....................................             418          3.3349               1               1               2               4               7
348.....................................            3021          4.8875               1               2               4               6               9
349.....................................             684          2.9956               1               1               2               4               6
350.....................................            6884          4.7451               2               3               4               6               8
352.....................................             576          3.9392               1               2               3               5               8
353.....................................            2621          8.3564               3               5               6              10              15
354.....................................            9693          6.3330               3               4               5               7              11
355.....................................            5607          3.8639               2               3               4               4               6
356.....................................           28647          3.0247               1               2               3               4               5
357.....................................            6526          9.8462               4               5               8              12              18
358.....................................           26797          4.7425               2               3               4               5               8
359.....................................           27392          3.2715               2               3               3               4               5
360.....................................           16717          3.5393               1               2               3               4               6
361.....................................             618          3.4644               1               1               2               4               7
363.....................................            4355          3.4953               1               2               2               3               6
364.....................................            1778          3.6310               1               1               2               5               8
365.....................................            2396          8.1123               2               3               5              10              18
366.....................................            4471          7.6741               2               3               5              10              16
367.....................................             545          3.3266               1               1               2               4               7
368.....................................            2285          6.9190               2               3               5               9              13
369.....................................            2409          3.7410               1               1               3               5               7

[[Page 27564]]

                                                                                                                                                        
370.....................................            1083          5.5568               3               3               4               5               9
371.....................................             950          3.5874               2               3               3               4               5
372.....................................             809          3.3498               1               2               2               3               6
373.....................................            3637          1.9249               1               1               2               2               3
374.....................................             116          2.3621               1               2               2               2               3
375.....................................               5          2.2000               1               1               2               3               4
376.....................................             151          3.4834               1               1               2               4               8
377.....................................              26          3.2308               1               1               1               3               8
378.....................................             163          2.9755               1               2               3               3               5
379.....................................             309          2.9256               1               1               2               3               5
380.....................................              71          2.3239               1               1               2               3               4
381.....................................             194          2.2835               1               1               1               2               5
382.....................................              47          1.6596               1               1               1               1               3
383.....................................            1455          4.0460               1               2               3               5               8
384.....................................             123          3.3496               1               1               1               3               7
385.....................................               3         17.0000               1               1               1              49              49
389.....................................              24         10.6667               3               4               8              10              18
390.....................................              10          5.0000               1               2               3               6               9
392.....................................            2467         11.6700               4               6               8              15              24
394.....................................            1642          7.8831               1               2               5               9              16
395.....................................           65671          5.3672               1               2               4               7              10
396.....................................              18          3.9444               1               1               3               7               8
397.....................................           15421          6.0683               2               3               4               7              12
398.....................................           16601          6.5794               2               3               5               8              12
399.....................................            1424          4.4347               1               2               4               6               8
400.....................................            7468         10.3293               2               4               7              13              23
401.....................................            6365         12.3829               2               5               9              16              25
402.....................................            1542          4.6984               1               1               3               6              10
403.....................................           34765          9.2628               2               4               7              12              19
404.....................................            3944          5.0822               1               2               4               7              10
406.....................................            3264         11.1468               3               5               8              14              23
407.....................................             723          4.9267               1               2               4               6               9
408.....................................            2949          8.2035               1               2               5              10              18
409.....................................            5649          6.6516               2               3               4               6              14
410.....................................           85871          3.3540               1               2               3               4               5
411.....................................              50          2.5600               1               1               2               3               7
412.....................................              35          3.0857               1               1               2               4               8
413.....................................            8422          8.2992               2               3               6              10              17
414.....................................             797          5.2070               1               2               4               7              11
415.....................................           38804         15.6974               4               7              12              19              31
416.....................................          192133          8.2122               2               4               7              10              15
417.....................................              45          4.6222               1               2               4               7              10
418.....................................           18663          6.7433               2               3               5               8              13
419.....................................           15677          5.6580               2               3               4               7              10
420.....................................            2871          4.3006               2               2               4               5               8
421.....................................           11386          4.6473               2               2               4               6               8
422.....................................              89          3.6854               1               2               3               4               7
423.....................................            9118          8.6534               2               4               6              10              18
424.....................................            1990         17.7397               3               6              12              20              34
425.....................................           15247          4.8955               1               2               3               6              10
426.....................................            4721          5.4938               1               2               4               7              11
427.....................................            1773          5.2775               1               2               4               7              11
428.....................................             904          8.4303               1               3               5              10              18
429.....................................           38861          8.9079               2               3               6              10              17
430.....................................           53430          9.7495               2               4               7              12              19
431.....................................             190          7.4632               1               3               5               9              14
432.....................................             430          6.3395               1               2               4               6              11
433.....................................            7843          3.4051               1               1               2               4               7
434.....................................           20810          5.8148               2               3               4               7              11
435.....................................           15477          4.8166               1               3               4               6               8
436.....................................            2915         14.5413               4               8              14              21              28
437.....................................           14205         10.8943               4               6              10              14              20
439.....................................             867          8.9262               2               3               6              11              18
440.....................................            4751          9.7838               2               3               6              12              21
441.....................................             611          4.4386               1               1               2               4               7
442.....................................           13818          8.7372               1               3               6              11              18
443.....................................            3299          3.5335               1               1               2               5               7
444.....................................            3319          5.3203               1               3               4               6              10
445.....................................            1321          3.7858               1               2               3               5               7
446.....................................               1          1.0000               1               1               1               1               1

[[Page 27565]]

                                                                                                                                                        
447.....................................            3816          2.7953               1               1               2               3               5
448.....................................              84          1.0000               1               1               1               1               1
449.....................................           28775          4.4101               1               2               3               5               9
450.....................................            6807          2.3364               1               1               2               3               5
451.....................................               7          6.1429               2               3               4               5               7
452.....................................           19382          5.4066               1               2               4               6              11
453.....................................            3636          3.1876               1               1               2               4               6
454.....................................            5132          5.1046               1               2               3               6              10
455.....................................            1092          2.8333               1               1               2               3               5
456.....................................             194          8.3711               1               1               4               9              21
457.....................................             127          4.7953               1               1               2               5              10
458.....................................            1550         16.9387               4               7              13              22              35
459.....................................             533         10.3471               2               4               7              13              22
460.....................................            2303          6.6309               1               3               5               8              13
461.....................................            3040          4.8862               1               1               2               5              12
462.....................................            9360         13.7955               5               6              12              18              26
463.....................................           11987          5.1410               1               2               4               6              10
464.....................................            3079          3.7347               1               2               3               5               7
465.....................................             197          3.9086               1               1               2               4               7
466.....................................            1838          4.6366               1               1               2               4              10
467.....................................            1722          4.1057               1               1               2               4               8
468.....................................           56350         15.2546               3               7              12              19              30
471.....................................            9111          8.0289               4               5               6               9              13
472.....................................             150         30.6667               2               9              28              41              62
473.....................................            8211         14.3041               2               4               8              21              35
475.....................................           89514         12.1394               2               5              10              16              24
476.....................................            6875         13.7876               3               7              11              17              25
477.....................................           30427          9.1915               1               3               7              12              19
478.....................................          117755          8.2916               1               3               6              10              17
479.....................................           17758          4.5591               1               2               4               6               9
480.....................................             359         29.7159              10              13              22              37              61
481.....................................             177         32.0678              19              22              28              35              52
482.....................................            6754         14.9011               5               8              11              17              28
483.....................................           36200         45.7958              15              23              37              56              84
484.....................................             327         15.3364               2               6              11              21              32
485.....................................            3165         11.5893               4               6               9              13              21
486.....................................            2045         13.3482               1               6              11              18              28
487.....................................            3765          8.8770               1               3               7              11              17
488.....................................            1593         17.5267               5               8              13              22              35
489.....................................           17612         10.3989               2               4               7              13              22
490.....................................            4999          6.5719               1               2               4               8              14
491.....................................            9441          4.2777               2               3               3               5               7
492.....................................            2029         17.3834               3               5              10              28              37
493.....................................           52260          5.8809               1               2               5               8              11
494.....................................           27127          2.4245               1               1               2               3               5
495.....................................             107         23.7944              10              13              18              29              41
                                         ----------------                                                                                               
                                                10571233                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------



 Table 8a.--Statewide Average Operating Cost-To-Charge Ratios for Urban 
             and Rural Hospitals (Case Weighted) April 1996             
------------------------------------------------------------------------
                         State                           Urban    Rural 
------------------------------------------------------------------------
ALABAMA...............................................    0.421    0.476
ALASKA................................................    0.505    0.795
ARIZONA...............................................    0.426    0.567
ARKANSAS..............................................    0.539    0.501
CALIFORNIA............................................    0.408    0.544
COLORADO..............................................    0.509    0.595
CONNECTICUT...........................................    0.553    0.551
DELAWARE..............................................    0.533    0.523
DISTRICT OF COLUMBIA..................................    0.525  .......
FLORIDA...............................................    0.414    0.414
GEORGIA...............................................    0.527    0.532
HAWAII................................................    0.484    0.567
IDAHO.................................................    0.563    0.639
ILLINOIS..............................................    0.490    0.588
INDIANA...............................................    0.565    0.628
IOWA..................................................    0.546    0.685
KANSAS................................................    0.457    0.651
KENTUCKY..............................................    0.507    0.562
LOUISIANA.............................................    0.478    0.538
MAINE.................................................    0.589    0.590
MARYLAND..............................................    0.765    0.816
MASSACHUSETTS.........................................    0.579    0.600
MICHIGAN..............................................    0.514    0.619
MINNESOTA.............................................    0.565    0.655
MISSISSIPPI...........................................    0.524    0.527
MISSOURI..............................................    0.460    0.532
MONTANA...............................................    0.513    0.622
NEBRASKA..............................................    0.526    0.696
NEVADA................................................    0.322    0.550
NEW HAMPSHIRE.........................................    0.597    0.615
NEW JERSEY............................................    0.479  .......
NEW MEXICO............................................    0.484    0.546
NEW YORK..............................................    0.595    0.684
NORTH CAROLINA........................................    0.546    0.501

[[Page 27566]]

                                                                        
NORTH DAKOTA..........................................    0.651    0.693
OHIO..................................................    0.567    0.606
OKLAHOMA..............................................    0.494    0.572
OREGON................................................    0.573    0.649
PENNSYLVANIA..........................................    0.437    0.585
PUERTO RICO...........................................    0.495    0.642
RHODE ISLAND..........................................    0.587  .......
SOUTH CAROLINA........................................    0.476    0.497
SOUTH DAKOTA..........................................    0.571    0.629
TENNESSEE.............................................    0.534    0.577
TEXAS.................................................    0.463    0.565
UTAH..................................................    0.578    0.665
VERMONT...............................................    0.638    0.596
VIRGINIA..............................................    0.499    0.538
WASHINGTON............................................    0.636    0.686
WEST VIRGINIA.........................................    0.579    0.541
WISCONSIN.............................................    0.607    0.686
WYOMING...............................................    0.495    0.735
------------------------------------------------------------------------



    Table 8b.--Statewide Average Capital Cost-To-Charge Ratios (Case    
                          Weighted) April 1996                          
------------------------------------------------------------------------
                             State                                Ratio 
------------------------------------------------------------------------
ALABAMA........................................................    0.055
ALASKA.........................................................    0.077
ARIZONA........................................................    0.051
ARKANSAS.......................................................    0.055
CALIFORNIA.....................................................    0.040
COLORADO.......................................................    0.053
CONNECTICUT....................................................    0.037
DELAWARE.......................................................    0.054
DISTRICT OF COLUMBIA...........................................    0.042
FLORIDA........................................................    0.051
GEORGIA........................................................    0.052
HAWAII.........................................................    0.051
IDAHO..........................................................    0.067
ILLINOIS.......................................................    0.045
INDIANA........................................................    0.059
IOWA...........................................................    0.062
KANSAS.........................................................    0.055
KENTUCKY.......................................................    0.056
LOUISIANA......................................................    0.069
MAINE..........................................................    0.045
MARYLAND.......................................................    0.013
MASSACHUSETTS..................................................    0.060
MICHIGAN.......................................................    0.053
MINNESOTA......................................................    0.055
MISSISSIPPI....................................................    0.056
MISSOURI.......................................................    0.053
MONTANA........................................................    0.064
NEBRASKA.......................................................    0.058
NEVADA.........................................................    0.034
NEW HAMPSHIRE..................................................    0.065
NEW JERSEY.....................................................    0.045
NEW MEXICO.....................................................    0.055
NEW YORK.......................................................    0.059
NORTH CAROLINA.................................................    0.050
NORTH DAKOTA...................................................    0.074
OHIO...........................................................    0.056
OKLAHOMA.......................................................    0.058
OREGON.........................................................    0.051
PENNSYLVANIA...................................................    0.045
PUERTO RICO....................................................    0.078
RHODE ISLAND...................................................    0.039
SOUTH CAROLINA.................................................    0.053
SOUTH DAKOTA...................................................    0.064
TENNESSEE......................................................    0.057
TEXAS..........................................................    0.055
UTAH...........................................................    0.055
VERMONT........................................................    0.050
VIRGINIA.......................................................    0.058
WASHINGTON.....................................................    0.063
WEST VIRGINIA..................................................    0.060
WISCONSIN......................................................    0.048
WYOMING........................................................    0.067
------------------------------------------------------------------------

Appendix A--Regulatory Impact Analysis

I. Introduction

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA)(5 U.S.C. 601 
through 612), unless the Secretary certifies that a proposed rule would 
not have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, we consider all hospitals to be 
small entities.
    Also, section 1102(b) of the Social Security Act (the Act) requires 
the Secretary to prepare a regulatory impact analysis for any proposed 
rule that may have a significant impact on the operations of a 
substantial number of small rural hospitals. Such an analysis must 
conform to the provisions of section 603 of the RFA. With the exception 
of hospitals located in certain New England counties, for purposes of 
section 1102(b) of the Act, we define a small rural hospital as a 
hospital with fewer than 100 beds that is located outside of a 
Metropolitan Statistical Area (MSA) or New England County Metropolitan 
Area (NECMA). Section 601(g) of the Social Security Amendments of 1983 
(Public Law 98-21) designated hospitals in certain New England counties 
as belonging to the adjacent NECMA. Thus, for purposes of the 
prospective payment system, we classify these hospitals as urban 
hospitals.
    It is clear that the changes being proposed in this document would 
affect both a substantial number of small rural hospitals as well as 
other classes of hospitals, and the effects on some may be significant. 
Therefore, the discussion below, in combination with the rest of this 
proposed rule, constitutes a combined regulatory impact analysis and 
regulatory flexibility analysis.

II. Objectives

    The primary objective of the prospective payment system is to 
create incentives for hospitals to operate efficiently and minimize 
unnecessary costs while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their legitimate 
costs. In addition, we share national goals of deficit reduction and 
restraints on government spending in general.
    We believe the proposed changes would further each of these goals 
while maintaining the financial viability of the hospital industry and 
ensuring access to high quality health care for Medicare beneficiaries. 
We expect that these proposed changes would ensure that the outcomes of 
this payment system are, in general, reasonable and equitable while 
avoiding or minimizing unintended adverse consequences.

III. Limitations of Our Analysis

    As has been the case in previously published regulatory impact 
analyses, the following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 1997, on various hospital groups. We estimate the 
effects of individual policy changes by estimating payments per case 
while holding all other payment policies constant. We use the best data 
available, but we do not attempt to predict behavioral responses to our 
policy changes, and we do not make adjustments for future changes in 
such variables as admissions, lengths of stay, or case mix. As we have 
done in previous proposed rules, we are soliciting comments and 
information about the anticipated effects of these changes on 
hospitals, and our methodology for estimating them.

IV. Hospitals Included In and Excluded From the Prospective Payment 
System

    The prospective payment systems for hospital inpatient operating 
and capital-related costs encompass nearly all general, short-term, 
acute care hospitals that participate in the Medicare program. There 
were 46 Indian Health Service hospitals in our data base, which we 
excluded from the analysis due to the special characteristics of the 
prospective payment method for these hospitals. Among other short-term, 
acute care hospitals, only the 50 such hospitals in Maryland remain 
excluded from the prospective payment system under the waiver at 
section 1814(b)(3) of the Act. Thus, as of April 1996, we have included 
5,130 hospitals in our analysis. This represents about 82 percent of 
all

[[Page 27567]]

Medicare-participating hospitals. The majority of this impact analysis 
focuses on this set of hospitals.
    The remaining 18 percent are specialty hospitals that are excluded 
from the prospective payment system and continue to be paid on the 
basis of their reasonable costs (subject to a rate-of-increase ceiling 
on their inpatient operating costs per discharge). These hospitals 
include psychiatric, rehabilitation, long-term care, children's, and 
cancer hospitals. The impacts of our proposed policy changes on these 
hospitals are discussed below.

V. Impact on Excluded Hospitals and Units

    As of April 1996, there were 1,141 specialty hospitals excluded 
from the prospective payment system and instead paid on a reasonable 
cost basis subject to the rate-of-increase ceiling under Sec. 413.40. 
In addition, there were 2,258 psychiatric and rehabilitation units in 
hospitals otherwise subject to the prospective payment system. These 
excluded units are also paid in accordance with Sec. 413.40.
    In accordance with section 1886(b)(3)(B)(ii)(V) of the Act, the 
update factor applicable to the rate-of-increase limit for excluded 
hospitals and units for FY 1997 would be 1.7 percent (excluded hospital 
market basket minus 1.0 percentage points), adjusted to account for the 
relationship between the hospital's allowable operating cost per case 
and its target amounts.
    The impact on excluded hospitals and units of the proposed update 
in the rate-of-increase limit depends on the cumulative cost increases 
experienced by each excluded hospital and excluded unit since its 
applicable base period. For excluded hospitals and units that have 
maintained their cost increases at a level below the percentage 
increases in the rate-of-increase limits since their base period, the 
major effect will be on the level of incentive payments these hospitals 
and units receive. Conversely, for excluded hospitals and units with 
per-case cost increases above the cumulative update in their rate-of-
increase limit, the major effect will be the amount of excess costs 
that the hospitals would have to absorb.
    In this context, we note that, under Sec. 413.40(d)(3), an excluded 
hospital or unit whose costs exceed the rate-of-increase limit is 
allowed to receive the lower of its rate-of-increase ceiling plus 50 
percent of reasonable costs in excess of the ceiling, or 110 percent of 
its ceiling. In addition, under the various provisions set forth in 
Sec. 413.40, excluded hospitals and units can obtain payment 
adjustments for significant, justifiable, increases in operating costs 
that exceed the limit. At the same time, however, by generally limiting 
payment increases, we continue to provide an incentive for excluded 
hospitals and units to restrain the growth in their spending for 
patient services.

VI. Quantitative Impact Analysis of the Proposed Policy Changes Under 
the Prospective Payment System for Operating Costs

A. Basis and Methodology of Estimates

    In this proposed rule, we are announcing policy changes and payment 
rate updates for the prospective payment systems for operating and 
capital-related costs. We have prepared separate analyses of the 
proposed changes to each system, beginning with changes to the 
operating prospective payment system.
    The data used in developing the quantitative analyses presented 
below are taken from the FY 1995 MedPAR file and the most current 
provider-specific file that is used for payment purposes. Although the 
analyses of the changes to the operating prospective payment system do 
not incorporate cost data, the most recently available hospital cost 
report data were used to create some of the variables by which 
hospitals are categorized. Our analysis has several qualifications. 
First, we do not make adjustments for behavioral changes that hospitals 
may adopt in response to these proposed policy changes. Second, due to 
the interdependent nature of the prospective payment system, it is very 
difficult to precisely quantify the impact associated with each 
proposed change. Third, we draw upon various sources for the data used 
to categorize hospitals in the tables. In some cases, particularly the 
number of beds, there is a fair degree of variation in the data from 
different sources. We have attempted to construct these variables with 
the best available source overall. For individual hospitals, however, 
some miscategorizations are possible.
    Using cases in the FY 1995 MedPAR file, we simulated payments under 
the operating prospective payment system given various combinations of 
payment parameters. Any short-term, acute care hospitals not paid under 
the general prospective payment systems (Indian Health Service 
hospitals and hospitals in Maryland) are excluded from the simulations. 
Payments under the capital prospective payment system, or payments for 
costs other than inpatient operating costs, are not analyzed here. 
Estimated payment impacts of proposed FY 1997 changes to the capital 
prospective payment system are discussed below in section VII of this 
Appendix.
    The proposed changes discussed separately below are the following:
    <bullet> The effects of the annual reclassification of diagnoses 
and procedures and the recalibration of the diagnosis-related group 
(DRG) relative weights required by section 1886(d)(4)(C) of the Act.
    <bullet> The effects of changes in hospitals' wage index values 
reflecting the wage index update (FY 1993 data).
    <bullet> The effects of geographic reclassifications by the 
Medicare Geographic Classification Review Board (MGCRB) that will be 
effective in FY 1997.
    <bullet> The effects of phasing out payments for extraordinarily 
lengthy cases (day outlier cases) with a corresponding increase in 
payments for extraordinarily costly cases (cost outliers), in 
accordance with section 1886(d)(5)(A)(v) of the Act.
    <bullet> The total change in payments based on FY 1997 policies 
relative to payments based on FY 1996 policies.
    To illustrate the impacts of the FY 1997 proposed changes, our 
analysis begins with an FY 1997 baseline simulation model using: the FY 
1996 GROUPER (version 13.0); the FY 1996 wage indexes; no MGCRB 
reclassifications; and current outlier policy (50 percent phase out of 
day outlier payments). Outlier payments are assumed to be 5.1 percent 
of total DRG payments.
    Each policy change is then added incrementally to this baseline 
model, finally arriving at an FY 1997 model incorporating all of the 
proposed changes. This allows us to isolate the effects of each 
proposed change.
    Our final comparison illustrates the percent change in payments per 
case from FY 1996 to FY 1997. Four factors not displayed in the 
previous five columns have significant impacts here. First is the 
update to the standardized amounts. In accordance with section 
1886(d)(3)(A)(iv) of the Act, we are proposing to update the large 
urban and the other areas average standardized amounts for FY 1997 
using the most recently forecasted hospital market basket increase for 
FY 1997 of 2.7 percent, minus 0.5 percentage points. Thus, the update 
to the large urban and other areas standardized amounts is 2.2 percent. 
Similarly, section 1886(b)(3)(C)(ii) of the Act provides that the 
update factor applicable to the hospital-specific rates for sole 
community hospitals (SCHs) and essential access community hospitals 
(EACHs) (which are treated as SCHs for

[[Page 27568]]

payment purposes) is also the market basket increase minus 0.5 percent, 
or 2.2 percent.
    A second significant factor impacting changes in hospitals' 
payments per case from FY 1996 to FY 1997 is a change in MGCRB 
reclassification status from one year to the next. That is, hospitals 
reclassified in FY 1996 that are no longer reclassified in FY 1997 may 
have a negative payment impact going from FY 1996 to FY 1997; 
conversely, hospitals not reclassified in FY 1996 that are reclassified 
in FY 1997 may have a positive impact. In some cases these impacts can 
be quite substantial, so if a relatively small number of hospitals in a 
particular category lose their reclassification status, the percentage 
increase in payments for the category may be below the national mean.
    A third significant factor is that we currently estimate that 
actual outlier payments during FY 1996 will be 4.2 percent of actual 
total DRG payments. When the FY 1996 final rule was published, we 
projected FY 1996 outlier payments would be 5.1 percent of total DRG 
payments, and the standardized amounts were reduced correspondingly. 
The effects of the lower than expected outlier payments during FY 1996 
(as discussed in the Addendum to this proposed rule) are reflected in 
the analyses below comparing our current estimates of FY 1996 payments 
per case to estimated FY 1997 payments per case.
    Finally, the regional floor provision (section 
1886(d)(1)(A)(iii)(II) of the Act) expires effective with discharges 
occurring on or after October 1, 1996. Under this provision (applicable 
during FY 1996), hospitals within any census division having a regional 
standardized amount greater than the national standardized amount 
(large urban or other, depending on which amount was applicable) 
received a blend of 85 percent of the national amount and 15 percent of 
the regional amount. Hospitals in census divisions where the regional 
floor was applicable during FY 1996 will be negatively impacted by its 
expiration when comparing FY 1996 to FY 1997.
    Table I demonstrates the results of our analysis. The table 
categorizes hospitals by various geographic and special payment 
consideration groups to illustrate the varying impacts on different 
types of hospitals. The top row of the table shows the overall impact 
on the 5,130 hospitals included in the analysis. This is 77 fewer 
hospitals than were included in the impact analysis in the FY 1996 
final rule (60 FR 45924). Data for 107 hospitals that were included in 
last year's analysis were not available for analysis this year; 
however, data were available this year for 30 hospitals for which data 
were not available last year.
    The next four rows of Table I contain hospitals categorized 
according to their geographic location (all urban, which is further 
divided into large urban and other urban, or rural). There are 2,878 
hospitals located in urban areas (MSAs or NECMAs) included in our 
analysis. Among these, there are 1,597 hospitals located in large urban 
areas (populations over 1 million), and 1,281 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 2,252 
hospitals in rural areas. The next two groupings are by bed size 
categories, shown separately for urban and rural hospitals. The final 
groupings by geographic location are by census divisions, also shown 
separately for urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' FY 1997 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban, large urban, other urban, and rural, show the 
numbers of hospitals being paid based on these categorizations (after 
consideration of geographic reclassifications), are 2,978, 1,793, 
1,185, and 2,152, respectively.
    The next three groupings examine the impacts of the proposed 
changes on hospitals grouped by whether or not they have residency 
programs (teaching hospitals that receive an indirect medical education 
(IME) adjustment), receive disproportionate share (DSH) payments, or 
some combination of these two adjustments. There are 4,057 nonteaching 
hospitals in our analysis, 841 teaching hospitals with fewer than 100 
residents, and 232 teaching hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their DSH 
payment status, and whether they are considered urban or rural after 
MGCRB reclassifications. Hospitals in the rural DSH categories, 
therefore, represent hospitals that were not reclassified for purposes 
of the standardized amount. (They may, however, have been reclassified 
for purposes of the wage index.) The next category groups hospitals 
considered urban after geographic reclassification, in terms of whether 
they receive the IME adjustment, the DSH adjustment, both, or neither.
    The next four rows examine the impacts of the proposed changes on 
rural hospitals by special payment groups (SCHs, rural referral centers 
(RRCs), and EACHs), as well as rural hospitals not receiving a special 
payment designation. Rural hospitals reclassified for FY 1997 for 
purposes of the standardized amount are not included here.
    The RRCs (90), SCH/EACHs (641), and SCH/EACH and RRCs (39) shown 
here were not reclassified for purposes of the standardized amount. 
There are four EACHs included in our analysis and five EACH/RRCs.
    There are two RRCs and three SCHs that will be reclassified for the 
standardized amount in FY 1997 that, therefore, are not included in 
these rows. There are significantly fewer reclassifications among these 
groups than there were in FY 1996, owing to the new criterion under 
Sec. 412.230(a)(5)(ii) that a hospital may not be reclassified for 
purposes of the standardized amount if the area to which the hospital 
seeks reclassification does not have a higher standardized amount than 
that currently received by the hospital. (See the September 1, 1995 
final rule (60 FR 45799).) Before this change (effective with 
reclassifications for FY 1997), some rural hospitals reclassified to 
other urban areas in order to qualify for urban DSH payments. For other 
rural hospitals that already qualified for DSH payments, the urban 
designation enabled them to qualify for a higher DSH adjustment than 
they would receive as a rural hospital.
    The next two groupings are based on type of ownership and the 
hospital's Medicare utilization expressed as a percent of total patient 
days. These data are taken primarily from the FY 1994 Medicare cost 
report files, if available (otherwise FY 1993 data are used). Data 
needed to calculate Medicare utilization percentages were unavailable 
for 131 hospitals. For the most part, these are either new hospitals or 
hospitals filing manual cost reports that are not yet entered into the 
data base.
    The next series of groupings concern the geographic 
reclassification status of hospitals. The first three groupings display 
hospitals that were reclassified by the MGCRB for either FY 1996 or FY 
1997, or for both years, by urban/rural status. The next rows 
illustrate the overall number of FY 1997 reclassifications, as well as 
the numbers of reclassified hospitals grouped by urban and rural 
location. The final row in Table I contains hospitals located in rural 
counties but deemed to be urban under section 1886(d)(8)(B) of the Act.

[[Page 27569]]



                                  Table I.--Impact Analysis of Changes for FY 1997 Operating Prospective Payment System                                 
                                                         [Percent changes in payments per case]                                                         
                                                                                                                                                        
                                                                                                                                Day outlier             
                                                                Number of          DRG          New wage          MGCRB            policy     All FY 97 
                                                                hosps.\1\     recalibration     data \3\     reclassification   changes \5\  changes \6\
                                                                       (0)             (1)            (2)              (3)              (4)          (5)
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                (By Geographic Location)                                                                
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
All hospitals................................................        5,130             0.1           -0.1              0.0              0.0          3.1
Urban hospitals..............................................        2,878             0.1            0.0             -0.4             -0.1          3.2
    Large urban..............................................        1,597             0.1            0.0             -0.5             -0.2          3.1
    Other urban..............................................        1,281             0.1           -0.1             -0.2              0.1          3.3
Rural hospitals..............................................        2,252             0.0           -0.1              2.3              0.1          2.7
Bed size (urban):                                                                                                                                       
    0-99 beds................................................          716             0.0           -0.3             -0.5              0.2          3.0
    100-199 beds.............................................          938             0.0           -0.2             -0.4              0.1          2.9
    200-299 beds.............................................          577             0.1           -0.1             -0.4              0.0          3.1
    300-499 beds.............................................          479             0.1            0.0             -0.4             -0.1          3.4
    500 or more beds.........................................          168             0.1            0.1             -0.2             -0.4          3.4
Bed size (rural):                                                                                                                                       
    0-49 beds................................................        1,173            -0.1            0.0              0.0              0.1          2.8
        50-99 beds...........................................          663            -0.1           -0.1              1.1              0.2          2.8
        100-149 beds.........................................          241             0.0           -0.1              3.1              0.2          2.9
        150-199 beds.........................................           99             0.0           -0.1              2.8              0.1          2.8
        200 or more beds.....................................           76             0.1           -0.2              4.9              0.1          2.2
Urban by census division:                                                                                                                               
    New England..............................................          160             0.1            0.0             -0.1             -0.1          2.4
    Middle Atlantic..........................................          434             0.1            0.6             -0.3             -1.1          3.5
    South Atlantic...........................................          419             0.1           -0.2             -0.5              0.1          3.3
    East North Central.......................................          483             0.1            0.3             -0.2              0.2          2.9
    East South Central.......................................          163             0.1           -0.3             -0.5              0.2          3.4
    West North Central.......................................          193             0.1           -0.4             -0.5              0.3          3.4
    West South Central.......................................          375             0.1           -0.4             -0.5              0.4          3.6
    Mountain.................................................          125             0.2           -0.4             -0.4              0.3          3.3
    Pacific..................................................          478             0.1           -0.5             -0.4              0.2          2.9
    Puerto Rico..............................................           48            -0.1           -0.7             -0.5              0.0          2.6
Rural by census division:                                                                                                                               
    New England..............................................           53             0.1           -1.0              2.0              0.3          2.1
    Middle Atlantic..........................................           85             0.1           -0.5              0.8             -0.2          1.9
    South Atlantic...........................................          297             0.0           -0.5              3.1              0.1          2.6
    East North Central.......................................          304             0.1            0.2              2.1              0.2          2.9
    East South Central.......................................          278            -0.1            0.2              2.5              0.2          2.2
    West North Central.......................................          525             0.0           -0.1              2.1              0.2          2.8
    West South Central.......................................          351            -0.1            0.2              3.1              0.2          3.2
    Mountain.................................................          213             0.1           -0.2              0.8              0.1          3.0
    Pacific..................................................          141             0.1            0.5              2.4              0.2          4.0
    Puerto Rico..............................................            5            -0.2           -2.1              2.7             -0.1          3.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 (by payment categories)                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
Urban hospitals..............................................        2,978             0.1            0.0             -0.3             -0.1          3.2
    Large urban..............................................        1,793             0.1            0.0             -0.2             -0.2          3.2
    Other urban..............................................        1,185             0.1           -0.1             -0.4              0.1          3.3
Rural hospitals..............................................        2,152             0.0           -0.1              1.9              0.1          2.6
Teaching status:                                                                                                                                        
    Non-teaching.............................................        4,057             0.0           -0.2              0.3              0.2          3.1
    Less than 100 res........................................          841             0.1            0.0             -0.4              0.0          3.2
    100+ residents...........................................          232             0.1            0.2             -0.1             -0.5          3.2
Disproportionate Share Hospitals (DSH)                                                                                                                  
    Non-DSH..................................................        3,200             0.1           -0.2              0.2              0.1          3.2
    Urban DSH:                                                                                                                                          
        100 beds or more.....................................        1,410             0.0            0.0             -0.3             -0.2          3.2
        Fewer than 100 beds..................................          111            -0.3           -0.4             -0.5              0.3          2.5
    Rural DSH:                                                                                                                                          
        Sole community (SCH).................................          146            -0.1           -0.1              0.2              0.0          3.3
        Referral centers (RRC)...............................           25             0.0           -0.1              3.9             -0.1          3.7
    Over 65..................................................        1,353             0.0           -0.1              0.1              0.1          3.1
    Unknown..................................................          131            -0.1            0.9             -0.4             -1.4          3.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Hospitals Reclassified by the Medicare Geographic Review Board                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reclassification status during FY96 and FY97                                                                                                            
    Reclassified during both FY96 and FY97...................          381             0.1            0.1              5.9              0.0          3.1

[[Page 27570]]

                                                                                                                                                        
        Urban................................................          133             0.1            0.3              3.6             -0.2          3.4
        Rural................................................          248             0.0           -0.2              9.1              0.1          2.8
    Reclassified during FY97 only............................          103             0.1            0.3              3.5             -0.4          8.6
        Urban................................................           34             0.2            0.4              2.4             -0.5          8.0
        Rural................................................           69             0.0           -0.2              7.1              0.1         10.5
Reclassified during FY96 only                                          251             0.1           -0.6             -1.3              0.1         -0.5
        Urban................................................           88             0.1           -0.9             -2.0              0.0          0.8
        Rural................................................          163             0.0           -0.2             -0.4              0.2         -2.1
FY 97 Reclassifications:                                                                                                                                
    All reclassified hosp....................................          484             0.1            0.1              5.3             -0.1          4.3
        Stand. amount only...................................          120             0.1            0.0              1.7              0.1          3.1
        Wage index only......................................          274             0.1           -0.3              8.1             -0.1          3.9
        Both.................................................           90             0.1            0.8              4.4             -0.2          5.9
        Nonreclassified......................................        4,619             0.1           -0.1             -0.6              0.0          3.0
    All urban reclass........................................          167             0.1            0.3              3.3             -0.3          4.6
        Stand. amount only...................................           63             0.1            0.1              0.9              0.0          3.3
        Wage index only......................................           30             0.2           -0.6              6.7             -0.6          4.5
        Both.................................................           74             0.1            0.9              3.1             -0.2          5.6
        Nonreclassified......................................        2,711             0.1           -0.1             -0.6             -0.1          3.1
    All rural reclass........................................          317             0.0           -0.2              8.8              0.1          3.8
        Stand. amount only...................................           57             0.0           -0.3              4.6              0.3          2.7
        Wage index only......................................          244             0.0           -0.1              8.8              0.1          3.6
        Both.................................................           16             0.1           -0.4             18.8              0.2          9.1
        Nonreclassified......................................        1,908             0.0           -0.1             -0.4              0.1          2.2
Other reclassifed:                                                                                                                                      
    Hospitals (section 1886(d)(8)(B))........................           27             0.1           -0.1              0.8              0.2          3.1
\1\ Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the        
  national total. Discharge data are from FY 1995, and hospital cost report data are from reporting periods beginning in FY 1993 and FY 1994.           
\2\ This column displays the payment impacts of the recalibration of the DRG weights, based on FY 1995 MedPAR data and the DRG classification changes,  
  in accordance with section 1886(d)(4)(C) of the Act.                                                                                                  
\3\ This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1993 cost reports. The percentage 
  changes displayed here reflect the impacts of the wage and recalibration budget neutrality factor (0.998509).                                         
\4\ Shown here are the combined effects of geographic reclassification by the Medicare Geographic Classification Review Board (MGCRB). The effects shown
  here demonstrate the FY 1997 payment impacts of going from no reclassifications to the reclassifications scheduled to be in effect for FY 1997.       
  Reclassification for prior years has no bearing on the payment impacts shown here.                                                                    
\5\ This column illustrates the payment impacts of changes in outlier payments, in accordance with section 1886(d)(5) of the Act.                       
\6\ This column shows changes in payments from FY 1996 to FY 1997. It incorporates all of the changes displayed in columns 1 through 5. It also displays
  the impacts of the updates to the FY 1997 standardized amounts, changes in hospitals' reclassification status in FY 1997 compared to FY 1996, the     
  expiration of the regional floor provision at section 1886(d)(1)(A)(iii)(II) of the Act, and the difference in outlier payments from FY 1996 to FY    
  1997. The sum of the first five columns plus these effects may be different from the percentage changes shown here due to changes in hospitals'       
  geographic reclassification status from FY 1996 to FY 1997, rounding errors and interactive effects.                                                  



B. The Impact of the Proposed Changes to the DRG Classifications and 
Relative Weights (Column 1)

    In column 1 of Table I, we present the combined effects of the DRG 
reclassifications and recalibration, as discussed in section II of the 
preamble to this proposed rule. Section 1886(d)(4)(C)(i) of the Act 
requires us each year to make appropriate classification changes and to 
recalibrate the DRG weights in order to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources.
    The impact of reclassifications and recalibration on aggregate 
payments is required by section 1886(d)(4)(C)(iii) of the Act to be 
budget neutral. In addition, section 1886(d)(3)(E) specifies that any 
updates or adjustments to the wage index are budget neutral. As pointed 
out in the Addendum to this proposed rule, we compared aggregate 
payments using the FY 1996 DRG relative weights and the wage index 
effective October 1, 1995 to aggregate payments using the proposed FY 
1997 DRG relative weights and wage index. Based on this comparison, we 
computed a wage and recalibration budget neutrality factor of 0.998509. 
In Table I, the combined overall impacts of the effects of both the DRG 
reclassifications and recalibration and the updated wage index (the All 
Hospitals row of columns 1 and 2) demonstrate that the net effect of 
these changes are budget neutral. That is, the 0.1 percent increase for 
all hospitals due to the DRG changes is negated by the 0.1 percent 
decrease for all hospitals with the new wage data.
    Consistent with the minor changes we are proposing for the FY 1997 
GROUPER, the redistributional impacts across hospital groups are very 
small (an increase of 0.1 for large and other urban hospitals). Among 
other hospital categories, the net effects are slightly negative 
changes for small (up to 99 beds) rural hospitals and slightly positive 
changes for larger (over 200 beds) rural and urban hospitals.
    The largest single effect on any of the hospital categories 
examined is a 0.3 percent decrease in payments for smaller (100 or 
fewer beds) urban and rural hospitals that receive DSH payments. We 
note that the only other hospital category to experience a

[[Page 27571]]

decrease of more than 0.1 percent is rural hospitals in Puerto Rico.
    We attribute these negative changes to the increasing gap between 
the relative weights for medical, diagnostic, and less complicated 
surgical DRGs and the weights for the more complicated surgical DRGs. 
Since the cases associated with the former DRGs tend to be treated more 
often in smaller hospitals with fewer resources available, lowering the 
relative weights associated with those cases would disproportionately 
affect these hospitals. In general, small hospitals that serve a 
disproportionate share of low-income patients and hospitals in rural 
Puerto Rico fit this definition. We note, however, that these negative 
impacts are relatively minor and do not result solely from the limited 
DRG revisions we are proposing for FY 1997.

C. The Impact of Updating the Wage Data (Column 2)

    Section 1886(d)(3)(E) of the Act requires that, beginning October 
1, 1993, we annually update the wage data used to calculate the wage 
index. In accordance with this requirement, the proposed wage index for 
FY 1997 is based on data submitted for hospital cost reporting periods 
beginning on or after October 1, 1992 and before October 1, 1993. As 
with the previous column, the impact of the new data on hospital 
payments is isolated by holding the other payment parameters constant 
in the two simulations. That is, column 2 shows the percentage changes 
in payments when going from a model using the FY 1996 wage index before 
geographic reclassifications based on FY 1992 wage data to a model 
using the FY 1997 prereclassification wage index based on FY 1993 wage 
data.
    As noted above, to comply with the requirements that the DRG and 
wage index changes be implemented in a budget neutral manner, we 
compute a budget neutrality adjustment factor to apply to the 
standardized amounts. The 0.1 percent decrease for all hospitals in 
this column reflects the wage and recalibration budget neutrality 
factor of 0.998509. This decrease, combined with the 0.1 percent 
increase for all hospitals in column 1, demonstrates that the net 
effect on aggregate payments of the proposed DRG and wage index changes 
are budget neutral.
    The results indicate that the new wage data do not have a 
significant overall impact on hospital payments. (It should be noted 
that the percentage changes attributed here to the new wage data are 
generally reduced by 0.2 percentage points due to the budget neutrality 
factor.) Thus, hospitals with significant changes in their wage indexes 
are not concentrated within any particular hospital group. Some of the 
largest changes are found among both urban and rural hospitals grouped 
by census division. In almost all cases, payments change by less than 1 
percent. Our review of the wage data (as described below) indicates 
that these changes were attributable to improved reporting, as well as 
relative changes in labor costs.
    In the 50 States and the District of Columbia, among the urban 
hospitals, the largest increase (0.6 percent) is in the Middle Atlantic 
census division. Significantly, New York City's wage index rises by 
over 1.6 percent (this also contributes to the 0.2 percent increase 
among major teaching hospitals and the 0.9 percent increase in the 
Unknown category under the Medicare Utilization rows). Last year, the 
Middle Atlantic experienced one of the largest decreases (0.6 percent), 
which contributed to the 0.4 percent decline among major teaching 
hospitals--New York City's wage index fell by nearly 2.0 percent in FY 
1996 (60 FR 45929). The largest decrease among urban hospitals occurs 
in the Pacific census division, with a decline of 0.5 percent.
    Among the rural hospitals, the largest increase (0.5 percent) is in 
the Pacific census division; the largest decrease (1.0 percent) is in 
the New England census division. This decrease is primarily due to a 
2.5 percent decrease in the wage index for rural Connecticut hospitals 
and a 2.4 percent decrease in the wage index for rural New Hampshire 
hospitals. The Pacific rural hospitals also experienced one of the 
greatest increases (0.6 percent) among rural hospitals last year.
    In Puerto Rico, payments decline by 2.1 percent for the five rural 
hospitals and by 0.7 percent for the urban hospitals. The average 
hourly wages reported in FY 1993 by two rural Puerto Rico hospitals 
fell from those reported in FY 1992 by 22.4 percent and 18.1 percent, 
leading to the 2.1 percent overall decline. Of the six urban areas in 
Puerto Rico, two experience increases in wage index values while four 
experience decreases. Among these four, three experience a decline of 
more than 5 percent. These MSAs have relatively few hospitals (two, 
five, and seven hospitals). The decreases appear to be the result of 
one or two hospitals in each area with a decrease of more than 5 
percent in average hourly wages.
    The proposed FY 1997 wage index represents the fourth annual update 
to the wage data, and will continue to include salaries, fringe 
benefits, home office salaries, and certain contract labor costs. In 
the past, updates to the wage data have resulted in significant payment 
shifts among hospitals. Since the wage index is now updated annually, 
we expect these payment fluctuations will decrease.
    This expectation is borne out by comparing the proposed FY 1997 
wage index (after reclassifications under sections 1886(d)(8)(B) and 
1886(d)(10) of the Act) to the FY 1996 wage index. The following chart 
compares the shifts in wage index values (after reclassifications) for 
labor markets for FY 1997 with those from FY 1996. The majority of 
labor market areas (339) experience less than a 5 percent change. Only 
25 labor market areas experience a change between 5 and 10 percent; 13 
of those experience increases. Still fewer labor markets experience a 
change of more than 10 percent; two experience increases and two 
experience decreases. For FY 1996, by comparison, 10 labor market areas 
experienced an increase in their wage index value of more than 10 
percent. We reviewed the data for any area that experienced a wage 
index change of 10 percent or more to determine the reason for the 
fluctuation.

------------------------------------------------------------------------
                                                         Number of labor
                                                          market areas  
      Percentage change in area wage index values      -----------------
                                                           FY       FY  
                                                          1997     1996 
------------------------------------------------------------------------
Increase more than 10 percent.........................        2       10
Increase between 5 and 10 percent, (inclusive)........       13       21
Increase/decrease below 5 percent.....................      339      331
Decrease between 5 and 10 percent, (inclusive)........       12        6
Decrease more than 10 percent.........................        2        0
------------------------------------------------------------------------

    Under the proposed FY 1997 wage index, 96.2 percent of urban 
hospitals and 92.7 percent of rural hospitals would experience a change 
in their wage index of less than 5 percent. Approximately 5.9 percent 
(3.1 percent of urban hospitals and 2.8 percent of rural hospitals) 
would experience a change of between 5 and 10 percent, and 5.3 percent 
(0.8 percent of urban hospitals and 4.5 percent of rural hospitals) 
would experience a change of more than 10 percent. The following chart 
shows the projected impact for urban and rural hospitals.

[[Page 27572]]



------------------------------------------------------------------------
                                                           Percent of   
                                                          hospitals (by 
      Percentage change in area wage index values         Urban/Rural)  
                                                       -----------------
                                                         Urban    Rural 
------------------------------------------------------------------------
Increase more than 10 percent.........................      0.4      2.5
Increase between 5 and 10 percent (inclusive).........      1.5      0.9
Increase or decrease less than 5 percent..............     96.2      2.7
Decrease between 5 and 10 percent (inclusive).........      1.6      1.9
Decrease more than 10 percent.........................      0.4      2.0
------------------------------------------------------------------------
 ANote: The sum of the columns may not total to 100 due to rounding.    

D. The Impact of MGCRB Reclassifications (Column 3)

    Our impact analysis to this point has assumed hospitals are paid on 
the basis of their actual geographic location (with the exception of 
ongoing policies that provide that certain hospitals receive payments 
on bases other than where they are geographically located, such as RRCs 
and hospitals in rural counties that are deemed urban under section 
1886(d)(8)(B) of the Act). The changes in column 3 reflect the per case 
payment impact of moving from this baseline to a simulation 
incorporating the MGCRB decisions for FY 1997. As noted below, these 
decisions affect hospitals' standardized amount and wage index area 
assignments. In addition, rural hospitals reclassified for purposes of 
the standardized amount also qualify to be treated as urban for 
purposes of the DSH adjustment.
    By March 30 of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, which 
begins on October 1. The MGCRB may reclassify a hospital for the 
purpose of using the other area's standardized amount, wage index 
value, or both. (RRCs and SCHs are exempt from the proximity 
requirement.) Effective FY 1997, rural hospitals can no longer be 
reclassified to an other urban area for purposes of the standardized 
amount under section 1886(d)(10) of the Act.
    The proposed FY 1997 wage index values incorporate all of the 
MGCRB's reclassification decisions for FY 1997. The wage index values 
also reflect any decisions made by the HCFA Administrator through the 
appeals and review process for MGCRB decisions as of March 29, 1996. 
Additional changes that result from the Administrator's review of MGCRB 
decisions or a request by a hospital to withdraw its application will 
be reflected in the final rule for FY 1997.
    The overall effect of geographic reclassification is required to be 
budget neutral by section 1886(d)(8)(D) of the Act. Therefore, we 
applied an adjustment of 0.994059 to ensure that the effects of 
reclassification are budget neutral. (See section II.A.4 of the 
Addendum to this proposed rule).
    As a group, rural hospitals benefit from geographic 
reclassification. Their payments rise 2.3 percent, while payments to 
urban hospitals decline 0.4 percent. Large urban hospitals lose 0.5 
percent because, as a group, they have the smallest percentage of 
hospitals that are reclassified (fewer than 3 percent of large urban 
hospitals are reclassified). There are enough hospitals in other urban 
areas that are reclassified to limit the decrease in payments to urban 
hospitals stemming from the budget neutrality offset to 0.2 percent. 
Among urban hospital groups generally (that is, bed size, census 
division, and special payment status), payments fall between 0.2 and 
0.5 percent.
    A positive impact is evident among all rural hospital groups except 
rural hospitals with up to 49 beds, which experience a 0.0 percent 
impact. The smallest effect among all rural census divisions is 0.8 
percent for the Middle Atlantic and Mountain divisions. These divisions 
have relatively fewer MGCRB reclassifications. Among urban census 
divisions, New England displays the smallest negative impact, 0.1 
percent.
    Among rural hospitals designated as RRCs, 50 hospitals are 
reclassified for purposes of the wage index only and experience a 9.5 
percent increase in payments overall. This positive impact on RRCs is 
also reflected in the category of rural hospitals with 200 or more 
beds, which have a 4.9 percent increase in payments.
    Rural hospitals reclassified for FY 1996 and FY 1997 experience a 
9.1 percent increase in payments, the greatest of any group in the 
category. This may be due to the fact that these hospitals have the 
most to gain from reclassification and have been reclassified for a 
period of years. Rural hospitals reclassified for FY 1997 only 
experience a 7.1 percent increase in payments while rural hospitals 
reclassified for FY 1996 only experience a 0.4 decrease in payments. 
This is due to the budget neutrality adjustment, since the changes in 
this column reflect FY 1997 payments relative to no reclassifications, 
rather than to FY 1996 reclassifications. Urban hospitals reclassified 
for FY 1996 but not FY 1997 experience a 2.0 percent decline in 
payments overall. This appears to be due to the combined impacts of the 
budget neutrality adjustment and a number of hospitals in this category 
that experience a 6 percent drop in their wage index after 
reclassification. Urban hospitals reclassified for FY 1997 but not for 
FY 1996 experience a 2.4 percent increase in payments.
    The FY 1997 Reclassification rows of Table I show the changes in 
payments per case for all FY 1997 reclassified and nonreclassified 
hospitals in urban and rural locations for each of the three 
reclassification categories (standardized amount only, wage index only, 
or both). The table illustrates that the largest impact for 
reclassified rural hospitals is for those hospitals reclassified for 
both the standardized amount and the wage index. These hospitals 
receive an 18.8 percent increase in payments. The number of hospitals 
in this category has declined from 42 in FY 1996 to 16 in FY 1997. In 
addition, rural hospitals reclassified for the wage index receive an 
8.8 percent payment increase. The overall impact on reclassified 
hospitals is to increase their payments per case by an average of 5.3 
percent for FY 1997.
    Among the 27 rural hospitals deemed to be urban under section 
1886(d)(8)(B) of the Act, payments increase 0.8 percent due to MGCRB 
reclassification. This is because, although these hospitals are treated 
as being attached to an urban area in our baseline (their redesignation 
is ongoing, rather than annual like the MGCRB reclassifications), they 
are eligible for MGCRB reclassification. For FY 1997, one hospital in 
this category reclassified to a large urban area, resulting in a net 
increase due to reclassifications of 0.8 percent.
    The reclassification of hospitals primarily affects payment to 
nonreclassified hospitals through changes in the wage index and the 
geographic reclassification budget neutrality adjustment required by 
section 1886(d)(8)(D) of the Act. Among hospitals that are not 
reclassified, the overall impact of hospital reclassifications is an 
average decrease in payments per case of about 0.6 percent, which 
corresponds closely with the geographic reclassification budget 
neutrality factor. Rural nonreclassified hospitals decrease slightly 
less, experiencing a 0.4 percent decrease. This occurs because the wage 
index values in some rural areas increase after reclassified hospitals 
are excluded from the calculation of those index values.
    The number of reclassifications for purposes of the standardized 
amount, or for both the standardized amount and the wage index, has 
declined from 358 in FY 1996 to 210 in FY 1997. This is not surprising 
because of the elimination of standardized amount

[[Page 27573]]

reclassifications from rural to other urban areas for individual 
hospitals. Individual rural hospitals can continue to reclassify to 
large urban areas for purposes of the standardized amount. The number 
of wage index only reclassifications increased slightly from 260 in FY 
1996 to 274 in FY 1997.
    The foregoing analysis was based on MGCRB and HCFA Administrator 
decisions made by March 29 of this year. As previously noted, there may 
be changes to some MGCRB decisions through the appeals, review, and 
applicant withdrawal process. The outcome of these cases will be 
reflected in the analysis presented in the final rule.

E. Outlier Changes (Column 4)

    Medicare provides extra payment in addition to the basic DRG 
payment amount for extremely costly or extraordinarily lengthy cases 
(cost outliers and day outliers, respectively). Section 
1886(d)(5)(A)(v) of the Act requires the Secretary to phase out payment 
for day outliers from FY 1994 day outlier levels in 25 percent 
increments beginning in FY 1995. Day outliers in FY 1997 should account 
for approximately 8 percent of total outlier payments (25 percent of FY 
1994 levels). This reduction in day outlier payments will be offset by 
an increase in cost outlier payments.
    As discussed in the Addendum, for FY 1997, we are proposing a day 
outlier threshold equal to the geometric mean length of stay for each 
DRG plus the lesser of 24 days or 3.0 standard deviations. The proposed 
marginal cost factor for day outliers is 35 percent. For FY 1997, we 
are proposing that a case would receive cost outlier payments if its 
costs exceed the DRG amount plus $11,050. We are also proposing to 
maintain the marginal cost factor for cost outliers at 80 percent.
    The payment impacts of these changes are minimal. Hospital 
categories negatively affected by phasing out day outliers are 
consistent with the categories negatively affected in previous years: 
urban New England (0.1 percent decline); urban and rural Middle 
Atlantic census divisions (1.1 percent and 0.2 percent declines, 
respectively); urban hospitals with 500 or more beds (0.4 percent 
decline); teaching hospitals with 100 or more residents (0.5 percent 
decline); and hospitals for which data were unavailable to calculate 
Medicare utilization rates (1.4 percent decline). As noted in the wage 
index discussion previously, this last category contains a number of 
New York City hospitals. Because the changes to outlier policy result 
in a shift in payments from cases paid as day outliers to cases paid as 
cost outliers, this indicates that these categories have higher 
percentages of day outliers. The largest positive impact is among urban 
hospitals in the West South Central census division (0.4 percent 
increase).

F. All Changes (Column 5)

    Column 5 compares our estimate of payments per case incorporating 
all of our proposed changes for FY 1997 to our estimate of payments per 
case in FY 1996. It also includes the effects of the 2.2 percent update 
to the standardized amounts and the hospital-specific rates for SCHs 
and EACHs, and the 0.9 percentage point difference between the 
percentage of projected outlier payments in FY 1997 (5.1 percent) and 
the current estimate of the percentage of actual outlier payments in FY 
1996 (4.2 percent), as described in the introduction to this Appendix 
and the Addendum.
    We also note that column 5 includes the impacts of FY 1997 MGCRB 
reclassifications compared to the payment impacts of FY 1996 
reclassifications. Therefore, when comparing FY 1997 payments to FY 
1996, the percent changes due to FY 1997 reclassifications shown in 
column 3 need to be offset by the effects of reclassification on 
hospitals' FY 1996 payments (column 4 of Table 1, September 1, 1995 
final rule; 60 FR 45926). That is, column 3 of Table 1 shows the 
impacts of going from no MGCRB reclassifications to the FY 1997 
reclassifications. When comparing FY 1996 and FY 1997 payments, 
hospitals similarly reclassified during FY 1996 would not experience 
the full extent of the change shown in column 3. For example, the 
impact of MGCRB reclassifications on rural hospitals' FY 1996 payments 
was approximately a 2.3 percent increase, equal to the 2.3 percent 
increase for FY 1997. Therefore, the net increase in FY 1997 payments 
due to reclassification for rural hospitals is 0 percent.
    In addition, eliminating the regional floor provision effective for 
discharges occurring on or after October 1, 1996, results in 
approximately a 0.2 percent lower average payment in FY 1997 than would 
occur otherwise. Of course, this effect is attributable to particular 
census divisions, as discussed below.
    Finally, the FY 1996 standardized amounts were adjusted by a budget 
neutrality factor of 0.997575, in accordance with section 1886(d)(5)(I) 
of the Act, so that the change to the transfer payment methodology we 
implemented last year (doubling the per diem payment for the first day 
of a transfer) would not affect aggregate payments. As we indicated in 
last year's final rule (60 FR 45854), this adjustment was applied on a 
one-time basis to the FY 1996 standardized amounts. After FY 1996, 
there will be no need for a further budget neutrality adjustment unless 
or until we make further changes to the transfer payment methodology. 
As a result, the FY 1997 standardized amounts are relatively higher 
(0.2 percent).
    A single geographic reclassification budget neutrality factor of 
0.994059 was applied to the proposed FY 1997 standardized amounts, 
compared to the FY 1996 factor of 0.994011. The budget neutrality 
adjustment factor for the updated wage index and the DRG recalibration 
is 0.998509, compared to the FY 1996 factor of 0.999306. Although the 
net effect of these changes is small, they are reflected in the payment 
differences shown in this column.
    There may also be interactive effects among the various factors 
comprising the payment system that we are not able to isolate. For 
these reasons, the values in column 5 may not equal the sum of the 
previous columns plus the other impacts that we are able to identify.
    The overall payment increase from FY 1997 to FY 1996 for all 
hospitals is a 3.1 percent increase. This reflects the 0.0 percent net 
change in total payments due to the proposed changes for FY 1997 shown 
in columns 1 through 4, the 2.2 percent update for FY 1997, and the 0.9 
percent higher outlier payments in FY 1997 compared to FY 1996, as 
discussed above.
    Hospitals in urban areas experience a 3.2 percent rise in payments 
per case over FY 1996. Similar to all hospitals nationally, this is 
primarily due to the factors discussed above: the 2.2 percent update; a 
0.9 percent higher level of outlier payments estimated for FY 1997; and 
the offsetting effects of eliminating the regional floor and the FY 
1996 transfer budget neutrality factor. Urban hospitals benefit 0.1 
percent from DRG recalibration, while losing 0.1 percent due to the 
phase out of the day outlier policy. Their 0.4 negative impact in FY 
1997 due to reclassification is offset by a similar impact from FY 1996 
reclassifications.
    Hospitals in large and other urban areas experience 3.1 percent and 
3.3 percent increases, respectively. The lower increase for hospitals 
in large urban areas appears to be attributable primarily to the 0.2 
percent negative impact of the continuing phase out of day outliers.

[[Page 27574]]

    Hospitals in rural areas experience a 2.7 percent increase. Their 
FY 1997 payments are estimated to be 0.6 percent higher than for FY 
1996 due to higher outlier payments. Like urban hospitals, the impact 
of geographic reclassification in FY 1997 is offset by an identical 2.3 
percent increase in FY 1996.
    Among urban bed size groups, column 5 shows changes in payments are 
higher for the largest urban hospitals compared to smaller urban 
hospitals. The relatively smaller increases for the smaller urban 
hospitals appear to be due to the negative impacts of the new wage 
data, as shown in column 2. Among rural bed size groups, the impacts 
range from 2.8 percent to 2.9 percent, with the exception of rural 
hospitals with 200 or more beds. Payments per case for this group of 
hospitals is estimated to increase 2.2 percent during FY 1997. This 
below average rate of increase appears to be attributable primarily to 
a smaller, though still significant, impact of MGCRB reclassifications 
during FY 1997 compared to FY 1996. In column 3 the FY 1997 impact of 
reclassification is shown to be 4.9 percent. For FY 1996, however, this 
impact was 5.4 percent. Thus, the rate of increase is 0.5 percent less 
for FY 1997 due to a smaller reclassification impact.
    As discussed previously, effective for discharges on or after 
October 1, 1996, the regional floor, which benefitted certain census 
divisions, expires. The regional floor provided that, in those census 
divisions where the regional standardized amount exceeded the national 
standardized amount, hospitals would be paid a blend of 85 percent of 
the national amount and 15 percent of the regional amount. The census 
divisions affected by the regional floor during FY 1996 are New England 
and East North Central. In New England, the impacts of eliminating the 
regional floor are a 0.7 percent decrease for urban hospitals and a 0.6 
percent decrease among rural hospitals. In the East North Central 
region, the impacts are a 1.0 percent reduction for urban hospitals, 
and a 0.7 percent reduction for rural hospitals. The negative impacts 
of losing the regional floor for urban hospitals in the East North 
Central region are largely offset by higher estimated outlier payments 
in FY 1997 compared to FY 1996, the 0.3 percent higher payments due to 
the FY 1993 wage data (column 2), and the 0.2 percent increase due to 
the phase-out of day outliers (column 4). On the other hand, urban New 
England hospitals' higher outlier payments in FY 1997 are offset 
entirely by the negative impacts of the expiration of the regional 
floor. Rural New England hospitals also see a 1.0 percent decrease in 
payments stemming from the FY 1993 wage data.
    Other census divisions below the average payment increase are urban 
Pacific, urban Puerto Rico, rural Middle Atlantic, rural South 
Atlantic, rural East South Central, and rural Mountain. With the 
exception of the rural Middle Atlantic and rural East South Central, 
the below average overall payment impacts of these census divisions are 
related to negative impacts of introducing the FY 1993 wage data. In 
the rural Middle Atlantic, the negative impact of the new wage data is 
combined with a smaller impact stemming from MGCRB reclassifications in 
FY 1997 (0.8 percent compared to 1.5 percent in FY 1996). A smaller FY 
1997 reclassification impact (2.5 percent compared with 3.7 percent in 
FY 1996) is also the reason for the small (2.2 percent) rate of 
increase in the rural East South Central census division.
    Conversely, the urban Middle Atlantic, urban West South Central, 
rural Pacific, and rural Puerto Rico census divisions all have overall 
rates of increase at least 0.4 percent above the national average. The 
urban West South Central gains from the continued phase-out of day 
outliers, as well as higher estimated FY 1997 outlier payments compared 
to FY 1996. As noted previously, the urban Middle Atlantic benefits 
significantly from the updated wage index data. These hospitals also 
have higher estimated FY 1997 outlier payments, which offset their 1.1 
percent decrease due to the phase-out of day outliers. Rural Pacific 
hospitals benefit from geographic reclassification in FY 1997, with 12 
hospitals being reclassified that were not reclassified in FY 1996.
    The only hospital groups with negative payment impacts from FY 1996 
to FY 1997 are hospitals that were reclassified for FY 1996 and are not 
reclassified for FY 1997. Overall, these hospitals lose 0.5 percent. 
The urban hospitals in this category actually experience slight payment 
increases over FY 1996 (0.8 percent), while the rural hospitals lose 
2.1 percent. On the other hand, hospitals reclassified for FY 1997 that 
were not reclassified for FY 1996 would experience the greatest payment 
increases: 10.5 percent for 69 rural hospitals in this category and 8.0 
percent for 34 urban hospitals.
    Reclassification appears to be a significant factor influencing the 
payment increases for a number of rural hospital groups with above 
average overall payment increases in column 5. For example, among 
hospital groups identified in the discussion of the impacts of MGCRB 
reclassifications for FY 1997 (column 3), almost all have overall 
increases of 3.6 percent or greater. This outcome highlights the 
redistributive effects of reclassification decisions upon hospital 
payments. This impact is illustrated even more clearly when one 
examines the rows categorizing hospitals by their reclassification 
status for FY 1997. All nonreclassified hospitals have an average 
payment increase of 3.0 percent. The average payment increase for all 
reclassified hospitals is 4.3 percent.
    Among SCH/EACHs, the payment increase is 2.7 percent. The primary 
reason for this below average increase is that there is minimal impact 
upon these hospitals from the higher estimated FY 1997 outlier 
payments. Because these hospital groups receive their hospital-specific 
rate if it exceeds the applicable Federal amount (including outliers), 
there is less of an impact due to changes in outlier payment levels, 
which are not applied to the hospital-specific rate. In addition, 
nonspecial status rural hospitals experience only a 2.1 percent 
increase. This is largely attributable to a much smaller 
reclassification impact for FY 1997 among these hospitals.

[[Page 27575]]



             Table II.--Impact Analysis of Changes for FY 1997 Operating Prospective Payment System             
                                               [Payments per case]                                              
                                                                                                                
                                                                            Average FY   Average FY             
                                                               Number of       1996         1997                
                                                               hospitals     payment      payment    All changes
                                                                             percase      percase               
                                                                      (1)      (2) \1\      (3) \1\          (4)
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                            (By Geographic Location)                                            
----------------------------------------------------------------------------------------------------------------
All hospitals...............................................        5,130        6,470        6,673          3.1
Urban hospitals.............................................        2,878        7,004        7,229          3.2
Large urban areas...........................................        1,597        7,524        7,761          3.1
Other urban areas...........................................        1,281        6,317        6,524          3.3
Rural areas.................................................        2,252        4,302        4,419          2.7
Bed size (urban):                                                                                               
    0-99 beds...............................................          716        4,721        4,862          3.0
    100-199 beds............................................          938        5,939        6,112          2.9
    200-299 beds............................................          577        6,521        6,722          3.1
    300-499 beds............................................          479        7,410        7,660          3.4
    500 or more beds........................................          168        9,150        9,457          3.4
Bed Size (rural):                                                                                               
    0-49 beds...............................................        1,173        3,540        3,639          2.8
    50-99 beds..............................................          663        3,996        4,108          2.8
    100-149 beds............................................          241        4,462        4,593          2.9
    150-199 beds............................................           99        4,582        4,713          2.8
    200 or more beds........................................           76        5,417        5,537          2.2
Urban by Census div.:                                                                                           
    New England.............................................          160        7,508        7,686          2.4
    Middle Atlantic.........................................          434        7,686        7,953          3.5
    South Atlantic..........................................          419        6,664        6,887          3.3
    East North Central......................................          483        6,742        6,940          2.9
    East South Central......................................          163        6,185        6,395          3.4
    West North Central......................................          193        6,652        6,880          3.4
    West South Central......................................          375        6,524        6,756          3.6
    Mountain................................................          125        6,774        6,996          3.3
    Pacific.................................................          478        8,077        8,313          2.9
    Puerto Rico.............................................           48        2,584        2,652          2.6
Rural by Census div.:                                                                                           
    New England.............................................           53        5,236        5,344          2.1
    Middle Atlantic.........................................           85        4,695        4,785          1.9
    South Atlantic..........................................          297        4,476        4,591          2.6
    East North Central......................................          304        4,328        4,454          2.9
    East South Central......................................          278        3,960        4,048          2.2
    West North Central......................................          525        4,008        4,121          2.8
    West South Central......................................          351        3,876        4,001          3.2
    Mountain................................................          213        4,575        4,712          3.0
    Pacific.................................................          141        5,306        5,519          4.0
    Puerto Rico.............................................            5        2,042        2,118          3.8
----------------------------------------------------------------------------------------------------------------
                                             (By Payment Categories)                                            
----------------------------------------------------------------------------------------------------------------
Urban hospitals.............................................        2,978        6,960        7,184          3.2
Large urban areas...........................................        1,793        7,352        7,586          3.2
Other urban areas...........................................        1,185        6,322        6,528          3.3
Rural areas.................................................        2,152        4,269        4,379          2.6
Teaching status:                                                                                                
    Non-teaching............................................        4,057        5,293        5,458          3.1
    Fewer than 100 residents................................          841        6,900        7,118          3.2
    100 or more residents...................................          232       10,565       10,901          3.2
Disproportionate Share Hospitals (DSH):                                                                         
    Non-DSH.................................................        3,200        5,602        5,779          3.2
    Urban DSH:                                                                                                  
        100 beds or more....................................        1,410        7,595        7,835          3.2
        Fewer than 100 beds.................................          111        4,811        4,929          2.5
    Rural DSH:                                                                                                  
        Sole community (SCH)................................          146        4,478        4,625          3.3
        Referral centers (RRC)..............................           25        5,216        5,409          3.7
    Other rural DSH hosp.:                                                                                      
        100 beds or more....................................           89        4,235        4,280          1.1
        Fewer than 100 beds.................................          149        3,412        3,497          2.5
Urban Teaching and DSH:                                                                                         
    Both teaching and DSH...................................          682        8,576        8,843          3.1
    Teaching and no DSH.....................................          337        7,094        7,324          3.2

[[Page 27576]]

                                                                                                                
    No Teaching and DSH.....................................          839        6,093        6,292          3.3
    No teaching and no DSH..................................        1,120        5,479        5,663          3.4
Rural hospital types:                                                                                           
    Nonspecial Status Hospitals.............................        1,382        3,901        3,984          2.1
    RRC.....................................................           90        5,068        5,249          3.6
    SCH/Each................................................          641        4,415        4,536          2.7
    SCH/Each and RRC........................................           39        5,200        5,345          2.8
Type of ownership:                                                                                              
    Voluntary...............................................        3,084        6,634        6,846          3.2
    Proprietary.............................................          691        5,917        6,093          3.0
    Government..............................................        1,355        6,030        6,207          2.9
Medicare utilization as a percent of inpatient days                                                             
    0-25....................................................          256        8,577        8,803          2.6
    25-50...................................................        1,285        7,877        8,124          3.1
    50-65...................................................        2,105        5,944        6,133          3.2
    Over 65.................................................        1,353        5,062        5,220          3.1
    Unknown.................................................          131        7,372        7,597          3.1
----------------------------------------------------------------------------------------------------------------
                         Hospitals Reclassified by the Medicare Geographic Review Board                         
----------------------------------------------------------------------------------------------------------------
Reclassification status during FY96 and FY97:                                                                   
    Reclassified during both FY96 and FY97..................          381        5,864        6,046          3.1
        Urban...............................................          133        6,750        6,976          3.4
        Rural...............................................          248        5,003        5,143          2.8
    Reclassified during FY97 only...........................          103        6,150        6,679          8.6
        Urban...............................................           34        7,091        7,658          8.0
        Rural...............................................           69        4,374        4,831         10.5
    Reclassified during FY96 only...........................          251        5,658        5,630         -0.5
        Urban...............................................           88        7,131        7,189          0.8
        Rural...............................................          163        4,515        4,421         -2.1
FY 97 Reclassifications: All reclassified hosp.                       484        5,922        6,176          4.3
        Stand. amt. Only....................................          120        5,764        5,944          3.1
        Wage index only.....................................          274        5,839        6,065          3.9
        Both................................................           90        6,205        6,571          5.9
        Nonreclass..........................................        4,619        6,548        6,745          3.0
    All urban reclass.......................................          167        6,837        7,150          4.6
        Stand. amt. only....................................           63        6,230        6,433          3.3
        Wage index only.....................................           30        9,311        9,728          4.5
        Both................................................           74        6,370        6,727          5.6
        Nonreclass..........................................        2,711        7,018        7,235          3.1
    All rural reclass.......................................          317        4,909        5,096          3.8
        Stand. amt. only....................................           57        4,623        4,749          2.7
        Wage index only.....................................          244        4,968        5,146          3.6
        Both................................................           16        4,898        5,345          9.1
        Nonreclass..........................................        1,908        4,063        4,152          2.2
Other reclassifed:                                                                                              
    Hospitals (section 1886(d)(8)(B)).......................           27        4,611        4,756          3.1
\1\ These payment amounts per case do not reflect any estimates of annual case-mix increases.                   


    Table II presents the projected impact of the proposed changes for 
FY 1997 for urban and rural hospitals and for the different categories 
of hospitals shown in Table I. It compares the projected payments per 
case for FY 1997 with the average estimated per case payments for FY 
1996, as calculated under our models. Thus, this table presents, in 
terms of the average dollar amounts paid per discharge, the combined 
effects of the changes presented in Table I. The percentage changes 
shown in the last column of Table I equal the percentage changes in 
average payments from column 5 of Table I.

VII. Impact of Proposed Changes in the Capital Prospective Payment 
System

A. General Considerations

    We now have data that were unavailable in previous impact analyses 
for the capital prospective payment system. Specifically, we have cost 
report data for the third year of the capital prospective payment 
system (cost reports beginning in FY 1994) available through the March 
1996 update of the Hospital Cost Report Information System (HCRIS). We 
also have updated information on the projected aggregate amount of 
obligated capital approved by the fiscal intermediaries. However, our 
impact analysis of payment changes for capital-related costs is still 
limited by the lack of hospital-specific data on several items. These 
are the hospital's projected new capital costs for each year, its 
projected old capital costs for

[[Page 27577]]

each year, and the actual amounts of obligated capital that will be put 
in use for patient care and recognized as Medicare old capital costs in 
each year. The lack of such information affects our impact analysis in 
the following ways:
    <bullet> Major investment in hospital capital assets (for example 
in building and major fixed equipment) occurs at irregular intervals. 
As a result, there can be significant variation in the growth rates of 
Medicare capital-related costs per case among hospitals. We do not have 
the necessary hospital-specific budget data to project the hospital 
capital growth rate for individual hospitals.
    <bullet> Moreover, our policy of recognizing certain obligated 
capital as old capital makes it difficult to project future capital-
related costs for individual hospitals. Under Sec. 412.302(c), a 
hospital is required to notify its intermediary that it has obligated 
capital by the later of October 1, 1992, or 90 days after the beginning 
of the hospital's first cost reporting period under the capital 
prospective payment system. The intermediary must then notify the 
hospital of its determination whether the criteria for recognition of 
obligated capital have been met by the later of the end of the 
hospital's first cost reporting period subject to the capital 
prospective payment system or 9 months after the receipt of the 
hospital's notification. The amount that is recognized as old capital 
is limited to the lesser of the actual allowable costs when the asset 
is put in use for patient care or the estimated costs of the capital 
expenditure at the time it was obligated. We have substantial 
information regarding intermediary determinations of projected 
aggregate obligated capital amounts. However, we still do not know when 
these projects will actually be put into use for patient care, the 
actual amount that will be recognized as obligated capital when the 
project is put into use, or the Medicare share of the recognized costs. 
Therefore, we do not know actual obligated capital commitments for 
purposes of the FY 1997 capital cost projections. We discuss in 
Appendix B the assumptions and computations we employ to generate the 
amount of obligated capital commitments for use in the FY 1997 capital 
cost projections.
    In Table III of this appendix, we present the redistributive 
effects that are expected to occur between ``hold-harmless'' hospitals 
and ''fully prospective'' hospitals in FY 1997. In addition, we have 
integrated sufficient hospital-specific information into our actuarial 
model to project the impact of the proposed FY 1997 capital payment 
policies by the standard prospective payment system hospital groupings. 
We caution that while we now have actual information on the effects of 
the transition payment methodology and interim payments under the 
capital prospective payment system and cost report data for most 
hospitals, we need to randomly generate numbers for the change in old 
capital costs, new capital costs for each year, and obligated amounts 
that will be put in use for patient care services and recognized as old 
capital each year. We continue to be unable to predict accurately FY 
1997 capital costs for individual hospitals, but with the more recent 
data on the experience to date under the capital prospective payment 
system, there is adequate information to estimate the aggregate impact 
on most hospital groupings.
    We present the transition payment methodology by hospital grouping 
in Table IV. In Table V we present the results of the cross-sectional 
analysis using the results of our actuarial model. This table presents 
the aggregate impact of the FY 1997 payment policies.

B. Projected Impact Based on the Proposed FY 1997Actuarial Model

1. Assumptions
    In this impact analysis, we model dynamically the impact of the 
capital prospective payment system from FY 1996 to FY 1997 using a 
capital acquisition model. The FY 1997 model, described in Appendix B 
of this proposed rule, integrates actual data from individual hospitals 
with randomly generated capital cost amounts. We have capital cost data 
from cost reports beginning in FY 1989 through FY 1994 received through 
the March 1996 update of the Hospital Cost Reporting Information System 
(HCRIS), interim payment data for hospitals already receiving capital 
prospective payments through PRICER, and data reported by the 
intermediaries that include the hospital-specific rate determinations 
that have been made through January 1, 1996 in the Provider-Specific 
file. We used this data to determine the proposed FY 1997 capital 
rates. However, we do not have individual hospital data on old capital 
changes, new capital formation, and actual obligated capital costs. We 
have data on costs for capital in use in FY 1993, and we age that 
capital by a formula described in Appendix B. We therefore need to 
randomly generate only new capital acquisitions for any year after FY 
1993. All Federal rate payment parameters are assigned to the 
applicable hospital.
    For purposes of this impact analysis, the FY 1997 actuarial model 
includes the following assumptions:
    <bullet> Medicare inpatient capital costs per discharge will 
increase at the following rates during these periods:

                 Average Percentage Increase in Capital                 
------------------------------------------------------------------------
                                                              Costs per 
                        Fiscal year                           discharge 
------------------------------------------------------------------------
1995.......................................................        -1.50
1996.......................................................         5.05
1997.......................................................         5.21
------------------------------------------------------------------------

    <bullet> The Medicare case-mix index will increase by 1.6 percent 
in FY 1996 and FY 1997.
    <bullet> The Federal capital rate as well as the hospital-specific 
rate is updated in FY 1996 by an analytical framework that considers 
changes in the prices associated with capital-related costs, and 
adjustments to account for forecast error, changes in the case-mix 
index, allowable changes in intensity, and other factors. The proposed 
FY 1997 update for inflation is 1.00 percent (see Addendum, Part III).
2. Results
    We have used the actuarial model to estimate the change in payment 
for capital-related costs from FY 1996 to FY 1997. Table III shows the 
effect of the capital prospective payment system on low capital cost 
hospitals and high capital cost hospitals. We consider a hospital to be 
a low capital cost hospital if, based on a comparison of its initial 
hospital-specific rate and the applicable Federal rate, it will be paid 
under the fully prospective payment methodology. A high capital cost 
hospital is a hospital that, based on its initial hospital-specific 
rate, will be paid under the hold-harmless payment methodology. Based 
on our actuarial model, the breakdown of hospitals is as follows:

[[Page 27578]]



                                     Capital Transition Payment Methodology                                     
----------------------------------------------------------------------------------------------------------------
                                                                                          FY 1997      FY 1997  
                                                               Percent of    FY 1997     percent of   percent of
                      Type of hospital                         hospitals    percent of    capital      capital  
                                                                            discharges     costs       payments 
----------------------------------------------------------------------------------------------------------------
Low Cost Hospital...........................................           66           62           53           56
High Cost Hospital..........................................           34           38           47           44
----------------------------------------------------------------------------------------------------------------

    A low capital cost hospital may request to have its hospital-
specific rate redetermined based on old capital costs in the current 
year, through the later of the hospital's cost reporting period 
beginning in FY 1994 or the first cost reporting period beginning after 
obligated capital comes into use (within the limits established in 
Sec. 412.302(e) for putting obligated capital in use for patient care). 
If the redetermined hospital-specific rate is greater than the adjusted 
Federal rate, these hospitals will be paid under the hold-harmless 
payment methodology. Regardless of whether the hospital became a hold-
harmless payment hospital as a result of a redetermination, we have 
continued to show these hospitals as low capital cost hospitals in 
Table III.
    Assuming no behavioral changes in capital expenditures, Table III 
displays the percentage change in payments from FY 1996 to FY 1997 
using the above described actuarial model.

[[Page 27579]]



                                      Table III.--Impact of Proposed Changes for FY 1997 on Payments per Discharge                                      
                                                             FY 1996 payments per discharge                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Adjusted     Average    Hospital      Hold                           
                                                           Number of  Discharges    federal     federal    specific    harmless   Exceptions     Total  
                                                           hospitals                payment     percent     payment     payment     payment     payment 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost Hospitals......................................       3,367   6,543,036     $413.51       55.01     $200.60      $15.30      $16.59     $646.01
    Fully Prospective...................................       1,472   2,953,665      373.96       50.00      236.94  ..........       11.59      622.49
    Rebase--Fully Prospective...........................       1,561   2,777,809      373.98       50.00      220.57  ..........       23.17      617.72
    Rebase--100% Federal Rate...........................         237     633,924      798.96      100.00  ..........  ..........        0.05      799.00
    Rebase--Hold Harmless...............................          97     177,638      313.93       44.64  ..........      563.62       55.92      933.48
High Cost Hospitals.....................................       1,737   4,044,123      665.47       85.61  ..........      152.51       16.36      834.35
    100% Federal Rate...................................       1,126   2,842,423      788.87      100.00  ..........  ..........        2.30      791.18
    Hold Harmless.......................................         611   1,201,700      373.59       49.81  ..........      513.26       49.61      936.46
      Total Hospitals...................................       5,104  10,587,159      509.76       66.94      123.98       67.71       16.50      717.95
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                                                                                        
                                                             FY 1997 payments per discharge                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Adjusted     Average    Hospital      Hold                                       
                                               Number of  Discharges    federal     federal    specific    harmless   Exceptions     Total      Percent 
                                               hospitals                payment     percent     payment     payment     payment     payment     change  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost Hospitals..........................       3,367   6,720,494     $472.14       64.07     $157.08      $12.37      $38.44     $680.03        5.27
    Fully Prospective.......................       1,472   3,033,773      438.87       60.00      185.55  ..........       34.06      658.48        5.78
    Rebase--Fully Prospective...............       1,561   2,853,148      440.66       60.00      172.70  ..........       45.15      658.50        6.60
    Rebase--100% Federal Rate...............         243     657,828      785.22      100.00  ..........  ..........        0.58      785.81       -1.65
    Rebase--Hold Harmless...................          91     175,744      385.79       55.77  ..........      473.19      146.68    1,005.66        7.73
High Cost Hospitals.........................       1,737   4,153,806      691.63       89.42  ..........      123.03       48.28      862.93        3.43
    100% Federal Rate.......................       1,164   2,988,949      780.85      100.00  ..........  ..........       11.02      791.87        0.09
    Hold Harmless...........................         573   1,164,856      462.69       61.34  ..........      438.70      143.88    1,045.27       11.62
      Total Hospitals.......................       5,104  10,874,300      555.98       74.04       97.08       54.64       42.20      749.90        4.45
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 27580]]


    Under section 1886(g)(1)(A) of the Act, aggregate payments under 
the capital prospective payment system for FY 1992 through 1995 
respectively, were projected to equal 90 percent of payments that would 
have been payable on a reasonable cost basis in each year. With the 
expiration of the capital budget neutrality provision, we now estimate 
that there was an aggregate 27.73 percent increase in FY 1996 Medicare 
capital payments over the FY 1995 payments. With the proposed Federal 
rate, we estimate aggregate Medicare capital payments will increase by 
7.28 percent in FY 1997.
    We project that low capital cost hospitals paid under the fully 
prospective payment methodology will experience an average increase in 
payments per case of 5.27 percent, and high capital cost hospitals will 
experience an average increase of 3.43 percent.
    For hospitals paid under the fully prospective payment methodology, 
the Federal rate payment percentage will increase from 50 percent to 60 
percent and the hospital-specific rate payment percentage will decrease 
from 50 to 40 percent in FY 1997. The Federal rate payment percentage 
for hospitals paid under the hold-harmless payment methodology is based 
on the hospital's ratio of new capital costs to total capital costs. 
The average Federal rate payment percentage for hospitals receiving a 
hold-harmless payment for old capital will increase from 49.81 percent 
to 61.34 percent. We estimate the percentage of hold-harmless hospitals 
paid based on 100 percent of the Federal rate will increase from 65.8 
percent to 67.9 percent.
    We expect that the average hospital-specific rate payment per 
discharge will decrease from $123.98 in FY 1996 to $97.08 in FY 1997. 
This is partly due to the 3.68 percent decrease in the FY 1997 
hospital-specific rate compared to FY 1996.
    We are proposing no changes in our exceptions policies for FY 1997. 
As a result, the minimum payment levels would be:
    <bullet> 90 percent for sole community hospitals;
    <bullet> 80 percent for urban hospitals with 100 or more beds and a 
disproportionate share patient percentage of 20.2 percent or more; or,
    <bullet> 70 percent for all other hospitals.
    We estimate that exceptions payments will increase from 2.30 
percent of total capital payments in FY 1996 to 5.63 percent of 
payments in FY 1997. The number and amount of exceptions payments is 
expected to increase throughout the transition period. The projected 
distribution of the payments is shown in the table below:

                  Estimated FY 1997 Exceptions Payments                 
------------------------------------------------------------------------
                                                              Percent of
               Type of hospital                  Number of    exceptions
                                                 hospitals     payments 
------------------------------------------------------------------------
Low Capital Cost..............................          450           58
High Capital Cost.............................          331           42
                                               -------------------------
    Total.....................................          781          100
------------------------------------------------------------------------

C. Cross-Sectional Comparison of Capital Prospective Payment 
Methodologies

    Table IV presents a cross-sectional summary of hospital groupings 
by capital prospective payment methodology. This distribution is 
generated by our actuarial model.

  Table IV.--Distribution by Method of Payment (Hold-Harmless/Fully Prospective) of Hospitals Receiving Capital 
                                                    Payments                                                    
----------------------------------------------------------------------------------------------------------------
                                                                               (2) Hold-harmless                
                                                                          --------------------------     (3)    
                                                               (1) Total    Percentage                Percentage
                                                               Number of    paid hold-   Percentage   paid fully
                                                               Hospitals     harmless    paid fully  prospective
                                                                               (A)      federal (B)      rate   
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals...........................................        5,104         13.0         27.6         59.4
    Large urban areas (populations over 1 million)..........        1,584         15.6         34.5         49.9
    Other urban areas (populations of 1 million or fewer)...        1,271         15.1         33.4         51.5
    Rural areas.............................................        2,249         10.0         19.4         70.6
    Urban hospitals.........................................        2,855         15.4         34.0         50.6
        0-99 beds...........................................          698         16.2         27.7         56.2
        100-199 beds........................................          933         19.3         36.8         43.9
        200-299 beds........................................          577         13.9         37.3         48.9
        300-499 beds........................................          479         11.5         32.6         55.9
        500 or more beds....................................          168          6.5         37.5         56.0
    Rural hospitals.........................................        2,249         10.0         19.4         70.6
        0-49 beds...........................................        1,171          7.1         14.3         78.7
        50-99 beds..........................................          662         12.8         21.9         65.3
        100-149 beds........................................          241         14.5         30.3         55.2
        150-199 beds........................................           99         16.2         22.2         61.6
        200 or more beds....................................           76          7.9         39.5         52.6
By Region:                                                                                                      
    Urban by Region.........................................        2,855         15.4         34.0         50.6
        New England.........................................          160          7.5         25.0         67.5
        Middle Atlantic.....................................          434          9.9         30.0         60.1
        South Atlantic......................................          417         19.2         41.0         39.8
        East North Central..................................          480         11.3         28.5         60.2
        East South Central..................................          162         19.8         36.4         43.8
        West North Central..................................          190         17.4         28.4         54.2
        West South Central..................................          366         25.7         47.5         26.8
        Mountain............................................          124         15.3         42.7         41.9
        Pacific.............................................          474         13.3         30.4         56.3
        Puerto Rico.........................................           48         18.8         16.7         64.6
    Rural by Region.........................................        2,249         10.0         19.4         70.6

[[Page 27581]]

                                                                                                                
        New England.........................................           53          7.5         15.1         77.4
        Middle Atlantic.....................................           84          6.0         19.0         75.0
        South Atlantic......................................          297         13.1         25.3         61.6
        East North Central..................................          304          8.6         13.5         78.0
        East South Central..................................          278         10.1         30.6         59.4
        West North Central..................................          525          7.2         15.0         77.7
        West South Central..................................          349         10.0         24.1         65.9
        Mountain............................................          213         15.5         12.7         71.8
        Pacific.............................................          141         11.3         15.6         73.0
    Large urban areas (populations over 1 million)..........        1,780         15.3         34.3         50.4
    Other urban areas (populations of 1 million or fewer)...        1,175         15.4         32.3         52.3
    Rural areas.............................................        2,149          9.8         19.4         70.8
    Teaching Status:                                                                                            
        Non-teaching........................................        4,031         13.7         26.6         59.7
        Fewer than 100 Residents............................          841         11.1         32.0         57.0
        100 or more Residents...............................          232          7.8         28.4         63.8
    Disproportionate share hospitals (DSH):                                                                     
        Non-DSH.............................................        3,175         12.7         23.8         63.5
        Urban DSH:                                                                                              
            100 or more beds................................        1,410         15.0         36.2         48.8
            Less than 100 beds..............................          110         11.8         25.5         62.7
        Rural DSH:                                                                                              
        Sole Community (SCH/EACH)...........................          146          9.6         20.5         69.9
        Referral Center (RRC/EACH)..........................           25          8.0         32.0         60.0
            Other Rural:                                                                                        
                100 or more beds............................           89         13.5         39.3         47.2
                Less than 100 beds..........................          149          6.7         25.5         67.8
    Urban teaching and DSH:                                                                                     
        Both teaching and DSH...............................          682          9.1         32.8         58.1
        Teaching and no DSH.................................          337         13.6         27.6         58.8
        No teaching and DSH.................................          838         19.3         37.6         43.1
        No teaching and no DSH..............................        1,098         16.7         32.7         50.6
    Rural Hospital Types:                                                                                       
        NON special status hospitals........................        1,379          7.6         19.5         72.9
        RRC/EACH............................................           90          8.9         37.8         53.3
        SCH/EACH............................................          641         14.5         16.4         69.1
        SCH, RRC and EACH...................................           39         12.8         20.5         66.7
    Type of Ownership:                                                                                          
    Voluntary:                                                                                                  
        Voluntary...........................................        3,058         12.8         27.7         59.5
        Proprietary.........................................          691         23.6         46.2         30.2
        Government..........................................        1,355          8.1         17.9         74.0
    Medicare Utilization as a Percent of Inpatient Days:                                                        
        0-25................................................          256         14.8         25.0         60.2
        25-50...............................................        1,285         14.6         33.1         52.3
        50-65...............................................        2,105         12.9         27.8         59.3
        Over 65.............................................        1,353         10.4         22.2         67.3
----------------------------------------------------------------------------------------------------------------



    As we explain in Appendix B, we were not able to determine a 
hospital-specific rate for 26 of the 5,130 hospitals in our data base. 
Consequently, the payment methodology distribution is based on 5,104 
hospitals. This data should be fully representative of the payment 
methodologies that will be applicable to hospitals.
    The cross-sectional distribution of hospital by payment methodology 
is presented by: (1) geographic location, (2) region, and (3) payment 
classification. This provides an indication of the percentage of 
hospitals within a particular hospital grouping that will be paid under 
the fully prospective payment methodology and under the hold-harmless 
methodology.
    The percentage of hospitals paid fully Federal (100 percent of the 
Federal rate) as hold-harmless hospitals is expected to increase to 
27.6 percent in FY 1997.
    Table IV indicates that 59.4 percent of hospitals are paid under 
the fully prospective payment methodology. (This figure, unlike the 
figure of 66 percent for low cost capital hospitals in the previous 
section, takes account of the effects of redeterminations. In other 
words, this figure does not include low cost hospitals that, following 
a hospital-specific rate redetermination, are now paid under the hold-
harmless methodology.) As expected, a relatively higher percentage of 
rural and governmental hospitals (70.8 percent and 74.0 percent, 
respectively by payment classification) are being paid under the fully 
prospective methodology. This is a reflection of their lower than 
average capital costs

[[Page 27582]]

per case. In contrast, only 30.2 percent of proprietary hospitals are 
being paid under the fully prospective methodology. This is a 
reflection of their higher than average capital costs per case. (We 
found at the time of the August 30, 1991 final rule (56 FR 43430) that 
62.7 percent of proprietary hospitals had a capital cost per case above 
the national average cost per case.)

D. Cross-Sectional Analysis of Changes in Aggregate Payments

    We used our FY 1997 actuarial model to estimate the potential 
impact of our proposed changes for FY 1997 on total capital payments 
per case, using a universe of 5,104 hospitals. The individual hospital 
payment parameters are taken from the best available data, including: 
the January 1, 1996 update to the Provider-Specific file, cost report 
data, and audit information supplied by intermediaries. Table V 
presents estimates of payments per case under our model for FY 1996 and 
FY 1997 (columns 2 and 3). Column 4 shows the total percentage change 
in payments from FY 1996 to FY 1997. Column 5 presents the percentage 
change in payments that can be attributed to Federal rate changes 
alone.
    Federal rate changes represented in Column 5 include the 4.36 
percent decrease in the Federal rate, a 1.6 percent increase in case 
mix, changes in the adjustments to the Federal rate (for example, the 
effect of the new hospital wage index on the geographic adjustment 
factor), and reclassifications by the Medicare Geographic 
Classification Review Board. Column 4 includes the effects of the 
Federal rate changes represented in Column 3. Column 4 also reflects 
the effects of all other changes, including: the change from 50 percent 
to 60 percent in the portion of the Federal rate for fully prospective 
hospitals, the hospital-specific rate update, changes in the proportion 
of new to total capital for hold-harmless hospitals, changes in old 
capital (for example, obligated capital put in use), hospital-specific 
rate redeterminations, and exceptions. The comparisons are provided by: 
(1) geographic location and (2) payment classification and payment 
region.
    The simulation results show that, on average, capital payments per 
case can be expected to increase 4.4 percent in FY 1997. The results 
show that the effect of the Federal rate changes alone is to decrease 
payments by 0.9 percent. The decrease attributable to the Federal rate 
changes is more than offset by a 5.3 percent increase is attributable 
to the effects of all other changes.
    Our comparison by geographic location shows that capital payments 
per case to urban and rural hospitals experience similar rates of 
increase (4.4 percent and 4.8 percent, respectively). Payments per case 
for urban hospitals will decrease at about the same rate as payments 
per case for rural hospitals (0.8 percent and 1.3 percent, 
respectively) from the Federal rate changes alone. Urban hospitals will 
gain slightly less than rural hospitals (5.2 percent compared to 6.1 
percent) from the effects of all other changes.
    By region, there is relatively little variation compared to some 
previous years. All regions are estimated to receive increases in total 
capital payments per case, due to the increased share of payments that 
is based on the Federal rate (from 50 to 60 percent). Changes by region 
vary from a low of 2.1 percent increase (Middle Atlantic rural region) 
to a high of 15.6 percent increase (rural hospitals of the New England 
region).
    By type of ownership, government hospitals are projected to have 
the largest rate of increase (5.1 percent, -1.1 percent due to Federal 
rate changes and a 6.2 percent positive offset from the effects of all 
other changes). Payments to voluntary hospitals will increase 4.5 
percent (a 0.9 percent decrease due to Federal rate changes and a 5.4 
percent positive offset from the effects of all other changes) and 
payments to proprietary hospitals will increase 3.8 percent (a 0.7 
percent decrease due to Federal rate changes and a 4.5 percent positive 
offset from the effects of all other changes).
    Section 1886(d)(10) of the Act established the Medicare Geographic 
Classification Review Board (MGCRB). Hospitals may apply for 
reclassification for purposes of the standardized amount, wage index, 
or both. Although the Federal capital rate is not affected, a 
hospital's geographic classification for purposes of the operating 
standardized amount does affect a hospital's capital payments as a 
result of the large urban adjustment factor and the disproportionate 
share adjustment for urban hospitals with 100 or more beds. 
Reclassification for wage index purposes affects the geographic 
adjustment factor since that factor is constructed from the hospital 
wage index.
    To present the effects of the hospitals being reclassified for FY 
1997 compared to the effects of reclassification for FY 1996, we show 
the average payment percentage increase for hospitals reclassified in 
each fiscal year and in total. For FY 1997 reclassifications, we 
indicate those hospitals reclassified for standardized amount purposes 
only, for wage index purposes only, and for both purposes. The 
reclassified groups are compared to all other nonreclassified 
hospitals. These categories are further identified by urban and rural 
designation.
    Hospitals reclassified during FY 1997 as a whole are projected to 
experience a 5.3 percent increase in payments (a 0.3 percent decrease 
attributable to Federal rate changes and a 5.6 percent positive offset 
attributable to the effects of all other changes). Payments to 
nonreclassified hospitals will increase slightly less (4.3 percent) 
than reclassified hospitals (5.3 percent) overall. Payments to 
nonreclassified hospitals will decrease slightly more than reclassified 
hospitals from the Federal rate changes (1.0 percent compared to 0.3 
percent), but they will gain about the same from the effects of all 
other changes (5.3 percent compared to 5.6 percent).

                                 Table V.--Comparison of Total Payments Per Case                                
                                 [FY 1996 Payments Compared to FY 1997 Payments]                                
----------------------------------------------------------------------------------------------------------------
                                                                                                       Portion  
                                                  Number of    Average FY   Average FY               attibutable
                                                  hospitals    1996 pay-    1997 pay-   All changes   to federal
                                                               ments/case   ments/case               rate change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals..............................        5,104          718          750          4.4         -0.9
    Large urban areas (populations over 1                                                                       
     million)..................................        1,584          823          858          4.3         -0.9
    Other urban areas (populations of 1 million                                                                 
     of fewer).................................        1,271          714          747          4.5         -0.8
    Rural areas................................        2,249          479          503          4.8         -1.3
    Urban hospitals............................        2,855          776          810          4.4         -0.8

[[Page 27583]]

                                                                                                                
        0-99 beds..............................          698          570          594          4.3         -0.9
        100-199 beds...........................          933          703          731          4.1         -1.0
        200-299 beds...........................          577          744          776          4.2         -0.9
        300-499 beds...........................          479          800          838          4.8         -0.8
        500 or more beds.......................          168          944          984          4.3         -0.5
    Rural hospitals............................        2,249          479          503          4.8         -1.3
        0-49 beds..............................        1,171          368          389          5.8         -1.5
        50-99 beds.............................          662          445          468          5.0         -1.2
        100-149 beds...........................          241          512          536          4.7         -1.3
        150-199 beds...........................           99          517          543          4.9         -1.0
        200 or more beds.......................           76          609          633          3.9         -1.5
By Region:                                                                                                      
    Urban by Region............................        2,855          776          810          4.4         -0.8
        New England............................          160          780          818          4.9         -1.5
        Middle Atlantic........................          434          816          855          4.8         -0.8
        South Atlantic.........................          417          777          809          4.2         -0.8
        East North Central.....................          480          730          759          4.0         -0.7
        East South Central.....................          162          707          744          5.3         -0.5
        West North Central.....................          190          768          807          5.1         -0.8
        West South Central.....................          366          794          825          3.8         -0.3
        Mountain...............................          124          774          804          3.8         -1.1
        Pacific................................          474          856          890          4.1         -1.3
        Puerto Rico............................           48          291          313          7.5         -1.1
    Rural by Region............................        2,249          479          503          4.8         -1.3
        New England............................           53          605          699         15.6         -1.8
        Middle Atlantic........................           84          489          499          2.1         -2.4
        South Atlantic.........................          297          501          518          3.4         -1.5
        East North Central.....................          304          479          506          5.7         -0.9
        East South Central.....................          278          453          471          4.0         -1.5
        West North Central.....................          525          449          471          5.0         -1.4
        West South Central.....................          349          447          467          4.4         -0.9
        Mountain...............................          213          507          540          6.4         -0.5
        Pacific................................          141          549          582          6.1         -0.9
By Payment Classification:                                                                                      
    All hospitals..............................        5,104          718          750          4.4         -0.9
    Large urban areas (populations over 1                                                                       
     million)..................................        1,780          808          842          4.3         -0.9
    Other urban areas (populations of 1 million                                                                 
     of fewer).................................        1,175          714          747          4.6         -0.8
    Rural areas................................        2,149          473          495          4.8         -1.4
    Teaching Status:                                                                                            
        Non-teaching...........................        4,031          623          647          3.9         -1.0
        Fewer than 100 Residents...............          841          756          791          4.7         -0.9
        100 or more Residents..................          232        1,039        1,096          5.5         -0.7
        Urban DSH:                                                                                              
            100 or more beds...................        1,410          814          850          4.5         -0.9
            Less than 100 beds.................          110          557          587          5.4         -1.1
        Rural DSH:                                                                                              
            Sole Community (SCH/EACH)..........          146          458          495          8.1         -1.9
            Referral Center (RRC/EACH).........           25          544          560          2.9         -0.2
        Other Rural:                                                                                            
            100 or more beds...................           89          501          519          3.6         -1.9
            Less than 100 beds.................          149          365          385          5.5         -1.6
    Urban teaching and DSH:....................                                                                 
        Both teaching and DSH..................          682          879          919          4.6         -0.8
        Teaching and no DSH....................          337          786          827          5.3         -0.8
        No teaching and DSH....................          838          712          743          4.4         -0.9
        No teaching and no DSH.................        1,098          672          695          3.4         -0.8
  Rural Hospital Types:                                                                                         
        Non special status hospitals...........        1,379          439          458          4.3         -1.7
        RRC/EACH...............................           90          559          574          2.5         -0.8
        SCH/EACH...............................          641          471          506          7.4         -1.2
        SCH, RRC and EACH......................           39          577          608          5.4         -1.0
    Hospitals Reclassified by the Medicare                                                                      
     Geographic Classification Review Board:                                                                    
            Reclassification Status During FY96                                                                 
             and FY97:                                                                                          
            Reclassified During Both FY96 and                                                                   
             FY97..............................          381          668          698          4.5         -1.1
            Reclassified During FY97 Only......          103          678          736          8.6          2.9
            Reclassified During FY96 Only......          228          631          640          1.4         -3.6
        FY97 Reclassifications:                                                                                 
            All Reclassified Hospitals.........          484          670          706          5.3         -0.3

[[Page 27584]]

                                                                                                                
            All Nonreclassified Hospitals......        4,593          725          756          4.3         -1.0
            All Urban Reclassified Hospitals...          167          762          799          4.9         -0.3
            Urban Nonreclassified Hospitals....        2,688          777          811          4.3         -0.9
            All Reclassified Rural Hospitals...          317          568          602          6.0         -0.3
            Rural Nonreclassified Hospitals....        1,905          443          463          4.3         -1.8
        Other Reclassified Hospitals (Section                                                                   
         1886 (D)(8)(B)).......................           27          552          575          4.1         -1.3
    Type of Ownership:                                                                                          
        Voluntary..............................        3,058          732          765          4.5         -0.9
        Proprietary............................          691          748          776          3.8         -0.7
        Government.............................        1,355          618          649          5.1         -1.1
    Medicare Utilization as a Percent of                                                                        
     Inpatient Days:                                                                                            
        0-25...................................          256          793          847          6.8         -1.4
        25-50..................................        1,285          844          880          4.2         -0.8
        50-65..................................        2,105          675          706          4.6         -0.9
        Over 65................................        1,353          603          628          4.1         -1.0
----------------------------------------------------------------------------------------------------------------



Appendix B: Technical Appendix on the Capital Acquisition Model and 
Required Adjustments

     Under section 1886(g)(1)(A) of the Act, we set capital prospective 
payment rates for FY 1992 through FY 1995 so that aggregate prospective 
payments for capital costs were projected to be 10 percent lower than 
the amount that would have been payable on a reasonable cost basis for 
capital-related costs in that year. To implement this requirement, we 
developed the capital acquisition model to determine the budget 
neutrality adjustment factor. Even though the budget neutrality 
requirement expires effective with FY 1996, we must continue to 
determine the recalibration and geographic reclassification budget 
neutrality adjustment factor, and the reduction in the Federal and 
hospital-specific rates for exceptions payments. We continue to use the 
capital acquisition model to determine these factors.
    The following data are used in the capital acquisition model for FY 
1997: the March 8, 1996 update of the cost reports for PPS-IX (cost 
reporting periods beginning in FY 1992), PPS-X (cost reporting periods 
beginning in FY 1993) and PPS-XI (cost reporting periods beginning in 
FY 1994), the January 1, 1996 update of the provider-specific file, and 
the March 1994 update of the intermediary audit file. The available 
data still lack certain items that were required for the determination 
of budget neutrality, including each hospital's projected new capital 
costs for each year, its projected old capital costs for each year, and 
the projected obligated capital amounts that will be put in use for 
patient care services and recognized as old capital each year.
    Since hospitals under alternative payment system waivers (that is, 
hospitals in Maryland) are currently excluded from the capital 
prospective payment system, we excluded these hospitals from our model.
    We then developed FY 1992, FY 1993, FY 1994, FY 1995, and FY 1996 
hospital-specific rates using the provider-specific file, the 
intermediary audit file, and, when available, cost reports. (We used 
the cumulative provider-specific file, which includes all updates to 
each hospital's records, and chose the latest record for each fiscal 
year.) We checked the consistency between the provider-specific file 
and the intermediary audit file. We also ensured that the FY 1993 
increase in the hospital-specific rate was at least 0.62 percent (the 
net FY 1993 update), that the FY 1994 hospital-specific rate was at 
least as large as the FY 1993 hospital-specific rate decreased by 2.16 
percent (the net FY 1994 update), that the FY 1995 increase in the 
hospital-specific rate was at least 0.05 percent (the net FY 1995 
update), and that the FY 1996 increase in the hospital-specific rate 
was at least 21.10 percent (the net FY 1996 update). We were able to 
match hospitals to the files as shown in the following table.

------------------------------------------------------------------------
                                                              Number of 
                           Source                             hospitals 
------------------------------------------------------------------------
Provider-Specific File Only................................          101
Provider-Specific and Audit File...........................         5029
                                                            ------------
      Total................................................         5130
------------------------------------------------------------------------

    Sixty-eight of these hospitals had unusable or missing data. We 
were able to backfill a hospital-specific rate for 42 of these 
hospitals from the cost reports as shown in the following table.

------------------------------------------------------------------------
                                                              Number of 
                           Source                             hospitals 
------------------------------------------------------------------------
PPS-VII Cost Reports.......................................            1
PPS-VIII Cost Reports......................................            2
PPS-IX Cost Reports........................................            3
PPS-X Cost Reports.........................................            7
PPS-XI Cost Reports........................................           29
                                                            ------------
      Total................................................           42
------------------------------------------------------------------------

    We did not have data for 26 hospitals, and had to eliminate them 
from the capital analysis. These hospitals likely are new hospitals or 
hospitals with very few Medicare admissions. This leaves us with 5104 
hospitals and should not affect the precision of the required 
adjustment factors.
    Next, we determined old and new capital amounts for FY 1992 using 
the PPS-IX cost reports as the first source of data. For FY 1993 
amounts, we used PPS-IX and PPS-X cost reports as the first source of 
data, weighting each cost report by the number of days in FY 1993. For 
FY 1994 amounts, we used PPS-X and PPS-XI cost reports as the first 
source of data, weighting each cost report by the number of days in FY 
1994. We were able to match 5,049 PPS-IX cost reports, 5,062 PPS-X cost 
reports, and 4,654 PPS-XI cost reports. In cases where cost reports 
could not be matched, we used the provider-specific file for old 
capital information. Even in cases where a cost report was available, 
the breakout of old and new capital was not always available. In these 
cases, we used the old capital amounts and new capital ratios from the 
provider-specific file. If these were missing, we derived

[[Page 27585]]

the old capital amount from the hospital-specific rate.
    Finally, we used the intermediary audit file to develop obligated 
capital amounts. Since the obligated amounts are aggregate projected 
amounts, we computed a Medicare capital cost per admission associated 
with these amounts. We adjusted the aggregate amounts by the following 
factors:
    (1) Medicare inpatient share of capital. This was derived from cost 
reports and was limited to the Medicare share of total inpatient days. 
It was necessary to limit the Medicare share because of data integrity 
problems. Medicare share of inpatient days is a reasonably good proxy 
for allocating capital. However, it may be understated if Medicare 
utilization is high, and may be overstated because it does not reflect 
the outpatient share of capital.
    (2) Capitalization factor. This factor allocates the aggregate 
amount of obligated capital to depreciation and interest amounts. 
Consistent with the assumptions in the capital input price index, we 
used a 25-year life for fixed capital and a 10-year life for movable 
capital, and an average projected interest rate of 6.7 percent. We also 
assumed that fixed capital acquisitions are about one-half of total 
capital. In conjunction with the useful life and interest rate 
assumptions, the resulting capitalized fixed capital is about one-half 
of total capitalization. This is consistent with the allocations 
between fixed and movable capital found on the cost reports. The ratio 
we developed is 0.137, which produces the first year capitalization 
based on the aggregate amount.
    (3) A divisor of Medicare admissions to derive the capital costs 
per discharge amount. Since we must project capital amounts for each 
hospital, we continued to use a Monte Carlo simulation to develop these 
amounts. (This model is described in detail in the August 30, 1991 
final rule (56 FR 43517).) The Monte Carlo simulation is now used only 
to project capital costs per discharge amounts for each hospital. We 
analyzed the distributions of capital increases, and noted a slightly 
negative correlation between the dollar level of capital cost per 
admission, and the rate of increase in capital. To determine the rate 
of increase in capital cost per admission, we multiplied the lesser of 
$3,000 or the capital cost per admission by .00006 and subtracted this 
result from 1.2. (Increases for capital levels over $3,000 were not 
influenced by the level of capital, so this part of the calculation was 
capped at $3,000.) We selected a random number from the normal 
distribution, multiplied it by 0.17 (the standard deviation) and added 
it to -0.04 (the mean) and then added 1 to create a multiplier. This 
random result was multiplied by the previous result to assign a rate of 
increase factor which was multiplied by the prior year's capital per 
discharge amount to develop a capital per discharge amount for the 
projected year.
    To model a projected year, we used the old and new capital for the 
prior year multiplied by 0.85 (aging factor). The 0.85 aging factor is 
the average of changes in capital over its life due to the gradual 
decrease in interest payments and the retirement of fully 
depreciatiated capital. The aged new and old capital is subtracted from 
the projected capital described in the previous paragraph. The 
difference represents newly acquired capital. If the hospital has 
obligated capital, any increase in ``old'' capital up to the total 
amount of obligated capital in FY 1993 and FY 1994 is assigned to 
obligated capital. Any remaining obligated capital is assigned to FY 
1995 up to the amount of the modeled increase in capital for FY 1995. 
Even though obligated capital must be put in use for patient care by 
October 1, 1994, the use of the obligated capital may have started late 
in FY 1994 with only part of the ``first year'' depreciation and 
interest realized in FY 1994. The remainder of the ``first year'' 
depreciation and interest would be realized in FY 1995. With the 
exception of certain hospitals about whom we have information to the 
contrary, we assume that hospitals would meet the expiration dates 
provided under the obligated capital provision. Hence, no obligated 
capital is assigned to years FY 1996 and later. Once obligated capital 
is assigned, it is included with the ``old'' capital and is capitalized 
into future years as part of ``old'' capital. The on-line obligated 
amounts are added to old capital and subtracted from the newly acquired 
capital to yield residual newly acquired capital, which is then added 
to new capital. The residual newly acquired capital is never permitted 
to be less than zero.
    Next, we computed the average total capital cost per discharge from 
the capital costs that were generated by the model and compared the 
results to total capital costs per discharge that we had projected 
independently of the model. We adjusted the newly acquired capital 
amounts proportionately, so that the total capital costs per discharge 
generated by the model match the independently projected capital costs 
per discharge.
    Once each hospital's capital-related costs are generated, the model 
projects capital payments. We use the actual payment parameters (for 
example, the case-mix index and the geographic adjustment factor) that 
are applicable to the specific hospital.
    To project capital payments, the model first assigns the applicable 
payment methodology (fully prospective or hold-harmless) to the 
hospital. If available, the model uses the payment methodology 
indicated in the PPS-IX cost reports or the provider-specific file. 
Otherwise, the model determines the methodology by comparing the 
hospital's FY 1992 hospital-specific rate to the adjusted Federal rate 
applicable to the hospital. The model simulates Federal rate payments 
using the assigned payment parameters and hospital-specific estimated 
outlier payments. The case-mix index for a hospital is derived from the 
FY 1995 MedPAR file using the FY 1997 DRG relative weights published in 
this proposed rule. The case-mix index is increased each year after FY 
1995 based on analysis of past experiences in case-mix increases.
    We analyzed the case-mix increases for the recent past and found 
that case-mix increases have decelerated to about 1.53 percent in FY 
1992, 0.80 percent in FY 1993, and 0.75 percent in FY 1994. It appears 
that the case-mix increase for FY 1995 accelerated to around 1.6 
percent. Early indications show that FY 1996 case-mix is increasing at 
FY 1995 level, around 1.6 percent. It appears that the deceleration of 
case-mix increases in FY 1993 and FY 1994 were anomalous, rather than 
the beginning of a trend. Therefore, in the model we are using the 
recent experience and have used a case-mix increase of 1.6 percent in 
FY 1995 and a projected case-mix increase of 1.6 percent in both FY 
1996 and FY 1997. (Since we are using FY 1995 cases for our analysis, 
the FY 1995 increase in case mix has no effect on projected capital 
payments.)
    Changes in geographic classification and revisions to the hospital 
wage data used to establish the hospital wage index affect the 
geographic adjustment factor. Changes in the DRG classification system 
and the relative weights affect the case-mix index.
    Section 1886(g)(1)(A) of the Act requires that, for discharges 
occurring after September 30, 1993, the unadjusted standard Federal 
rate be reduced by 7.4 percent. Consequently, the model reduces the 
unadjusted standard Federal rate by 7.4 percent effective in FY 1994. 
Since budget neutrality expires effective with FY 1996, this adjustment 
affects the adjusted Federal rate starting in FY 1996.

[[Page 27586]]

    Section 412.308(c)(4)(ii) requires that the estimated aggregate 
payments for the fiscal year, based on the Federal rate after any 
changes resulting from DRG reclassifications and recalibration and the 
geographic adjustment factor, equal the estimated aggregate payments 
based on the Federal rate that would have been made without such 
changes. For FY 1996, the budget neutrality adjustment factor was 
1.0025. To determine the factor for FY 1997, we first determined the 
portion of the Federal rate that would be paid for each hospital in FY 
1997 based on its applicable payment methodology. Using our model, we 
then compared estimated aggregate Federal rate payments based on the FY 
1996 DRG relative weights and the FY 1996 geographic adjustment factor 
to estimated aggregate Federal rate payments based on the FY 1997 
relative weights and the FY 1997 geographic adjustment factor. In 
making the comparison, we held the FY 1997 Federal rate portion 
constant and set the other budget neutrality adjustment factor and the 
exceptions reduction factor to 1.00. We determined that to achieve 
budget neutrality for the changes in the geographic adjustment factor 
and DRG classifications and relative weights, an incremental budget 
neutrality adjustment of 0.9992 for FY 1997 should be applied to the 
previous cumulative FY 1996 adjustment of 1.0025 (the product of the FY 
1993 incremental adjustment of 0.9980, the FY 1994 incremental 
adjustment of 1.0053, the FY 1995 incremental adjustment of 0.9998, and 
the FY 1996 incremental adjustment of 0.9994), yielding a cumulative 
adjustment of 1.0017 through FY 1997.
    The methodology used to determine the recalibration and geographic 
(DRG/GAF) budget neutrality adjustment factor is similar to that used 
in establishing budget neutrality adjustments under the prospective 
payment system for operating costs. One difference is that under the 
operating prospective payment system, the budget neutrality adjustments 
for the effect of geographic reclassifications are determined 
separately from the effects of other changes in the hospital wage index 
and the DRG relative weights. Under the capital prospective payment 
system, there is a single DRG/GAF budget neutrality adjustment factor 
for changes in the geographic adjustment factor (including geographic 
reclassification) and the DRG relative weights. In addition, there is 
no adjustment for the effects that geographic reclassification has on 
the other payment parameters, such as the payments for serving low 
income patients or the large urban add-on.
    In addition to computing the DRG/GAF budget neutrality adjustment 
factor, we used the model to simulate total payments under the 
prospective payment system.
    Additional payments under the exceptions process are accounted for 
through a reduction in the Federal and hospital-specific rates. 
Therefore, we used the model to calculate the exceptions reduction 
factor. This exceptions reduction factor ensures that aggregate 
payments under the capital prospective payment system, including 
exceptions payments, are projected to equal the aggregate payments that 
would have been made under the capital prospective payment system 
without an exceptions process. Since changes in the level of the 
payment rates change the level of payments under the exceptions 
process, the exceptions reduction factor must be determined through 
iteration.
    In the August 30, 1991 final rule (56 FR 43517), we indicated that 
we would publish each year the estimated payment factors generated by 
the model to determine payments for the next 5 years. The table below 
provides the actual factors for FY 1992, FY 1993, FY 1994, FY 1995, FY 
1996, the proposed FY 1997 factor, and the estimated factors that would 
be applicable through FY 2001. We caution that, except with respect to 
FY 1992, FY 1993, FY 1994, FY 1995 and FY 1996, these are estimates 
only, and are subject to revisions resulting from continued 
methodological refinements, more recent data, and any payment policy 
changes that may occur. In this regard, we note that in making these 
projections we have assumed that the cumulative DRG/GAF adjustment 
factor will remain at 1.0017 for FY 1997 and later because we do not 
have sufficient information to estimate the change that will occur in 
the factor for years after FY 1997.
    The projections are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                       Federal  
                                                                 Update     Exceptions     Budget    rate (after
                         Fiscal year                             factor     reduction    neutrality    outlier) 
                                                                              factor       factor     reduction)
----------------------------------------------------------------------------------------------------------------
1992........................................................          N/A       0.9813       0.9602       415.59
1993........................................................         6.07        .9756        .9162   \1\ 417.29
1994........................................................         3.04        .9485        .8947   \2\ 378.34
1995........................................................         3.44        .9734        .8432   \3\ 376.83
1996........................................................         1.20        .9849          N/A   \4\ 461.96
1997........................................................         1.00        .9393          N/A   \5\ 441.84
1998........................................................         1.00        .9161          N/A       435.23
1999........................................................         1.00        .9228          N/A       442.80
2000........................................................         1.10        .9155          N/A       444.13
2001........................................................         1.10         N/A<SUP>6          N/A       490.46
----------------------------------------------------------------------------------------------------------------
\1\ Note: Includes the DRG/GAF adjustment factor of 0.9980 and the change in the outlier adjustment from 0.9497 
  in FY 1992 to 0.9496 in FY 1993.                                                                              
\2\ Note: Includes the 7.4 percent reduction in the unadjusted standard Federal rate. Also includes the DRG/GAF 
  adjustment factor of 1.0033 and the change in the outlier adjustment from 0.9496 in FY 1993 to 0.9454 in FY   
  1994.                                                                                                         
\3\ Note: Includes the DRG/GAF adjustment factor of 1.0031 and the change in the outlier adjustment from 0.9454 
  in FY 1994 to 0.9414 in FY 1995.                                                                              
\4\ Note: Includes the the transfer adjustment of .9972. Also includes the DRG/GAF adjustment factor of 1.0025  
  and the change in the outlier adjustment from 0.9414 in FY 1995 to 0.9536 in FY 1996.                         
\5\ Note: Includes the DRG/GAF adjustment factor of 1.0017 and the change in the outlier adjustment from 0.9536 
  in FY 1996 to 0.9476 in FY 1997. Future adjustments are, for purposes of this projection, assumed to remain at
  the same level.                                                                                               
\6\ Note: We are unable to estimate exceptions payments for the year under the special exceptions provision     
  (Sec.  412.348(g) of the regulations) because the regular exceptions provision (Sec.  412.348(e)) expires.    


[[Page 27587]]



Appendix C: Rebased Market Basket Data Sources I. Data Sources Used To 
Determine the Market Basket Relative Weights and Choice of Price Proxy 
Variables for the Operating Hospital Input Price Indexes

    As discussed in section IV of the preamble to this proposed rule, 
we are rebasing and revising the hospital market baskets. This appendix 
describes the technical features of the 1992-based indexes that we are 
proposing in this rule. For both the prospective payment and excluded 
hospital market baskets, the differences between the proposed 1992-
based market basket and the previous 1987-based market basket are 
noted. In the September 4, 1990 final rule (55 FR 36170), we discussed 
in detail the 1987-based hospital market baskets.
    We present this description of the hospital operating market 
baskets in three steps:
    <bullet> A synopsis of the structural differences between the 1987-
based market baskets and the proposed 1992-based market baskets.
    <bullet> A description of the methodology used to develop the cost 
category weights in the 1992-based market baskets, making note of the 
differences from the methodology used to develop the 1987-based market 
baskets.
    <bullet> A description of the data sources used to measure price 
change for each component of the 1992-based market baskets, making note 
of the differences from the price proxies used in the 1987-based 
hospital market baskets.

A. Synopsis of Structural Changes Adopted in the Rebased 1992 Operating 
Hospital Market Baskets

    Three major structural differences exist between the 1987-based and 
the proposed 1992-based operating hospital market baskets.
    <bullet> The proposed hospital market baskets are based on more 
recent hospital expenditure data. The 1987-based market baskets 
contained skeletal cost shares that were derived from the 1987 cost 
data from the 1988 Annual Survey of the American Hospital Association 
(AHA). The 1992-based market baskets use data from the hospital cost 
reports for cost reporting periods beginning on or after October 1, 
1991 and before October 1, 1992.
    <bullet> Some cost categories have been combined, namely Fuel, Oil, 
Coal, and Other Fuel with Motor Gasoline, and Blood Services with 
Chemicals. These category mergers reflect the Bureau of Economic 
Analysis (BEA) reclassification decisions in the 1987 update of the BEA 
Input-Output Tables.
    <bullet> In the proposed 1992-based market basket, the sample of 
excluded hospitals is restricted to more closely reflect the average 
Medicare length of stay in excluded hospitals. We have used cost report 
data for excluded hospitals from only those hospitals in which the 
Medicare average length of stay is within 15 percent of the total 
average length of stay to more accurately reflect the structure of 
costs for Medicare cases. This is a change from the FY 1987-based 
market basket, for which data from all excluded hospitals were used.

B. Methodology for Developing the Cost Category Weights

    Cost category weights for the 1992-based market baskets were 
developed in four stages. First, base weights for three (Wages and 
Salaries, Employee Benefits, Pharmaceuticals) of the six main 
categories were derived from the 1992 Medicare cost reports for 
operating costs. Second, the weight for Nonmedical Professional Fees 
was developed by subtracting Medical Professional Fees reported in the 
Hospital Cost Report Information System (HCRIS) file from AHA Annual 
Survey Total Professional Fees to obtain Nonmedical Professional Fees, 
and the weight for Professional Liability Insurance was developed using 
1989 HCRIS data trended forward to 1992, using the relative importance 
values in the previous market baskets. Third, the sum of Wages and 
Salaries, Employee Benefits, Pharmaceuticals, Nonmedical Professional 
Fees, and Professional Liability Insurance was subtracted from total 
expenses to obtain All Other Expenses. Finally, the weight for All 
Other Expenses was divided into subcategories using cost shares from 
the 1987 Input-Output Table for the hospital industry, produced by the 
U.S. Department of Commerce, Bureau of Economic Analysis, aged to 1992 
using price changes. We will incorporate 1992 data from the U.S. 
Department of Commerce into the final market basket if the data are 
released in time to be analyzed in developing the final rule.
    Below, we describe the source of the six main category weights and 
their subcategories in the 1992-based market baskets. We make note of 
the differences between the methodologies used to develop the 1987-
based and the 1992-based market baskets.
    1. Wages and Salaries: The cost weight for the Wages and Salaries 
category was derived using the 1992 Medicare cost reports. Contract 
Labor, which is also derived from the 1992 Medicare cost reports, is 
split between the Wages and Salaries and Employee Benefits cost 
categories, using the relationship for employed workers. Examples of 
Contract Labor are registered nurses and workers in hospital food 
service or security who are employed and paid by firms that contract 
for their work with the hospital. The Wages and Salaries cost category 
was disaggregated into nine occupational subcategories (professional 
and technical, managers and administration, sales, clerical, craft and 
kindred, operatives excluding transport, transport equipment 
operatives, nonfarm laborers and service workers) to reflect the mix of 
occupational inputs used by hospitals. The Contract Labor wages and 
salaries component was allocated proportionally to Professional-
Technical and Service occupations. The 1987-based weights were 
developed from the 1987 Current Population Survey, while the 1992-based 
weights were developed from the 1992 Current Population Survey.
    2. Employee Benefits: The cost weight for the employee benefits 
category was derived from the 1992 cost reports. Like wages and 
salaries, the employee benefit weight in each 1992-based market basket 
is a composite of nine labor subcategories. The employee benefits 
categories in the 1987-based market baskets were developed from the 
1987 AHA Annual Survey and used the 1987 Current Population Survey. In 
1987 Contract Labor's implied fringe benefits were allocated 
proportionally to Professional and Technical occupations, while in 1992 
they were allocated to Professional-Technical and Service occupations.
    3. Nonmedical Professional Fees: The cost weight for the nonmedical 
professional fees category was derived from the 1992 Medicare Cost 
Reports and AHA Annual Survey data. Total professional fees were split 
into the subcategories medical and other (nonmedical) fees using AHA 
Total Professional Fees minus HCRIS Medical Professional Fees to equal 
Nonmedical Professional Fees. The 1987-based nonmedical professional 
fees cost category was derived from the 1987 AHA Annual Survey and 
American Medical Association (AMA) data. It was split into the 
subcategories medical and other fees using data derived from the 
American Medical Association. The medical professional fees category is 
excluded from the hospital market basket since it is paid under 
Medicare Part B.
    4. Professional Liability Insurance: The 1987-based market baskets 
have weights for professional liability insurance that were derived 
from the June 30 and December 31, 1987 HAS/Monitrend surveys. The cost 
weight for

[[Page 27588]]

the 1992-based professional liability insurance category was derived 
from 1989 HCRIS cost shares trended to 1992 using the change in the 
relative importance factor for professional liability insurance 
(malpractice) from the previous 1987-based prospective payment hospital 
and excluded hospital market baskets.
    5. Utilities: For the 1987-based market baskets, the cost weight 
for utilities was derived by extrapolating the 1985 AHA Annual Survey 
utilities cost weight forward to 1987 using the rate of growth in the 
HAS/Monitrend cost weight for utilities between 1985 and 1987. The 1987 
Utility subcategory weights were aged from their 1982-based index 
subcategory weights using price changes from 1982 to 1987. The 1992-
based market basket cost weights for the subcategories (fuel, oil and 
gasoline; electricity; natural gas; and water and sewage) were derived 
from the Bureau of Economic Analysis' 1987 Input-Output table for the 
hospital industry, aged forward to 1992 by price changes and summed to 
a weight for utilities.
    6. All Other Goods and Services: The all other goods and services 
category has more subcategories than any other market basket category. 
Goods found in this category include: direct service food, contract 
service food, pharmaceuticals, chemicals, medical instruments, photo 
supplies, rubber and plastics, paper products, apparel, machinery and 
equipment and miscellaneous products. Services found in this category 
include: business services, computer services, transportation and 
shipping, telephone, postage, other labor-intensive services, and other 
nonlabor-intensive services. The share for pharmaceuticals was derived 
from the 1992 Medicare cost reports. Relative shares for the other 
subcategories were derived from the 1987 Bureau of Economic Analysis' 
Input-Output table for the hospital industry and were aged forward to 
1992 using price changes. As noted above, if more recent U.S. 
Department of Commerce data become available for these categories and 
we have time to analyze these data before the publication of the final 
rule, they will be incorporated into the final market baskets.

C. Price Proxies Used to Measure Cost Category Growth

    1. Wages and Salaries: For measuring price growth in the 1992-based 
market basket, 10 price proxies are applied to the 9 occupational 
subcategories within the wages and salaries component. As in the 1987-
based market basket, the professional and technical subcategory was 
split in half. An Employee Cost Index (ECI) for hourly wages paid to 
civilian hospital workers was applied to one half. An ECI of hourly 
wages and salaries paid to professional and technical workers in 
private industry was applied to the other half of the professional and 
technical component. The other eight occupations subcategories of the 
wages and salaries component were proxied using ECIs for wages and 
salaries for private industry workers in their respective occupational 
categories.
    2. Employee Benefits: The 1992-based hospital market baskets use 
occupation-specific ECIs for employee benefits. The distribution of 
weights and price proxies is the same as for wages and salaries 
discussed above, but occupation-specific employee benefit ECIs replace 
occupation-specific wages and salaries ECIs. The components are summed 
into a composite index, just as was done for the 1987-based market 
basket.
    3. Nonmedical Professional Fees: The ECI for compensation for 
professional and technical workers in private industry is applied to 
this category. This is a revision from the 1987-based market basket in 
which the ECI for wages and salaries for professional and technical 
workers in private industry was used.
    4. Fuel, Oil, and Gasoline: The percentage change in the price of 
refined petroleum products as measured by the Producer Price Index 
(PPI) (Commodity Code #057) was applied to this component. This is a 
revision from the 1987-based indexes in which the PPIs for Light Fuel 
Oil (Commodity Code #0573) and Gasoline (Commodity Code #0571) were 
used.
    5. Electricity: The percentage change in the price of commercial 
electric power as measured by the PPI (Commodity Code #0542) was 
applied to this component. This is a revision from the 1987-based 
indexes in which the PPI for industrial power (Commodity Code #0543) 
was used.
    6. Natural Gas: The percentage change in the price of gas fuels as 
measured by the PPI (Commodity Code #0552) was applied to this 
component. This is a revision from the 1987-based indexes in which the 
PPI for Natural Gas (Commodity Code #0531) was used.
    7. Water and Sewerage: The percentage change in the price of water 
and sewerage maintenance as measured by the Consumer Price Index (CPI) 
for all urban consumers was applied to this component. The same price 
measure was used in the 1987-based market baskets.
    8. Professional Liability Insurance: The percentage change in the 
hospital professional liability insurance price as estimated by 
hospital industry professional liability insurance premium increase was 
applied to this component. The same price measure was used in the 1987-
based market baskets.
    9. Pharmaceuticals: The percentage change in the price of ethical 
preparations as measured by the PPI (Commodity Code #0635) was applied 
to this variable. The same price measure was used in the 1987-based 
market baskets.
    10. Food, Direct Purchases: The percentage change in the price of 
processed foods and feeds as measured by the PPI (Commodity Code #02) 
was applied to this component. The same price measure was used in the 
1987-based market baskets.
    11. Food, Contract Services: The percentage change in the price of 
food purchased away from home as measured by the CPI for all urban 
consumers was applied to this component. The same price measure was 
used in the 1987-based market baskets.
    12. Chemicals: The percentage change in the price of industrial 
chemical products as measured by the PPI (Commodity Code #061) was 
applied to this component. The same price measure was used in the 1987-
based market baskets.
    13. Surgical and Medical Equipment: The percentage change in the 
price of medical and surgical instruments as measured by the PPI 
(Commodity Code #1562) was applied to this component. The same price 
measure was used in the 1987-based market baskets.
    14. Photographic Supplies: The percentage change in the price of 
photographic supplies as measured by the PPI (Commodity Code #1542) was 
applied to this component. The same price measure was used in the 1987-
based market baskets.
    15. Rubber and Plastics: The percentage change in the price of 
rubber and plastic products as measured by the PPI (Commodity Code #07) 
was applied to this component. The same price measure was used in the 
1987-based market baskets.
    16. Paper Products: The percentage change in the price of converted 
paper and paperboard products as measured by the PPI (Commodity Code # 
0915) was used. This is a revision from the 1987-based indexes in which 
a weighted average of the percentage change in the price of converted 
paper and paperboard products and the percentage change in the price of 
paper excluding newsprint and packaging paper (Commodity Code #091301) 
was used.

[[Page 27589]]

    17. Apparel: The percentage change in the price of apparel as 
measured by the PPI (Commodity Code #381) was applied to this 
component. This is a revision from the 1987-based indexes in which the 
PPI for textile house furnishings (Commodity Code #0382) was used.
    18. Minor Machinery and Equipment: The percentage change in the 
price of machinery and equipment as measured by the PPI (Commodity Code 
#11) was applied to this component. The same price measure was used in 
the 1987-based market baskets.
    19. Miscellaneous Products: The percentage change in the price of 
all finished goods as measured by the PPI was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
    20. Business Services: The ECI for compensation for workers in the 
business services industry was applied to this component. This is a 
revision from the 1987-based indexes in which the percentage change in 
the AHE for wages and salaries for production and nonsupervisory 
workers in the business services industry as measured by the Bureau of 
Labor Statistics (SIC Code 73) was used.
    21. Computer and Data Processing Services: The percentage change in 
the AHE of production and nonsupervisory workers engaged in firms 
furnishing computer data processing services (SIC Code 737) was applied 
to this component. The same price measure was used in the 1987-based 
market baskets.
    22. Transportation and Shipping: The percentage change in the 
transportation component of the CPI for all urban consumers was applied 
to this component. The same price measure was used in the 1987-based 
market baskets.
    23. Telephone: The percentage change in the price of telephone 
services as measured by the CPI for all urban consumers was applied to 
this component. The same price measure was used in the 1987-based 
market baskets.
    24. Postage: The percentage change in the price of postage as 
measured by the CPI for all urban consumers was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
    25. All Other Services, Labor Intensive: The percentage change in 
the ECI for compensation paid to service workers employed in private 
industry was applied to this component. This is a revision from the 
1987-based indexes in which the ECI for wages and salaries paid to 
service workers employed in private industry was used.
    26. All Other Services, Nonlabor Intensive: The percentage change 
in the all-items component of the CPI for all urban consumers was 
applied to this component. The same price measure was used in the 1987-
based market baskets.
    For further discussion of the rationale for choosing specific price 
proxies, we refer the reader to the September 3, 1986 final rule (51 FR 
31582).

II. Data Sources Used to Determine the Cost Category Weights and 
Vintage Weights, and Choices of Price Proxy Variables for the Hospital 
Capital Input Price Index

    In the preamble to this proposed rule, we discuss the rebasing of 
the capital input price index (CIPI). This appendix describes certain 
technical features of the 1992-based index that we are proposing in 
this rule, as well as differences between the proposed 1992-based CIPI 
and the current 1987-based CIPI. We discussed the 1987-based CIPI in 
the September 1, 1995 final rule (60 FR 45817.)
    This discussion has the following three parts:
    <bullet> A synopsis of the differences between the 1987-based CIPI 
and the proposed 1992-based CIPI.
    <bullet> A description of the methodology used to develop the cost 
category weights and vintage weights in the 1992-based CIPI, making 
note of the differences from the methodology used to develop the 1987-
based CIPI.
    <bullet> A description of the data sources used to measure price 
change for each component of the 1992-based CIPI, making note of the 
differences from the price proxies used in the 1987-based CIPI.

A. Synopsis of Changes Adopted in the Rebased 1992 CIPI

    We made no structural changes in the 1992-based CIPI. The only 
major change is the use of more recent hospital capital expenditure 
data in the proposed 1992-based CIPI.
    The 1987-based CIPI contained cost category weights that were 
derived from 1987 Medicare cost report data and the 1987 Annual Survey 
of the AHA. The 1992-based CIPI uses data from the hospital Medicare 
cost reports for cost periods beginning between October 1, 1991 and 
September 30, 1992. The 1992-based CIPI also uses data from the 1992 
Annual Survey of the AHA.
    The 1987-based CIPI contained vintage weights that were derived 
from 1987 Medicare cost report data, the 1963-1987 Panel Survey of the 
AHA, and the 1980-1989 Securities Data Corporation data on hospital 
bonds. The 1992-based CIPI uses data from the 1992 Medicare cost 
reports, the 1963-1992 Panel Survey of the AHA, and 1980-1992 
Securities Data Corporation data on hospital bonds.

B. Methodology for Developing Cost Category Weights and Vintage Weights 
for the 1992-based CIPI

    There are five cost categories in the CIPI: building and fixed 
equipment depreciation, movable equipment depreciation, capital-related 
interest expense from government/nonprofit debt instruments, capital-
related interest expense from for-profit debt instruments, and other 
capital-related expenses, such as taxes and insurance. The methodology 
for developing each of these cost category weights is described below:
    1. Building and Fixed Equipment Depreciation: The 1992-based cost 
weight for building and fixed equipment depreciation was derived using 
the 1992 Medicare cost reports. The proportion of lease expenses 
attributable to building and fixed equipment was included in the cost 
weight based on the proportion of overall capital expenses allocated to 
building and fixed equipment depreciation. The 1987-based weight was 
developed from the 1987 Medicare cost reports and the 1987 AHA Annual 
Survey.
    2. Movable Equipment Depreciation: The 1992-based cost weight for 
movable equipment depreciation was derived using the 1992 Medicare Cost 
Reports. The proportion of lease expenses attributable to movable 
equipment was included in the cost weight based on the proportion of 
overall capital expenses allocated to movable equipment depreciation. 
The 1987-based weight was developed from the 1987 Medicare cost reports 
and the 1987 AHA Annual Survey.
    3. Government/Nonprofit Interest: The 1992-based cost weight for 
government/nonprofit interest was derived using the 1992 AHA Annual 
Survey data. The government/nonprofit interest is 85 percent of total 
interest, reflecting the relative debts of the government/nonprofit 
hospital sector and the for-profit hospital sector. The proportion of 
lease expenses attributable to government/nonprofit interest was 
included in the cost weight based on the proportion of overall capital 
expenses allocated to government/non-profit interest expense. The 1987-
based weight was developed from the 1987 AHA Annual Survey.
    4. For-Profit Interest: The 1992-based cost weight of for-profit 
interest was

[[Page 27590]]

derived using the 1992 AHA Annual Survey data. The for-profit interest 
is 15 percent of total interest, reflecting the relative debts of the 
government/nonprofit hospital sector and the for-profit hospital 
sector. The proportion of lease expenses attributable to for-profit 
interest was included in the cost weight based on the proportion of 
overall capital expenses allocated to for-profit interest expense. The 
1987-based weight was developed from the 1987 AHA Annual Survey.
    5. Other Capital-Related Expenses: The 1992-based cost weight for 
other capital-related expenses was derived using 1992 Medicare cost 
reports. The proportion of lease expenses attributable to other 
capital-related expenses was included in the cost weight based on the 
proportion of overall capital expenses allocated to other capital-
related expenses. The 1987-based weight was developed from the 1987 
Medicare cost reports and the 1987 Capital Expenditure Survey.
    There are three sets of vintage weights in the CIPI: building and 
fixed equipment depreciation, movable equipment depreciation, and 
interest expense. The methodology for developing each of these vintage 
weights is described below.
    1. Building and Fixed Equipment: The 1992-based building and fixed 
equipment vintage weights were derived from the 1992 Medicare cost 
reports and the 1963-1992 AHA Panel Survey. The 1987-based weights were 
developed from the 1987 Medicare cost reports and the 1963-1987 AHA 
Panel Survey.
    2. Movable Equipment: The 1992-based movable equipment vintage 
weights were derived from the 1992 Medicare cost reports and the 1963-
1992 AHA Panel Survey. The 1987-based weights were developed from the 
1987 Medicare cost reports and the 1963-1987 AHA Panel Survey.
    3. Capital-Related Interest: The 1992-based movable equipment 
vintage weights were derived from the 1980-1992 Securities Data 
Corporation data on hospital bonds and the 1963-1992 AHA Panel Survey. 
The 1987-based weights were developed from the 1980-1989 Securities 
Data Corporation data on hospital bonds and the 1963-1987 AHA Panel 
Survey.

C. Price Proxies Used to Measure Cost Category Growth in the CIPI

    1. Building and Fixed Equipment Depreciation: The percentage change 
in the vintage-weighted price of building and fixed equipment 
depreciation as measured by the Boeckh institutional construction index 
was applied to this category in the 1992-based CIPI. The same price 
proxy was used in the 1987-based CIPI.
    2. Movable Equipment Depreciation: The percentage change in the 
vintage-weighted price of movable equipment depreciation as measured by 
the Producer Price Index (PPI) for machinery and equipment was applied 
to this category in the 1992-based CIPI. The same price proxy was used 
in the 1987-based CIPI.
    3. Government/Nonprofit Interest Expense: The percentage change in 
the vintage-weighted price of government/nonprofit interest expense as 
measured by the Average yield on Domestic Municipal Bonds from the Bond 
Buyer index of 20 bonds was applied to this category in the 1992-based 
CIPI. The same price proxy was used in the 1987-based CIPI.
    4. For-Profit Interest Expense: The percentage change in the 
vintage-weighted price of for-profit interest expense as measured by 
the Average yield on Moody's AAA Bonds was applied to this category in 
the 1992-based CIPI. The same price proxy was used in the 1987-based 
CIPI.
    5. Other Capital-Related Expenses: The percentage change in the 
price of other capital-related expenses as measured by the CPI for all 
urban consumers for residential rent was applied to this category in 
the 1992-based CIPI. The same price proxy was used in the 1987-based 
CIPI.
    We provided more detailed discussion of the rationale for the 
choice of these price proxies in the June 2, 1995 proposed rule (60 FR 
29227) and in the September 1, 1995 final rule (60 FR 45815).
The Honorable Albert Gore, Jr.
President of the Senate
Washington, D.C. 20510

    Dear Mr. President: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires me to report to Congress the initial estimate 
of the applicable percentage increase in inpatient hospital payment 
rates for Federal Fiscal Year (FY) 1997 that I will recommend for 
hospitals subject to the Medicare prospective payment system (PPS) 
and for hospitals and units excluded from PPS. This submission 
constitutes the required report.
    Current law mandates an update for all PPS hospitals of the 
market basket rate of increase minus 0.5 percentage points. The 
President's FY 1997 budget includes an update for PPS hospitals in 
both large urban areas and other areas equal to the market basket 
rate of increase minus 1.5 percentage points. The President's FY 
1997 budget estimated the PPS market basket rate of increase for FY 
1997 to be 3.6 percent. Based on this estimate, we recommend an 
update for hospitals in both large urban and other areas of 2.1 
percent. However, recent data from ProPAC and other sources suggest 
that the final PPS market basket rate of increase for FY 1997 will 
be lower.
    Sole community hospitals (SCHs) are the sole source of care in 
their area and are afforded special payment protection to maintain 
access to services for Medicare beneficiaries. SCHs are paid the 
higher of a hospital-specific rate or the Federal PPS rate. Current 
law mandates an update for sole community hospitals of the market 
basket rate of increase minus 0.5 percentage points. Consistent with 
the President's FY 1997 budget, we recommend an update to hospital-
specific rates equal to the increase for all PPS hospitals; that is, 
the market basket rate of increase of 3.6 percent minus 1.5 
percentage points, or 2.1 percent.
    Hospitals and distinct part hospital units excluded from PPS are 
paid based on their reasonable costs subject to a limit under the 
Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982. Current 
law mandates an update for all hospitals and distinct part hospital 
units excluded from PPS equal to the rate of increase in the 
excluded hospital market basket minus 1.0 percentage point, although 
the update can be higher for certain hospitals and units with costs 
that are greater than their target amounts. The President's FY 1997 
budget incorporates an increase in the TEFRA limit equal to the rate 
of increase in the excluded hospital market basket (3.6 percent) 
minus 1.5 percentage points. Therefore, we recommend an increase in 
the TEFRA limit of 2.1 percent.
    My recommendation for the updates is based on cost projections 
used in the President's FY 1997 budget. A final recommendation on 
the appropriate percentage increases for FY 1997 will be made nearer 
the beginning of the new Federal Fiscal Year based on the most 
current market basket projection available at that time. The final 
recommendation will incorporate our analysis of the latest estimates 
of all relevant factors, including recommendations by the 
Prospective Payment Assessment Commission (ProPAC). We currently 
expect that the final estimate of the market basket rate of increase 
will be lower than the estimate used in the President's FY 1997 
budget.
    Section 1886(d)(4)(C)(iv) of the Act also requires that I 
include in my report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time I 
do not anticipate recommending any adjustment to the DRG weighting 
factors for FY 1997.
    I am pleased to provide this recommendation to you. I am also 
sending a copy of this letter to the Speaker of the House of 
Representatives.
        Sincerely,
Donna E. Shalala
The Honorable Newt Gingrich
Speaker of the House of Representatives
Washington, D.C. 20515

    Dear Mr. Speaker: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires me to report to Congress the initial estimate 
of the applicable percentage increase in inpatient hospital payment 
rates for Federal Fiscal Year (FY) 1997 that I will recommend for 
hospitals subject to the Medicare prospective payment system (PPS) 
and for hospitals and units excluded from PPS. This submission 
constitutes the required report.

[[Page 27591]]

    Current law mandates an update for all PPS hospitals of the 
market basket rate of increase minus 0.5 percentage points. The 
President's FY 1997 budget includes an update for PPS hospitals in 
both large urban areas and other areas equal to the market basket 
rate of increase minus 1.5 percentage points. The President's FY 
1997 budget estimated the PPS market basket rate of increase for FY 
1997 to be 3.6 percent. Based on this estimate, we recommend an 
update for hospitals in both large urban and other areas of 2.1 
percent. However, recent data from ProPAC and other sources suggest 
that the final PPS market basket rate of increase for FY 1997 will 
be lower.
    Sole community hospitals (SCHs) are the sole source of care in 
their area and are afforded special payment protection to maintain 
access to services for Medicare beneficiaries. SCHs are paid the 
higher of a hospital-specific rate or the Federal PPS rate. Current 
law mandates an update for sole community hospitals of the market 
basket rate of increase minus 0.5 percentage points. Consistent with 
the President's FY 1997 budget, we recommend an update to hospital-
specific rates equal to the increase for all PPS hospitals; that is, 
the market basket rate of increase of 3.6 percent minus 1.5 
percentage points, or 2.1 percent.
    Hospitals and distinct part hospital units excluded from PPS are 
paid based on their reasonable costs subject to a limit under the 
Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982. Current 
law mandates an update for all hospitals and distinct part hospital 
units excluded from PPS equal to the rate of increase in the 
excluded hospital market basket minus 1.0 percentage point, although 
the update can be higher for certain hospitals and units with costs 
that are greater than their target amounts. The President's FY 1997 
budget incorporates an increase in the TEFRA limit equal to the rate 
of increase in the excluded hospital market basket (3.6 percent) 
minus 1.5 percentage points. Therefore, we recommend an increase in 
the TEFRA limit of 2.1 percent.
    My recommendation for the updates is based on cost projections 
used in the President's FY 1997 budget. A final recommendation on 
the appropriate percentage increases for FY 1997 will be made nearer 
the beginning of the new Federal Fiscal Year based on the most 
current market basket projection available at that time. The final 
recommendation will incorporate our analysis of the latest estimates 
of all relevant factors, including recommendations by the 
Prospective Payment Assessment Commission (ProPAC). We currently 
expect that the final estimate of the market basket rate of increase 
will be lower than the estimate used in the President's FY 1997 
budget.
    Section 1886(d)(4)(C)(iv) of the Act also requires that I 
include in my report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time I 
do not anticipate recommending any adjustment to the DRG weighting 
factors for FY 1997.
    I am pleased to provide this recommendation to you. I am also 
sending a copy of this letter to the President of the Senate.
        Sincerely,
Donna E. Shalala

Appendix E: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background
    Several provisions of the Social Security Act (the Act) address the 
setting of update factors for inpatient services furnished in FY 1997 
by hospitals subject to the prospective payment system and those 
excluded from the prospective payment system. Section 
1886(b)(3)(B)(i)(XII) of the Act sets the FY 1997 percentage increase 
in the operating cost standardized amounts equal to the rate of 
increase in the hospital market basket minus 0.5 percentage points for 
prospective payment hospitals in all areas. Section 1886(b)(3)(B)(iv) 
of the Act sets the FY 1997 percentage increase in the hospital-
specific rates applicable to sole community hospitals equal to the rate 
set forth in section 1886(b)(3)(B)(i) of the Act, that is, the same 
update factor as all other hospitals subject to the prospective payment 
system, or the rate of increase in the market basket minus 0.5 
percentage points. Section 1886(b)(3)(B)(ii) of the Act sets the FY 
1997 percentage increase in the rate of increase limits for hospitals 
excluded from the prospective payment system equal to the rate of 
increase in the excluded hospital market basket minus the applicable 
reduction or, in the case of a hospital in a fiscal year for which the 
hospital's update adjustment percentage is at least 10 percent, the 
excluded hospital market basket percentage increase. Under section 
1886(b)(3)(B)(v) of the Act, a hospital's update adjustment percentage 
increase for FY 1997 is the percentage increase by which the hospital's 
allowable operating costs of inpatient hospital services recognized 
under this title for the cost reporting period beginning in FY 1990 
exceed the hospital's target amount for such cost reporting period, 
increased for each fiscal year (beginning with FY 1994) by the sum of 
any of the hospital's applicable reductions for previous years. The 
applicable reduction with respect to a hospital for FY 1997 is the 
lesser of 1 percentage point or the percentage point difference between 
10 percent and the hospital's update adjustment percentage for FY 1997.
    In accordance with section 1886(d)(3)(A) of the Act, we are 
proposing to update the standardized amounts, the hospital-specific 
rates, and the rate-of-increase limits for hospitals excluded for the 
prospective payment system as provided in section 1886(b)(3)(B) of the 
Act. Based on the first quarter 1996 forecast of the FY 1997 rebased 
market basket increase of 2.7 percent for hospitals subject to the 
prospective payment system, the proposed updates in the standardized 
amounts are 2.2 percent for hospitals in both large urban and other 
areas. The proposed update in the hospital-specific rate applicable to 
sole community hospitals is 2.2 percent (that is, the market basket 
rate of increase of 2.7 percent minus 0.5 percentage points). The 
proposed update for hospitals excluded from the prospective payment 
system is based on the percentage increase in the excluded hospital 
market basket (currently estimated at 2.7 percent) minus the applicable 
reduction factor. The applicable reduction factor is the lesser of 1 
percentage point or the percentage point difference between 10 percent 
and the hospital's update adjustment percentage. Therefore, for 
excluded hospitals, the hospital-specific proposed update can vary 
between 1.7 and 2.7 percent.
    Sections 1886(e)(2)(A) and (3)(A) of the Act require that the 
Prospective Payment Assessment Commission (ProPAC) recommend to the 
Congress by March 1, 1996 an update factor that takes into account 
changes in the market basket rate of increase index, hospital 
productivity, technological and scientific advances, the quality of 
health care provided in hospitals, and long-term cost effectiveness in 
the provision of inpatient hospital services.
    In its March 1, 1996 report, ProPAC recommended update factors to 
the standardized amounts equal to the percentage increase in the market 
basket minus 0.7 to 2.0 percentage points for hospitals in both large 
urban and other areas (Recommendation 10). Based on its market basket 
rate of increase estimate of 2.7 percent, ProPAC's recommended update 
to the standardized amounts equals 2.0 to 0.7 percent for hospitals in 
both large urban and other areas. (ProPAC's market basket is still 
using the 1987-based weights.) ProPAC did not make a separate 
recommendation for the hospital-specific rates applicable to sole 
community hospitals. The components of ProPAC's update factor 
recommendations are described in detail in the ProPAC report, which is 
published as Appendix F to this document. We discuss ProPAC's 
recommendations concerning the update factors and our responses to 
these recommendations below.
    Section 1886(e)(4) of the Act requires that the Secretary, taking 
into

[[Page 27592]]

consideration the recommendations of ProPAC, recommend update factors 
for each fiscal year that take into account the amounts necessary for 
the efficient and effective delivery of medically appropriate and 
necessary care of high quality. Under section 1886(e)(5) of the Act, we 
are required to publish the update factors recommended under section 
1886(e)(4) of the Act. Accordingly, this appendix provides the 
recommendations of appropriate update factors, the analysis underlying 
our recommendations, and our responses to the ProPAC recommendations 
concerning the update factors.

II. Secretary's Recommendations

    Under section 1886(e)(4) of the Act, we are recommending that the 
standardized amounts be increased by an amount equal to the market 
basket rate of increase minus 1.5 percentage points for hospitals 
located in large urban and other areas. We are also recommending an 
update of the market basket rate of increase minus 1.5 percentage 
points to the hospital-specific rate for sole community hospitals. 
These figures are consistent with the President's FY 1997 budget 
recommendation, which continues the reductions imposed by section 13501 
of the Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66), 
that is, reductions in the hospital market basket of 2.5 percentage 
points for FYs 1994 and 1995 and 2.0 percentage points for FY 1996. We 
believe these recommended changes in the update factor would ensure 
that Medicare acts as a prudent purchaser and provide incentives to 
hospitals for increased efficiency, thereby contributing to the 
solvency of the Medicare Part A Trust Fund. When the President's budget 
was submitted, the market basket rate of increase was projected at 3.6 
percent. As noted above, this proposed recommendation is based on the 
most recent forecast of the proposed rebased market basket. (See 
section IV of the preamble to this proposed rule for a detailed 
discussion of the market basket.)
    We recommend that hospitals excluded from the prospective payment 
system receive an update equal to the percentage increase in the 
proposed rebased market basket that measures input price increases for 
services furnished by excluded hospitals minus 1.5 percentage points. 
That market basket rate of increase is currently forecast at 2.7 
percent. Subtracting 1.5 percentage points would result in an update 
for hospitals excluded from the prospective payment system of 1.2 
percent. This recommendation is consistent with the President's budget, 
acknowledging that the market basket rate of increase for these 
hospitals also was forecast at 3.6 percent at the time the budget was 
submitted.
    As required by section 1886(e)(4) of the Act, we have taken into 
consideration the recommendations of ProPAC in setting these 
recommended update factors. Our responses to the ProPAC recommendations 
concerning the update factors are discussed below.

III. ProPAC Recommendation for Updating the Prospective Payment System 
Standardized Amounts

    For FY 1997, ProPAC's update framework would support an update 
between 0.7 percentage points and 2.0 percentage points less than the 
increase in the hospital market basket index. The methodology employed 
by the Commission in previous years would lead to a recommendation of 
about market basket minus 1.5 percentage points, roughly corresponding 
to the midpoint of that range. In light of the significant changes 
occurring in health care delivery, the Commission believes that the 
increase in the prospective payment system rates could be held to 
market basket minus 2.0 percentage points for the next year or two. 
However, it is concerned about the potential effects of continuing 
updates at that level on hospitals' financial health. Low updates over 
an extended period of time could affect a hospital's ability to provide 
quality care to Medicare beneficiaries, compromise access, and impede 
the diffusion of quality-enhancing technological advances.
    Based on the market basket estimate of 2.7 percent, ProPAC 
recommends that hospitals in large urban and other areas receive an 
update between 0.7 to 2.0 percent.
    Response: We are recommending an update that is consistent with the 
Administration's budget proposal. Our recommendation is that the update 
for FY 1997 for prospective payment system hospitals located in large 
urban and other areas be equal to the market basket rate of increase 
forecast minus 1.5 percentage points. Based on HCFA's current forecast 
of the market basket rate of increase (2.7 percent), we recommend an 
update for FY 1997 for large urban and other hospitals equal to 1.2 
percent. Our recommendation is supported by the following analyses that 
measure changes in hospital productivity, scientific and technological 
advances, practice pattern changes, and changes in case mix:
    <bullet> Productivity: Service level productivity is defined as the 
ratio of total service output to full-time equivalent employees (FTEs). 
While we recognize that productivity is a function of many variables 
(for example, labor, nonlabor material, and capital inputs), we use a 
labor productivity measure since this update framework applies to 
operating payment. To recognize that we are apportioning the short run 
output changes to the labor input and not considering the nonlabor 
inputs, we weight our productivity measure for operating costs by the 
share of direct labor services in the market basket rate of increase to 
determine the expected effect on cost per case.
    Our recommendation for the service productivity component is based 
on historical trends in productivity and total output for both the 
hospital industry and the general economy, and projected levels of 
future hospital service output. ProPAC has also estimated cumulative 
service productivity growth to be 4.9 percent from 1985-1989, or 1.2 
percent annually. At the same time, the Commission estimates total 
output growth at 3.4 percent annually, implying a ratio of service 
productivity growth to output growth of 0.35. Our Medicare Provider 
Analysis and Review (MedPAR) file analysis indicates total Medicare 
service output (charges per admission, adjusted for CPI change) 
increased 10.7 percent from 1987-1995, or an approximate average annual 
increase of 1.2 percent. Since it is not possible at this time to 
develop a productivity measure specific to Medicare patients, we 
examined productivity (output per hour) and output (gross domestic 
product) for the economy. Depending on the exact time period, annual 
changes in productivity range from 0.3 to 0.35 percent of the change in 
output (that is, a 1.0 percent increase in output would be correlated 
with an 0.3 to 0.35 percent change in output per hour).
    Under our framework, the recommended update is based in part on 
expected productivity--that is, projected service output during the 
year multiplied by the historical ratio of service productivity to 
total service output, multiplied by the share of labor in total 
operating inputs, as calculated in the hospital market basket rate of 
increase. This method estimates an expected labor productivity 
improvement in the same proportion to expected total service growth 
that has occurred in the past and assumes that, at a minimum, growth in 
FTEs changes proportionally to the growth in total service output. 
Thus, the recommendation allows for unit productivity to be smaller 
than the

[[Page 27593]]

historical averages in years that output growth is relatively low and 
higher in years that output growth is larger than the historical trend. 
Based on the above estimates from both the hospital industry and the 
economy, we have chosen to employ the range of ratios of productivity 
change to output change of 0.30 to 0.35.
    The expected change in total hospital service output is the product 
of projected growth in total admissions (adjusted for outpatient 
usage), projected real case-mix growth, and expected quality enhancing 
intensity growth, net of expected decline in intensity due to reduction 
of cost ineffective practice. Case-mix growth and intensity numbers for 
Medicare are used as proxies for those of the total hospital, since 
case-mix increases (used in the intensity measure as well) are 
unavailable for non-Medicare patients. Thus, expected output growth is 
simply the sum of the expected change in intensity (0.0 percent), 
projected admissions change (2.7 percent for FY 1997), and projected 
real case-mix growth (1.6 percent), or 4.3 percent. The share of direct 
labor services in the market basket rate of increase (consisting of 
wages, salaries, and employee benefits) is 61.4 percent. Multiplying 
the expected change in total hospital service output (4.3 percent) by 
the ratio of historical service productivity change to total service 
growth of 0.30 to 0.35 and by the direct labor share percentage (0.614) 
provides our productivity standard of 0.8 to 0.9 percent.
    ProPAC also believes hospitals should be given an incentive for 
additional productivity improvement. ProPAC measures productivity as 
the ratio of hospital admissions (adjusted for case mix and outpatient 
services) per FTE employee (adjusted for changes in skill mix). ProPAC 
includes in its productivity measurement the effect of changes in 
practice patterns. We treat practice pattern changes as a portion of 
our intensity adjustment, described below. ProPAC's latest estimate 
indicate that hospital productivity increased as much as 2.3 percent in 
1994. Given this improvement, ProPAC believes a productivity adjustment 
in the range of -0.7 to -1.2 percentage points would be reasonable in 
fiscal year 1997. The adjustment is intended to share productivity 
equally between hospitals and Medicare. In the near future, ProPAC 
believes there may be even greater productivity improvements, as 
hospitals strive to stay competitive and financially viable.
    <bullet> Intensity: We base our intensity standard on the combined 
effect of three separate factors: changes in the use of quality 
enhancing services, changes in the use of services due to shifts in 
within-DRG severity, and changes in the use of services due to 
reductions of cost-ineffective practices. For FY 1997, we recommend an 
adjustment of 0.0 percent. The basis of this recommendation is 
discussed below.
    We have no empirical evidence that accurately gauges the level of 
quality-enhancing technology changes. Typically, a specific new 
technology increases cost in some uses and decreases cost in other 
uses. Concurrently, health status is improved in some situations while 
in other situations it may be unaffected or even worsened using the 
same technology. It is difficult to separate out the relative 
significance of each of the cost increasing effects for individual 
technologies and new technologies.
    The quality enhancing technology component is intended to recognize 
the use of services that increase cost but whose value in terms of 
enhanced health-status is commensurate with these costs. Such services 
may result from technological change, or in some cases, increased use 
of existing technologies. The latter recognizes that as cost and 
medical effectiveness studies become available, some increased use of 
existing, as well as new, services may be warranted.
    The component for reduction of cost-ineffective practice recognizes 
that some improvements in practice patterns could be made so that the 
intensity of services provided is more consistent with the efficient 
use of limited resources. That is, improvements could be made so that 
the number of services provided during an inpatient stay, and their 
complexity, produce an improvement in health status that is consistent 
with the cost of care. This component of our update recommendation is 
intended to encourage both hospitals and physicians to more carefully 
consider the cost-effectiveness of medical care. This component of the 
framework also accounts for real within-DRG change, since that should 
be directly reflected in the CMI-adjusted growth in real charges per 
case.
    Following methods developed by HCFA's Office of the Actuary for 
deriving hospital output estimates from total hospital charges, we have 
developed Medicare-specific intensity measures based on a 5-year 
average using FY 1991-1995 MedPAR billing data. Case-mix constant 
intensity is calculated as the change in total Medicare charges per 
discharge adjusted for changes in the average charge per unit of 
service as measured by the Medical CPI hospital component and changes 
in real case mix. Thus, in order to measure changes in intensity, one 
must measure changes in real case mix.
    For FY 1991 and FY 1992, we estimate that 1.0 to 1.4 percent of 
observed case-mix increase was real. This estimate is supported by past 
studies of case-mix change by the RAND Corporation. The most recent 
study was <gr-thn-eq>Has DRG Creep Crept Up? Decomposing the Case Mix 
Index Change Between 1987 and 1988<gr-thn-eq> by G.M. Carter, J.P. 
Newhouse, and D.A. Relles, R-4098-HCFA/ProPAC (1991). The study 
suggests that real case-mix change was not dependent on total change, 
but was rather a fairly steady 1.0 to 1.5 percent per year. In the past 
we have used 1.4 percent as the upper bound because the RAND study did 
not take into account that hospitals may have induced doctors to 
document medical records more completely in order to improve payment. 
For FY 1993 and FY 1994, we assumed that all of the observed case-mix 
increases of 0.9 and 0.8 percent, respectively, were real. For FY 1995, 
we assumed that all of the observed case-mix increase of 1.6 percent 
was real. We note that this assumed increase in real case mix is higher 
than our previously assumed upper bound of 1.4 percent. Based on its 
analysis of the FY 1995 MedPAR data, the Office of the Actuary has 
concluded that the apparent shifting of some cases to the outpatient 
setting and activity in the cardiovascular DRGs has contributed to a 
higher than expected increase in real case mix.
    Given estimates of real case-mix increase of 1.0 percent for FY 
1991-1992, 0.9 percent for FY 1993, 0.8 percent for FY 1994, and 1.6 
percent for FY 1995, we estimate case-mix constant intensity declined 
by an average 1.1 percent during FY 1991 through 1995, for a cumulative 
decrease of 5.6 percent. If we assume that real case-mix increase was 
1.4 percent for FYs 1991 and 1992, 0.9 percent for FY 1993, 0.8 percent 
for FY 1994, and 1.6 percent for FY 1995, we estimate case-mix constant 
intensity declined by an average of 1.2 percent during FY 1991 through 
1994, for a cumulative decrease of 5.9 percent. Since we estimate that 
intensity has declined during FY 1991-1995 period, we are recommending 
a 0.0 percent intensity adjustment for FY 1997.
    <bullet> Quality Enhancing New Science and Technology: For FY 1997, 
ProPAC has computed the adjustment for scientific and technological 
advances to be a future-oriented policy target intended to provide 
additional funds for hospitals to adopt quality-enhancing, cost 
increasing health care innovations.

[[Page 27594]]

While in the past the Commission has included an adjustment ranging 
from 0.3 to 1.0 percentage points, the current range is lower because 
there is little evidence of significant new cost-increasing advances 
ready for implementation. Moreover, the cost-competitive environment 
now faced by hospitals may dampen the adoption of new technologies as 
they closely evaluate their relative costs and benefits. Therefore, the 
Commission recommends an adjustment of 0.1 to 0.6 percentage points for 
the increase in operating costs due to scientific and technological 
advances.
    <bullet> Change in Case Mix: Our analysis takes into account 
projected changes in case mix, adjusted for changes attributable to 
improved coding practices. For our FY 1997 update recommendation, we 
are projecting a 1.6 percent increase in the case-mix index. We define 
real case-mix increase as actual changes in the mix (and resource 
requirements) of Medicare patients as opposed to changes in coding 
behavior that result in assignment of cases to higher-weighted DRGs but 
do not reflect greater resource requirements. For FY 1997, we believe 
that real case-mix increase is equal to our projected change in case 
mix. We do not see any changes in coding behavior in our projected 
case-mix change. Our net adjustment to case-mix change for FY 1997 is 
0.0 percentage points.
    The -1.0 to -0.9 percent figure used in the ProPAC framework 
represents ProPAC's projection for observed case-mix change. ProPAC 
projects a 0.8 to 0.9 percentage points increase in real case-mix 
change across DRG's and a 0.0 to 0.2 percentage points increase in 
within-DRG case-complexity change. ProPAC's net adjustment for case mix 
is -0.2 to 0.0 percentage points.
    <bullet> Effect of FY 1995 DRG Reclassification and Recalibration: 
We estimate that DRG reclassification and recalibration for FY 1995 
resulted in a 0.0 percent increase in the case-mix index when compared 
with the case-mix index that would have resulted if we had not made the 
reclassification and recalibration changes to the GROUPER. ProPAC does 
not make an adjustment for DRG reclassification and recalibration in 
its update recommendation.
    <bullet> Correction for Market Basket Forecast Error: The estimated 
market basket percentage increase used to update the FY 1995 payment 
rates was 3.6 percent. Our most recent data indicate the actual FY 1995 
increase was 3.0 percent, reflecting that the actual increase in wages 
was lower than projected. The resulting forecast error in the FY 1995 
market basket rate of increase is 0.6 percentage points. Under our 
update framework, we make a forecast error correction if our estimate 
is off by 0.25 percentage points or more. Therefore, we are 
recommending an adjustment of -0.6 percentage points to reflect this 
overestimation of the FY 1995 market basket rate of increase. The 
following is a summary of the update ranges supported by our analyses 
compared to ProPAC's framework.

                             Table 1.--Comparison of FY 1997 Update Recommendations                             
----------------------------------------------------------------------------------------------------------------
                                                                                HHS                 ProPAC      
----------------------------------------------------------------------------------------------------------------
Market Basket.........................................................                   MB                   MB
Difference Between HCFA & ProPAC Market Baskets.......................  ...................          -0.1 to 0.0
                                                                       -----------------------------------------
      Subtotal........................................................                   MB         MB to MB-0.1
                                                                       =========================================
Policy Adjustment Factors                                                                                       
Productivity..........................................................         -0.9 to -0.8         -1.2 to -0.7
Intensity:                                                                              0.0  ...................
    Science and Technology............................................  ...................           0.1 to 0.6
    Practice Patterns.................................................  ...................                (\1\)
    Real Within DRG Change............................................  ...................                (\2\)
                                                                       -----------------------------------------
      Subtotal........................................................         -0.9 to -0.8         -1.1 to -0.1
                                                                       =========================================
Case-Mix Adjustment Factors                                                                                     
    Projected Case-Mix Change.........................................                 -1.6         -1.0 to -0.9
    Real Across DRG Change............................................                  1.6           0.8 to 0.9
    Real Within DRG Change............................................                (\3\)           0.0 to 0.2
                                                                       -----------------------------------------
      Subtotal........................................................                  0.0          -0.2 to 0.0
                                                                       =========================================
    Effect of 1995 Reclassification and Recalibration.................                  0.0  ...................
Forecast Error Correction.............................................                 -0.6                 -0.6
                                                                       -----------------------------------------
      Total Recommended Update........................................     MB-1.5 to MB-1.4     MB-2.0 to MB-0.7
----------------------------------------------------------------------------------------------------------------
\1\ Included in ProPAC's Productivity Measure.                                                                  
\2\ Included in ProPAC's Case-Mix Adjustment.                                                                   
\3\ Included in HHS' Intensity Factor.                                                                          

    The above analysis would support a recommendation that the update 
be between market basket minus 1.4 and market basket minus 1.5 
percentage points. We are recommending an update of market basket minus 
1.5 percentage points, consistent with President Clinton's FY 1997 
budget proposal. We also recommend that the hospital-specific rates 
applicable to sole community hospitals be increased by the same update, 
market basket minus 1.5 percentage points.

V. ProPAC Recommendation for Updating the Rate-of-Increase Limits for 
Excluded Hospitals

    ProPAC recommends an update factor equal to the market basket rate 
of increase minus 0.6 percentage points for excluded hospitals and 
units (Recommendation 12). The 0.6 percentage points reduction 
represents a

[[Page 27595]]

reduction of 0.6 percentage points to account for the forecast error in 
the FY 1995 market basket rate of increase for excluded units, no 
increase to reflect the different compensation price proxies used by 
ProPAC, and no allowance for new technology. ProPAC believes that major 
changes in the excluded hospitals' target amounts should not be made at 
this time. Rather, a prospective payment system for excluded hospitals 
and units should be implemented as soon as possible.
    Response: We recommend that hospitals excluded from the prospective 
payment system receive an update equal to the percentage increase in 
the market basket that measures input price increases for services 
furnished by excluded hospitals minus 1.5 percentage points. The 
reduction is consistent with the updates provided under President 
Clinton's budget proposal. The market basket rate of increase for 
excluded hospitals is currently forecast at 2.7 percent. Subtracting 
1.5 percentage points would result in an update of 1.2 percent for 
excluded hospitals and units.
    As noted by ProPAC, HCFA has contracted with the RAND Corporation 
to analyze a classification system for rehabilitation patients that 
appears to have the potential to serve as the basis for a prospective 
payment system for rehabilitation hospitals and units. However, even if 
this classification system is found to be suitable, it would be several 
years before we could fully implement any prospective payment system 
for these facilities. In addition, we have been less successful in our 
pursuit of a suitable classification system for the other types of 
excluded hospitals. Therefore, as an interim measure, the President's 
budget contains a proposal to rebase the target amounts for excluded 
hospitals and units on more recent cost data. Changes would also be 
made to the conditions under which facilities would receive additional 
payment when they exceed their limits. Incentive payments for 
facilities whose costs are below their target amounts would be 
eliminated.

BILLING CODE 4120-01-P

[[Page 27596]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.000



[[Page 27597]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.001



[[Page 27598]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.002



[[Page 27599]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.003



[[Page 27600]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.004



[[Page 27601]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.005



[[Page 27602]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.006



[[Page 27603]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.007



[[Page 27604]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.008



[[Page 27605]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.009



[[Page 27606]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.010



[[Page 27607]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.011



[[Page 27608]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.012



[[Page 27609]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.013



[[Page 27610]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.014



[[Page 27611]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.015



[[Page 27612]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.016



[[Page 27613]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.017



[[Page 27614]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.018



[[Page 27615]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.019



[[Page 27616]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.020



[[Page 27617]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.021



[[Page 27618]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.022



[[Page 27619]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.023



[[Page 27620]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.024



[[Page 27621]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.025



[[Page 27622]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.026



[[Page 27623]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.027



[[Page 27624]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.028



[[Page 27625]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.029



[[Page 27626]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.030



[[Page 27627]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.031



[[Page 27628]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.032



[[Page 27629]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.033



[[Page 27630]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.034



[[Page 27631]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.035



[[Page 27632]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.036



[[Page 27633]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.037



[[Page 27634]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.038



[[Page 27635]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.039



[[Page 27636]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.040



[[Page 27637]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.041



[[Page 27638]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.042



[[Page 27639]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.043



[[Page 27640]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.044



[[Page 27641]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.045



[[Page 27642]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.046



[[Page 27643]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.047



[[Page 27644]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.048



[[Page 27645]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.049



[[Page 27646]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.050



[[Page 27647]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.051



[[Page 27648]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.052



[[Page 27649]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.053



[[Page 27650]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.054



[[Page 27651]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.055



[[Page 27652]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.056



[[Page 27653]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.057



[[Page 27654]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.058



[[Page 27655]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.059



[[Page 27656]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.060



[[Page 27657]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.061



[[Page 27658]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.062



[[Page 27659]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.063



[[Page 27660]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.064



[[Page 27661]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.065



[[Page 27662]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.066



[[Page 27663]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.067



[[Page 27664]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.068



[[Page 27665]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.069



[[Page 27666]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.070



[[Page 27667]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.071



[[Page 27668]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.072



[[Page 27669]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.073



[[Page 27670]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.074



[[Page 27671]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.075



[[Page 27672]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.076



[[Page 27673]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.077



[[Page 27674]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.078



[[Page 27675]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.079



[[Page 27676]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.080



[[Page 27677]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.081



[[Page 27678]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.082



[[Page 27679]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.083



[[Page 27680]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.084



[[Page 27681]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.085



[[Page 27682]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.086



[[Page 27683]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.087



[[Page 27684]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.088



[[Page 27685]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.089



[[Page 27686]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.090



[[Page 27687]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.091



[[Page 27688]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.092



[[Page 27689]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.093



[[Page 27690]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.094



[[Page 27691]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.095



[[Page 27692]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.096



[[Page 27693]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.097



[[Page 27694]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.098



[[Page 27695]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.099



[[Page 27696]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.100



[[Page 27697]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.101



[[Page 27698]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.102



[[Page 27699]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.103



[[Page 27700]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.104



[[Page 27701]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.105



[[Page 27702]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.106



[[Page 27703]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.107



[[Page 27704]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.108



[[Page 27705]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.109



[[Page 27706]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.110



[[Page 27707]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.111



[[Page 27708]]

[GRAPHIC] [TIFF OMITTED] TP31MY96.112



[FR Doc. 96-13613 Filed 5-30-96; 8:45 am]
BILLING CODE 4120-01-C

</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>