34344 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

[BPD–867–NC]

RIN 0938–AH54

Medicare Program; Schedule of Limits

on Home Health Agency Costs Per

Visit for Cost Reporting Periods

Beginning On or After July 1, 1996

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Notice with comment period.

SUMMARY: This notice sets forth a

revised schedule of limits on home

health agency costs that may be paid

under the Medicare program. These

limits replace the per-visit limits that

were set forth in our February 14, 1995

notice with comment period (60 FR

8389). This notice also responds to

comments on the February 14, 1995

notice. This notice does not provide for

a permanent extension of the provision

of the Omnibus Budget Reconciliation

Act of 1993 (OBRA ’93) that there be no

changes in the home health agency cost

limits for cost reporting periods

beginning on or after July 1, 1994, and

before July 1, 1996. However, a proposal

to extend the effects of the OBRA ’93

freeze is included in President Clinton’s

FY 1997 Budget.

DATES: Effective Date: The schedule of

limits is effective for cost reporting

periods beginning on or after July 1,

1996.

Comment Date: Written comments

will be considered if we receive them at

the appropriate address, as provided

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

30, 1996.

ADDRESSES: Mail comments (one

original and three copies) to the

following address:

Health Care Financing Administration,

Department of Health and Human

Services,

Attention: BPD–867–NC

P.O. Box 7517

Baltimore, MD 21207–0517

If you prefer, you may deliver your

written comments (one original and

three copies) to one of the following

addresses:

Room 309–G, Hubert H. Humphrey

Building, 200 Independence Avenue,

SW, Washington, DC 20221, or

Room C5–09–26, 7500 Security

Boulevard, Baltimore, Maryland

21244–1850.

Because of staffing and resource

limitations, we cannot accept comments

by facsimile (FAX) transmission. In

commenting please refer to file code

BPD–867–NC. 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).

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)

783–3238 or by faxing to (202) 275–

6802. The cost for each copy is $8.00.

As an alternative, you may view and

photocopy the Federal Register

document at most libraries designated

as U.S. Government Depository

Libraries and at many other public and

academic libraries throughout the

country that receive the Federal

Register.

FOR FURTHER INFORMATION CONTACT:

Michael Bussacca, (410) 786–4602.

SUPPLEMENTARY INFORMATION:

I. Background

Section 1861(v)(1)(A) of the Social

Security Act (the Act) authorizes the

Secretary to establish limits on

allowable costs incurred by a provider

of services that may be paid under the

Medicare program, based on estimates

of the costs necessary in the efficient

delivery of needed health services.

Under this authority, we have

maintained limits on home health

agency (HHA) per-visit costs since 1979.

The limits may be applied to direct or

indirect overall costs or to the costs

incurred for specific items or services

furnished by the provider.

Implementing regulations are located at

42 CFR 413.30. Additional statutory

provisions specifically governing the

limits applicable to HHAs are contained

at section 1861(v)(1)(L) of the Act.

Section 1861(v)(1)(L)(i) of the Act

specifies that the cost limits are not to

exceed 112 percent of the mean of the

labor-related and nonlabor per-visit

costs for freestanding HHAs. For cost

reporting periods beginning on or after

July 1, 1986, and before October 1, 1993,

section 1861(v)(1)(L)(ii) of the Act

requires that the Secretary make an

adjustment to the cost limits for the

administrative and general (A&G) costs

of hospital-based HHAs. Section

1861(v)(1)(L)(iii) of the Act requires that

the Secretary establish HHA cost limits

on an annual basis for cost reporting

periods beginning on or after July 1 of

each year (except for cost reporting

periods beginning on or after July 1,

1994, and before July 1, 1996). In

establishing these limits, the Act directs

the Secretary to use the applicable

hospital wage index, as discussed

below.

On February 14, 1995, we published

in the Federal Register (60 FR 8389) a

notice with comment period that set

forth a revised schedule of limits on

HHA costs that may be paid under the

Medicare program for cost reporting

periods beginning on or after July 1,

1993. These limits replaced the per-visit

limits that were set forth in our July 8,

1993 notice with comment period (58

FR 36748). Like the July 8, 1993 limits,

the February 14, 1995 limits were

computed using the actual cost-per-visit

data from cost reporting periods ending

on or after June 30, 1989, and before

May 31, 1991, and were adjusted by

later estimates in the ‘‘market basket’’

index to reflect changes in the prices of

goods and services furnished by HHAs.

The February 14, 1995 notice also

provided, in accordance with section

13564(a) of the Omnibus Budget

Reconciliation Act of 1993 (OBRA ‘93)

(Public Law 103–66), that there be no

changes in the HHA costs limits for cost

reporting periods beginning on or after

July 1, 1994, and before July 1, 1996

(except as needed to take into account

the elimination of the A&G add-on for

hospital-based HHAs, effective for cost

reporting periods beginning on or after

October 1, 1993).

This notice with comment period sets

forth cost limits for cost reporting

periods beginning on or after July 1,

1996. As required by section

1861(v)(1)(L)(iii) of the Act, we are

using the area wage index applicable

under section 1886(d)(3)(E) of the Act

determined using the survey of the most

recent available wages and wage-related

costs of hospitals located in the

geographic area in which the HHA is

located. For purposes of this notice, the

HHA wage index is based on the most

recent hospital wage index, that is, the

hospital wage index effective for

hospital discharges on or after October

1, 1995, which uses FY 1992 wage data.

As the statute also specifies, in applying

the hospital wage index to HHAs, no

adjustments are to be made to account

for hospital reclassifications under

section 1886(d)(8)(B) of the Act,

decisions of the Medicare Geographic

Classification Review Board under
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34345

section 1886(d)(10) of the Act, or

decisions by the Secretary.

II. Analysis of and Response to Public

Comments

We received 14 items of timely

correspondence on the February 14,

1995 notice with comment period.

These comments and our responses are

discussed below.

Comment: Nine commenters stated

that, in view of the elimination,

effective for cost reporting periods

beginning on or after October 1, 1993, of

the payment adjustment for the A&G

cost of hospital-based HHAs, it was no

longer appropriate to establish cost

limits based only on cost reporting data

from freestanding HHAs. Although the

commenters acknowledged that section

1861(v)(1)(L)(i) of the Act continues to

require that the limits be based on the

‘‘* * * per visit costs for freestanding

home health agencies’’, they suggested

that this provision was inconsistent

with the elimination of the A&G add-on

under section 13564(b) of OBRA ‘93 and

requested that cost reporting data from

both hospital-based and freestanding

agencies be used in establishing the

limits.

Response: As the commenters noted,

section 1861(v)(1)(L)(i) of the Act

specifies that the Secretary is to

establish a single schedule of HHA cost

limits based on the mean per-visit costs

of freestanding agencies. Although

section 13564(b) of OBRA ’93 amended

section 1861(v)(1)(L)(ii) of the Act to

provide that, effective for cost reporting

periods beginning on or after October 1,

1993, we no longer make a payment

adjustment to the limits to account for

the A&G costs of hospital-based

agencies, this provision of OBRA ’93 did

not amend the explicit requirement of

section 1861(v)(1)(L)(i) of the Act

concerning the agency costs upon which

the limits are to be based. Therefore, the

limits continue to be based on the costs

of freestanding home health agencies, as

required by the Act. We have no

discretion to include hospital-based

providers in the calculation of HHA

limits.

Comment: One commenter suggested

that certain services be allowed when

provided by a pharmacist in the

patient’s home such as patient

counseling/education, clinical

assessment, drug regimen review and

drug therapy monitoring.

Response: Section 1861(m) of the Act

provides for per-visit payment to HHAs

solely for those services provided by the

six home health disciplines. Current

policy does not provide for payment for

home visits by pharmacists as suggested

by the commenter.

Comment: One commenter asked if

the special adjustment factors for cost

reporting periods of other than 12

months would have to be revised

because of the changes in the revised

schedule of limits published on

February 14, 1995.

Response: The projected annual rates

of inflation used in the July 8, 1993 and

February 14, 1995 notices were the

same, as were the adjustment factors in

both notices. Therefore, no change in

the special adjustment factors to be

applied by the intermediaries was

necessary.

Comment: Two commenters requested

clarification on how HCFA applies the

add-on adjustment to the limits for

those agencies with costs in excess of

their limit that are attributable to the

Occupational Safety and Health

Administration (OSHA) universal

precaution requirement.

Response: As discussed in detail later,

the OSHA add-on is no longer necessary

for cost reporting periods beginning on

or after July 1, 1996. Even for cost

reporting periods prior to that date, the

OSHA add-on is not an automatic

adjustment to the home health agency

cost limits. An agency must apply to the

intermediary for the add-on amount and

the agency must demonstrate that it will

exceed its cost limit and provide

adequate documentation to support the

add-on adjustment. The agency must

show that it has incurred expenses to

comply with the OSHA requirements.

Documentation should include copies

of the agency’s infection control

procedure, invoices documenting the

purchase of gloves, gowns and other

disposable items. The costs of

inoculations of hepatitis B vaccine can

also be used to support the adjustment.

An HHA can also provide

documentation that it has given training

to the employees concerning bloodborne pathogens. We provided

instructions to HCFA’s intermediaries

spelling out these requirements in a

1994 program memorandum.

Comment: One commenter stated that

the HHA market basket increases have

consistently lagged behind actual costper-visit increases.

Response: As discussed in detail

below in section IV of this notice and

the Appendix, we have used a revised

and rebased market basket in calculating

the cost limits set forth in this notice.

Actual aggregate cost-per-visit increases

reflect changes in both the mix of visit

types and the quantity and intensity of

services per visit, as well as

discretionary purchase price increases

higher than reasonable costs. In

contrast, the HHA market basket is

designed to measure price to inflation

for inputs used to produce HHA service.

Thus, we would not expect actual

aggregate cost-per-visit increases to

equal changes in an HHA market basket

that reflects pure price increases for

efficient purchases.

Comment: Nine commenters

questioned whether HCFA had correctly

interpreted the requirement under

section 13564(a) of OBRA ‘93 that there

be no changes in the previous per-visit

HHA cost limits for cost reporting

periods beginning on or after July 1,

1994 and before July 1, 1996. The

commenters pointed out that, under our

July 8, 1993 notice, the cost limits of

HHAs with cost reporting periods

beginning on or after July 1, 1993, and

before July 1, 1994, were subject to

monthly cost reporting period

adjustment factors to allow for the

effects of inflation on the cost limits of

HHAs with different cost reporting

periods. Subsequently, under our

February 14, 1995 notice, we specified

that each HHA’s latest per-visit cost

limit for a period beginning on or after

July 1, 1993, and before July 1, 1994,

was to remain in effect until its cost

reporting period beginning on or after

July 1, 1996. Thus, HHAs with cost

reporting periods beginning on July 1,

1993, for example, would be subject to

lower limits than HHAs with cost

reporting periods that began any time

after that date. Commenters asserted

that this policy created continuing

inequities and suggested several

alternatives, including:

• Eliminate the monthly cost

reporting period adjustment factors for

all HHAs.

• Set the cost reporting period

adjustment factor for all HHAs to the

level that would have been in effect for

an agency whose cost reporting period

began on June 30, 1994, effectively

equalizing payment to all HHAs at the

highest possible level under the limits

effective for cost reporting periods

beginning on or after July 1, 1993, until

the establishment of the new limits

effective for cost reporting periods

beginning on or after July 1, 1996.

• Amend OBRA ’93 to allow for the

use of the market basket inflation factors

set forth in our July 8, 1993 notice with

comment period.

Response: We recognize that the

provisions of OBRA ’93 produced

differences in per-visit limits for HHAs

depending on their cost reporting

periods. However, we do not believe

that the interpretations of OBRA ’93

suggested by the commenter are within

our authority, given the explicit

language of section 13564 of OBRA ’93,

which precludes ‘‘any change’’ to the

existing limits (except for those related
34346 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

to the elimination of the A&G add-on for

hospital-based HHAs). The Congress

undoubtedly was aware that not all

HHAs have the same cost reporting

periods, but chose not to make any

adjustments to the existing cost limits in

setting forth the relevant provisions. In

our view, none of the three specific

alternatives raised by the commenters

could be accomplished through

rulemaking, but would require further

legislative action.

Comment: Several commenters

recommended that HCFA study the

weighting and price proxies of the

present market basket index.

Response: As discussed in detail

below, in the process of developing a

revised and rebased market basket, we

have thoroughly examined the current

market basket cost categories, weights,

and price proxies. We have tabulated

freestanding HHA 1993 Medicare cost

report data, the latest available data that

are relatively complete, in order to

develop the cost structure of

freestanding home health agencies. New

cost categories based on the latest

Medicare Cost Reports and other

sources have been used and revised

price proxies have been applied that

more accurately represent reasonable

price changes of the new cost categories.

The 1993-based weights reflect the

latest available structure of costs for

HHAs. The 1993-based market basket

has 12 cost categories, only three of

which replicate the previous, 1976-

based market basket cost categories.

Both the wages and salaries and

employee benefit price proxies are

occupational indexes and have relative

weights specific to the home health

industry. Price proxies reflect economywide as well as hospital wages. The

occupational indexes each contain four

occupational subcategories: professional

and technical workers (including

registered nurses, therapists, medical

social workers and other professional/

technical workers); managerial and

supervisory workers; clerical workers;

and service workers (which includes

home health aides). The non-labor

proxies include price series which

represent specific cost categories such

as telephones and postage expenses as

well as more general categories, such as

All Other Expenses.

We believe that the 1993-based

market basket cost categories accurately

reflect the structure of HHA costs, and

that the price proxies accurately reflect

the price changes in the goods and

services purchased by prudent HHAs.

Comment: Several commenters

recommended that HCFA include

service-related measures in order to

make the market basket a better

prognosticator of costs per visit.

Response: Under a case-mix system of

payment, service-related measures may

be useful in setting upper limits for

particular illness levels for each of the

categories of HHA visits, just as

prospective payment system for

hospitals uses different illness levels for

various diagnostic groups. Under the

current HHA payment system, however,

different intensities of HHA services

associated with patients’ illness levels

and needs for care are reflected in the

mix of types of visits used and in the

number and length of visits per week.

The percent increase in costs per visit

per unit of time are approximately the

same for all categories of visits. Thus,

we apply a uniform HHA market basket

inflation adjustment, just as the hospital

prospective payment system uses a

single hospital market basket

adjustment factor for all DRGs.

Comment: One commenter stated that

the wage indices in the February 14,

1995 and July 8, 1993 notices should

have reflected changes to the

Metropolitan Statistical Areas (MSAs)

that were included in the hospital

prospective payment system proposed

rule published on May 26, 1993 (58 FR

30222).

Response: Section 1861(v)(I)(L)(iii) of

the Act specifies that in establishing the

HHA cost limits, we use the area wage

index applicable under section

1886(d)(3)(E) of the Act. The hospital

wage index used in both our July 8,

1993 and February 14, 1995 notices was

the index applicable on July 1, 1993, the

effective date of the July 8, 1993 and

February 14, 1995 cost limits notices.

(Subsequently, section 13564(a) of

OBRA ’93 specified that there be no

changes in the HHA costs limits, except

those related to the elimination of the

A&G add-on, for cost reporting periods

beginning on or after July 1, 1994 and

before July 1, 1996.) As noted in our

May 26, 1993 proposed rule and

confirmed in the September 1, 1993

hospital prospective payment system

final rule, the revisions to MSA

designations that were discussed in the

May 26, 1993 proposed rule did not take

effect until October 1, 1993 (58 FR

46292). Thus, for HHA payment

purposes these MSA changes are now

taking effect, under this notice, for cost

reporting periods beginning on or after

July 1, 1996.

III. Updating the Wage Index on a

Budget-Neutral Basis

Section 4207(d)(2) of the Omnibus

Budget Reconciliation Act of l990

(OBRA ’90) (Public Law 101–508)

requires that, in updating the wage

index, aggregate payments to HHAs will

remain the same as they would have

been if the wage index had not been

updated. Therefore, overall payments to

HHAs are not affected by changes in the

wage index values.

To comply with the requirement of

section 4207(d)(2) of OBRA ’90 that

updating the wage index be budget

neutral, we determined that it is

necessary to apply a budget neutrality

adjustment factor of 0.91 to the laborrelated portion of the cost limits. This

adjustment ensures that aggregate

payments to HHAs are not affected by

the change to a wage index based on the

hospital wage index published on

September 1, 1995. That is, an

adjustment of ¥9.1 percent in the laborrelated portion of the limits results in

the same program expenditures as if we

had not updated the wage index (See

the example in section VIII.A of this

notice regarding the adjustment of cost

limits by the wage index and the budget

neutrality factor.)

IV. Update of Limits

The methodology used to develop the

schedule of limits set forth in this notice

is the same as that used in setting the

limits effective July 1, 1993. We are

continuing to use the latest settled cost

report data from freestanding HHAs to

develop the HHA cost limits. We have

updated the cost limits to reflect the

expected cost increases occurring

between the cost reporting periods for

the data contained in the data base and

June 30, 1997.

A. Data Used

To develop the schedule of limits

effective July 1, 1996, we extracted

actual cost per-visit data from settled

Medicare cost reports for periods

beginning on or after June 1, 1991, and

settled by October 1, 1995. The majority

of the cost reports were from Federal

fiscal year (FY) 1993. We then adjusted

the data using the latest available

market basket indexes to reflect

expected cost increases occurring

between the cost reporting periods

contained in our data base and June 30,

1997.

In previous cost limits, HCFA used

the market basket index to adjust the

cost report data to the midpoint

(December 31) of the first cost reporting

period to which the limits applied (July

1). The present limits adjust the data to

the end of the first cost reporting period

to which the limits apply (June 30,

1997), a change that will enable fiscal

intermediaries to calculate the

applicable adjustment factors for HHAs

with a cost reporting period of fewer

than 12 months. Previously, the
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34347

intermediaries had to contact HCFA’s

central office for this adjustment.

We note that, under this notice, we

are no longer providing for an add-on to

the HHA cost limits for those HHAs that

incur costs associated with the OSHA

universal precaution requirements. This

add-on is no longer necessary because

these updated limits were computed

using a data base that includes the costs

of complying with the OSHA standards.

B. Wage Index

The wage index is used to adjust the

labor-related portion of the limits to

reflect differing wage levels among

areas. In setting this schedule of limits,

we used the FY 1996 hospital wage

index, which is based on 1992 hospital

wage data.

Each HHA’s labor market area is

determined based on the definitions of

MSAs issued by the Office of

Management and Budget (OMB).

Section 1861(v)(1)(L) of the Act requires

that we use the current hospital wage

index (that is, the FY 1996 hospital

wage index, which was published in the

Federal Register on September 1, 1995

(60 FR 45883)) to establish the HHA cost

limits. Therefore, this schedule of limits

reflects the MSA definitions that

currently are in effect under the hospital

prospective payment system.

We are continuing to incorporate

exceptions to the MSA classification

system for certain New England

counties that were identified in the July

1, 1992 notice (57 FR 29410). These

exceptions have been recognized in

setting hospital cost limits for cost

reporting periods beginning on and after

July 1, 1979 (45 FR 41218), and were

authorized under section 601(g) of the

Social Security Amendments of 1983

(Public Law 98–21). Section 601(g) of

Public Law 98–21 requires that any

hospital in New England that was

classified as being in an urban area

under the classification system in effect

in 1979 will be considered urban for the

purposes of the hospital prospective

payment system. This provision is

intended to ensure equitable treatment

under the hospital prospective payment

system. Under this authority, the

following counties have been deemed to

be urban areas for purposes of payment

under the inpatient hospital prospective

payment system:

• Litchfield County, CT in the

Hartford, CT MSA.

• York County, ME and Sagadahoc

County, ME in the Portland, ME MSA.

• Merrimack County, NH in the

Boston-Brockton-Nashua, MA–NH

MSA.

• Newport County, RI in the

Providence Fall-Warwick, RI MSA.

We are continuing to grant these

urban exceptions for the purpose of

applying the HCFA hospital wage index

to the HHA cost limits. These

exceptions result in the same New

England County Metropolitan Area

(NECMA) definitions for hospitals,

SNFs, and HHAs. In New England,

MSAs are defined on town boundaries

rather than on county lines but exclude

parts of the four counties cited above

that would be considered urban under

the MSA definition. Under this notice,

those four counties are urban under

either definition, NECMA or MSA.

V. Provisions of the HHA Schedule of

Limits

The schedule of limits set forth below

was calculated using 112 percent of the

mean per-visit costs of free-standing

HHAs and is adjusted by the latest

estimates in the market basket index.

The schedule of limits effective for

cost reporting periods beginning on or

after July 1, 1996 is based on the latest

settled cost data available and provides

for the following:

• A classification system based on

whether an HHA is located within an

MSA, a NECMA, or a non-MSA area.

(See Tables 7a and 7b in section X of

this notice for the listing of MSAs,

NECMAs, and rural areas.)

• The use of a single schedule of

limits for hospital-based and

freestanding agencies. This single limit

is based on the cost experience of

freestanding agencies.

• The use of a market basket index,

which was developed from the price of

goods and services purchased by HHAs

to account for the impact of changing

wage and price levels on HHA costs.

The market basket has been rebased and

revised as described in section VI of this

notice.

• The use of the current hospital

wage index. The wage index is used to

adjust the labor-related portion of the

limits. The employee wage portion of

the market basket index, including a

proportionate share of contract services

(64.226 percent), and the employee

benefits portion (13.442 percent) are

used to determine the labor component

(77.668 percent) of all HHA per-visit

costs used to set the limits.

• Separate treatment of the laborrelated and nonlabor components of

per-visit costs. The separate components

of costs are calculated by obtaining

actual HHA cost data for each agency for

cost periods beginning on or after June

1, 1991 and settled before October 1,

1995, and increasing those data by the

actual and projected increases in the

HHA market basket index. We then

separate each HHA’s per-visit costs into

labor and nonlabor portions, and divide

the labor portion by the wage index

value for the agency’s location to control

for the effect of geographic variations in

prevailing wage levels. Separate means

are computed for the labor and nonlabor

components of per-visit costs. For each

comparison group, the resulting

amounts are shown in Table 6 of section

IX of this notice.

• The application of a cost-of-living

adjustment to the nonlabor portion of

the limit for HHAs located in Alaska,

Hawaii, Puerto Rico, and the U.S. Virgin

Islands.

• Limits that are determined for the

per-visit cost of each type of home

health service: skilled nursing care,

physical therapy, speech pathology,

occupational therapy, medical social

services, and home health aide.

• Application of the limits in the

aggregate after an HHA’s actual costs are

adjusted. An HHA’s actual costs are

adjusted for individual items of cost that

are found to be excessive under

Medicare principles of provider

payment and for costs that are not

included in the limitation amount. The

limits are applied in the aggregate to the

cost remaining after these adjustments

are made. Payment is limited to the

lower of the actual costs or the cost

limits.

VI. Rebasing and Revising of the Home

Health Agency Market Basket

A. Background

Effective for cost reporting periods

beginning on or after July 1, 1980, HCFA

developed and adopted a home health

agency input price index (that is, the

home health agency ‘‘market basket’’).

Although ‘‘market basket’’ technically

describes the mix of goods and services

used to produce home health care, this

term is also commonly used to denote

the input price index derived from that

market basket. Accordingly, the term

‘‘market basket’’ used in this notice

refers to the home health agency input

price index.

The percentage change in the market

basket reflects the average change in the

price of goods and services purchased

by home health agencies to furnish

reasonable cost home health care

services. HCFA first used the market

basket to adjust home health agency cost

limits by an amount that reflected the

average increase in the prices of the

goods and services used to furnish

reasonable cost home health care. This

approach linked the increase in the cost

limits to the efficient utilization of

resources. For background information

on the home health agency market

basket, see the February 15, 1980
34348 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

Federal Register (45 FR 10451) and the

February 14, 1995 Federal Register (60

FR 8392).

The home health agency market

basket is a fixed-weight Laspeyres type

price index 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.’’

The next step essential for developing

an input price index is to match each

expenditure category to an appropriate

price/wage variable, called a price

proxy. These proxy variables are drawn

from a publicly available statistical

series published on a consistent

schedule, preferably at least quarterly.

In the final step, the price level for each

spending category is multiplied by the

expenditure weight for that category.

The sum of these products (that is,

weights multiplied by proxied indexed

levels) for all cost categories yields the

composite index level in the market

basket in a given year. Repeating the

third step (that is, establishing a price

proxy for each expenditure category) for

other years will produce a time series of

market basket index levels. Dividing one

index level by an earlier index will

produce 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 more or less

it would cost, at a later 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 by

design not considered.

HCFA believes that it is desirable to

rebase the market basket so the cost

weights reflect changes in the mix of

goods and services that HHAs purchase

(HHA inputs) in furnishing home health

care. The current HHA cost weights are

from calendar year 1976. To the extent

feasible, the data used to rebase the

home health agency market basket are

from FY 1993. If data from other periods

supplemented FY 1993 data, they were

aged forward or backward for price

changes.

B. Rebasing and Revising the Home

Health Agency Market Basket

The terms ‘‘rebasing’’ and ‘‘revising’’,

while often used interchangeably,

actually denote different activities.

Rebasing is the term used to define

moving the base year for the structure of

costs of an input price index (that is, for

this notice we are moving the base year

cost structure from calendar year 1976

to Federal fiscal year 1993). Revising is

the term used to define changing data

sources, cost categories, and/or price

proxies used in the input price index.

HCFA has rebased and revised the

home health agency market basket to:

• Reflect 1993 cost data, the latest

available data on the structure of HHA

costs, rather than 1976 cost data;

• Create additional cost categories;

and

• Modify certain variables used as the

price proxies for some of the cost

categories, using improved price proxies

that were not available when the current

market basket was developed.

In developing the revised market

basket, HCFA reviewed HHA

expenditure data for the market basket

cost categories. For each freestanding

HHA, we reviewed the latest settled cost

report whose cost reporting period

began on or after June 1, 1991 and was

settled by October 1, 1995. These

reports primarily were from FY 1993.

Earlier and later year cost data were

aged forward or backward for price

changes to FY 1993. Data on home

health agency expenditures for nine

major expense categories (wages and

salaries, employee benefits,

transportation, operation and

maintenance, administrative and

general, insurance, fixed capital,

movable capital, and a residual ‘‘all

other’’) were tabulated. Expenditures for

contract services were also tabulated

from these Medicare cost reports. After

totals for these main cost categories

were calculated, we then determined

the proportion of total costs that each

category represents. The proportions

represent the major rebased market

basket weights.

Weights for the telephone, paper and

printing, postage, and residual all other

administrative and general

subcategories were determined using

the latest available (1987) U.S.

Department of Commerce Bureau of

Economic Analysis (BEA) Input-Output

Table, from which data for other

medical and health services were

extracted. These data were aged from

1987 to 1993 using relative price

changes. The BEA Input-Output

database, which is updated at 5-year

intervals, was most recently described

in the Survey of Current Business

article, ‘‘Benchmark Input-Output

Accounts for the U.S. Economy, 1987’’

(April 1994).

This work resulted in the

identification of 12 separate cost

categories. The 1976-based home health

agency market basket had nine separate

cost categories. Detailed descriptions of

each category and respective price

proxy are provided in the Appendix to

this notice. The differences between the

major categories for the 1993-based

index and those used for the current

1976-based index are summarized in

Table 1 below. HCFA has allocated the

Contracted Services weight to the Wages

and Salaries and Employee Benefits cost

categories in the 1976-based index in

the same way as the 1993-based index

for consistency and ease of comparison.

See Table 2 for documentation of how

HCRIS contract services’ labor was

allocated to three cost category

components.

TABLE 1.—COMPARISON OF 1993 AND 1976 HOME HEALTH AGENCY MAJOR COST CATEGORIES AND WEIGHTS

Cost categories

Rebased 1993

Home Health

Agency market basket

1976-based

market basket,

adjusted for

consistency of

contract labor

with rebased

1993-based

market basket

Wages and Salaries, including allocated Contract Services’ Labor ........................................................................ 64.226 70.724

Employee Benefits, including allocated Contract Services’ Labor .......................................................................... 13.442 8.577

All Other, including allocated Contract Services’ Non-Labor to Other Administrative & General and Other Expenses .................................................................................................................................................................. 22.332 20.699

Total ............................................................................................................................................................... 100.000 100.000
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34349

The 1993-based cost categories and weights are listed in Table 2 below.

TABLE 2.—1993-BASED COST CATEGORIES, WEIGHTS, AND PRICE PROXIES

Cost Category

1993-based

market basket

weight

Price proxy

Compensation, including allocated Contract Services’ Labor ............................................................ 77.668

Wages and Salaries, including allocated Contract Services’ Labor ............................................ 64.226 HHA Occupational Wage

Index.

Employee benefits, including allocated Contract Services’ Labor .............................................. 13.442 HHA Occupational Benefits

Index.

Operations & Maintenance ................................................................................................................. 0.832 CPI–U Fuel & Other Utilities.

Administrative & General, including allocated Contract Services’ Non-Labor ................................... 9.569

Telephone .................................................................................................................................... 0.725 CPI–U Telephone.

Paper & Printing ........................................................................................................................... 0.529 CPI–U Household Paper,

Paper Products & Stationery Supplies.

Postage ........................................................................................................................................ 0.724 CPI–U Postage.

Other Administrative & General, including allocated Contract services Non-Labor ................... 7.591 CPI–U Services.

Transportation ..................................................................................................................................... 3.405 CPI–U Private Transportation.

Capital-Related .................................................................................................................................... 3.204

Insurance ..................................................................................................................................... 0.560 CPI–U Household Insurance.

Fixed Capital ................................................................................................................................ 1.764 CPI–U Owner’s Equivalent

Rent.

Movable Capital ........................................................................................................................... 0.880 PPI Machinery & Equipment.

Other Expenses, including allocated Contract Services’ Non-Labor .................................................. 5.322 CPI–U All Items Less Food

& Energy.

Total .......................................................................................................................................... 100.000

In the 1976-based market basket, the labor-related portion was 79.301 and the remaining share was 20.699. In

the revised and rebased market basket, the labor-related share is 77.668. The labor-related share includes wages and

salaries, employee benefits, and contracted services’ labor. The nonlabor-related share is 22.332. The higher share of

nonlabor-related cost in 1993 may reflect in part the changing cost structure associated with the post-prospective payment

system case mix of home health agencies. Table 3 details the components of the labor-related share for the 1976-

based and 1993-based market baskets.

TABLE 3.—LABOR-RELATED SHARE OF HOME HEALTH AGENCY MARKET BASKET

Cost category

1993-based

market basket

weight

1976-based

market basket

weight

Wages and Salaries, including Contract Services’ Labor allocation ....................................................................... 64.226 70.724

Employee Benefits, including Contract Services’ Labor allocation ......................................................................... 13.442 8.577

Contracted Services, Labor-Related share .............................................................................................................. (1) (1)

Total Labor Related ....................................................................................................................................... 77.668 79.301

Total Non-Labor Related ............................................................................................................................... 22.332 20.699

1Included above.

After the 1993 cost weights for the

rebased home health agency market

basket were computed, we selected the

most appropriate wage and price

proxies currently available to monitor

the rate of increase for each expenditure

category. The indicators are based on

Bureau of Labor Statistics (BLS) data

and are grouped into one of the

following BLS categories:

• 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. ECIs were not

available when we developed the

calendar year 1976-based home health

agency market basket. ECIs are superior

to average hourly earnings as price

proxies for input price indexes for two

reasons: (1) They measure pure price

change, and (2) they are available by

occupational groups, not just by

industry.

• Consumer Price Indexes—

Consumer Price Indexes (CPIs) measure

change in the prices of final goods and

services bought by the typical

consumer. Consumer price indexes were

used when the expenditure was more

similar to that of retail consumers in

general rather than a purchase at the

wholesale level, or if no appropriate

Producer Price Index (PPI) was

available.
34350 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

• Producer Price Indexes—PPIs are

used to measure price changes for goods

sold in other than retail markets. For

example, a PPI for movable equipment

was used, rather than a CPI for

equipment. PPIs in some cases are

preferable price proxies for goods that

home health agencies purchase as

inputs utilized in the process of

producing their outputs.

• Average Hourly Earnings—Average

Hourly Earnings (AHEs) are used to

measure the rate of change of earnings

for various industries and, therefore, can

reflect a changing occupational mix

within a particular industry. The AHE

series is calculated by dividing gross

payrolls by total hours, and it 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. The

1993-based HHA input price index does

not use AHE as a price proxy, but the

1976-based index did.

Our price proxies for the rebased

home health agency market basket are

summarized in the Appendix to this

notice. The forecasted rate of growth for

the fiscal year, beginning July 1, 1996,

for the rebased home health agency

market basket is 3.1 percent, while the

forecasted rate of growth for the 1976-

based home health agency market basket

is 3.3 percent. A comparison of the

yearly changes from 1993–1998 for the

1976-based market basket and the 1993-

based market basket is shown below.

TABLE 4—COMPARISON OF THE 1993-BASED MARKET BASKET AND THE 1976–MARKET BASKET, PERCENT CHANGE,

1993–1998

Fiscal years beginning July 1

Home Health

Agency market basket, FY

1993 base

Home Health

Agency market basket, CY

1976 base

Difference (1993-

based minus 1976-

based

Historical:

July 1992, FY 1993 ....................................................................................................... 3.4 3.8 (0.4)

July 1993, FY 1994 ....................................................................................................... 3.0 2.7 0.3

July 1994, FY 1995 ....................................................................................................... 2.9 3.2 (0.3)

Forecasted:

July 1995, FY 1996 ....................................................................................................... 2.7 3.1 (0.4)

July 1996, FY 1997 ....................................................................................................... 3.1 3.3 (0.2)

July 1997, FY 1998 ....................................................................................................... 3.2 3.4 (0.2)

Historical Average: 1993–1995 ............................................................................................ 3.1 3.2 (0.1)

Forecasted Average: 1996–1998 ......................................................................................... 3.0 3.3 (0.3)

Source: DRI/McGraw Hill HCC, 1st QTR 1996;@USSIM/TREND25YR0296 @CISSIM/CONTROL961.

Released by HCFA, OACT, Office of National Health Statistics.

Note that the historical average rate of

growth for 1993–1995 for the home

health agency 1993-based market basket

was only 0.1 percentage points less than

that of the 1976-based market basket, an

insignificant difference. HCFA believes

that the 1993-based HHA market basket

gives a more accurate measure of the

annual increases in reasonable cost care

because (1) The cost structure reflects

1993 rather than 1976 costs, and (2)

superior new wage-price variables have

been incorporated into the 1993-based

index. The forecasted average annual

rate of growth for 1996–1998 is 3.0

percent for the 1993-based market

basket, and 3.3 percent for the 1976-

based market basket. Given the

complexities of forecasting, this

difference is very small.

HCFA has developed a HHA Blended

Wage and Salary Index and a HHA

Blended Benefits Index. HCFA will use

these blended indexes as price proxies

for the wages and salary and the

employee benefits portions of the

market basket. In the 1976-based market

basket, the average hourly earnings in

the hospital industry (nonsupervisory

workers) was used as a price proxy for

wages and salaries, and the supplements

to wages and salaries per worker in

nonagricultural establishments were

used as a price proxy for employee

benefits.

The new price proxies for these two

cost categories are similar to those used

in the prospective payment hospital

market basket and the excluded hospital

market basket, but with occupational

weights reflecting the occupational mix

in home health agencies. These proxies

are a combination of internal and

external proxies (health industry

specific and economy-wide). HCFA has

disaggregated the mix of home health

agency workers into specific categories

and applied a combination of internal

and external price proxies in the HCFA

HHA Occupational Wage and Salary

and Benefits Indexes. The supply and

demand relationships for certain

professional-technical occupations such

as registered nurses may be more

appropriately reflected in the blended

indicators of compensation changes for

professional and technical employees.

The occupational composition of the

HHA Occupational Wage and Salary

Index and the HHA Occupational

Benefits Index are shown in the

Appendix to this notice.

VII. Methodology for Determining Costper-Visit Limits

A. Data

For this notice, the cost-per-visit limit

values were determined by extracting

settled actual cost-per-visit data from

Medicare cost reports for periods

beginning on or after June 30, 1991, and

settled before October 1, 1995. We then

adjusted the data using the latest

available market basket factors to reflect

expected cost increases occurring

between the cost reporting periods

contained in our data base and June 30,

1997. The following adjustment factors

were used to compute the per-visit

costs:
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34351

TABLE 5.—FACTORS FOR INFLATING DATA BASE DOLLARS TO JUNE 30, 1997

[Inflation Adjustment Factors] 1

Fiscal year end 1992 1993 1994

January 31 .................................................................................................................................... ........................ 1.13729 1.10178

February 28 .................................................................................................................................. ........................ 1.13412 1.09908

March 31 ...................................................................................................................................... ........................ 1.13096 1.09642

April 30 ......................................................................................................................................... ........................ 1.12782 1.09380

May 31 .......................................................................................................................................... ........................ 1.12473 1.09121

June 30 ......................................................................................................................................... 1.15976 1.12172 1.08863

July 31 .......................................................................................................................................... 1.15643 1.11878 1.08606

August 31 ..................................................................................................................................... 1.15316 1.11589 1.08349

September 30 ............................................................................................................................... 1.14995 1.11301 1.08090

October 31 .................................................................................................................................... 1.14678 1.11015 1.07830

November 30 ................................................................................................................................ 1.14363 1.10731 1.07571

December 31 ................................................................................................................................ 1.14047 1.10453 1.07316

1By multiplying nominal dollars for a given fiscal year end by its respective inflation adjustment factor will express those dollars in the dollar

levels for June 30, 1997.

Sources: Input Price Index used to develop adjustment factors were obtained from DRI/McGraw-Hill for the period between 1989:4 and 1999:4.

The forecasts are from DRI’s 1st QTR 1996;@USSIM/TREND25YR 0296 @CISSIM/Control 961 forecast exercise which has historical data

through 1995:4.

B. Cost Reporting Periods Consisting of

Fewer Than 12 Months

HHAs may have cost reporting

periods that are fewer than 12 months

in duration. This may happen, for

example, when a new provider enters

the Medicare program after its selected

fiscal year has already begun, or when

a provider experiences a change of

ownership before the end of the cost

reporting period. As explained in

section IV of this preamble, the data

used in calculating the cost limits were

updated to June 30, 1997. Therefore, the

cost limits published in this notice are

for a 12-month cost reporting period

beginning July 1, 1996 and ending June

30, 1997. For 12-month cost reporting

periods beginning after July 1, 1996 and

before July 1, 1997, cost reporting year

adjustment factors are provided in Table

8. However, when a cost reporting

period consists of fewer than 12 months,

adjustments must be made to the data

that have been developed for use with

12-month cost reporting periods. In

previous notices, we instructed

intermediaries to contact HCFA for

short period adjustment factors. In this

notice, however, to promote the efficient

dissemination of cost limits to providers

with cost reporting periods of fewer

than 12 months, we are publishing the

following examples and tables to enable

intermediaries to calculate the

applicable adjustment factors.

Cost reporting periods of fewer than

12 months may not necessarily begin on

the first of the month or end on the last

day of the month. In order to simplify

the process in calculating ‘‘short

period’’ adjustment factors, if the short

cost reporting period begins before the

sixteenth of the month, we will consider

the period have begun on the first of

that month. If the start period begins on

or after the sixteenth of the month, it

will be considered to have begun at the

beginning of the next month. Also, if the

short period ends before the sixteenth of

the month, we will consider the period

to have ended at the end of the

preceding month; if the short period

ends on or after the sixteenth of the

month it will be considered to have

ended at the end of that month.

Examples

1. After approval by its intermediary,

an HHA changes its fiscal year end from

June 30 to December 31. Therefore, the

HHA had a short cost reporting period

beginning on July 1, 1996 and ending on

December 31, 1996. The cost limits that

apply to this short period must be

adjusted as follows:

Step 1—From Table 9, sum the index

levels for the months of July, 1996

through December, 1996: 6.84863.

Step 2—Divide the results from Step 1

by the number of months in the

short period.

6.84963 ÷ 6 = 1.141438

Step 3—From Table 9, sum the index

levels for the months in the

common period of July, 1996

through June, 1997.

13.79728

Step 4—Divide the results in Step 3 by

the number of months in the

common period.

13.79728 ÷ 12 = 1.149773

Step 5—Divide the results from Step 2

by the results from Step 4. This is

the adjustment factor to be applied

to the published limits

1.141438 ÷ 1.149773 = .992751

Step 6—Apply the results from Step 5

to the published cost limits.

a. Urban Skilled Nursing Labor

Portion

$76.57 × .992751 = $76.01

b. Urban Skilled Nursing Nonlabor

Portion

$21.62 × .992751 = $21.46.

2. A HHA with a fiscal year end of

November 30, 1996 changes ownership

on September 21, 1997. The HHA is

required to file a terminated cost report

for the period of December 1, 1996 to

September 21, 1997. The cost limits that

apply to this short period must be

adjusted as follows:

Step 1—From Table 9, sum the index

level for the month of December,

1996 through September, 1997.

11.61295

Step 2—Divide the results from Step 1

by the number of months in the

short period.

11.61295 ÷ 10 = 1.161295

Step 3—From Table 9, sum the index

levels for the months in the

common period of July, 1996,

through June, 1997.

13.79728

Step 4—Divide the results from Step 3

by the number of months in the

common period.

13.79728 ÷ 12 = 1.149773

Step 5—Divide the results from Step 2

by the results from Step 4.

1.161295 ÷ 1.149773 = 1.010021

Step 6—Apply the results from Step 5

to the published cost limits.

a. Urban Skilled Nursing Labor

Portion

$76.57 × 1.010021 = $77.34

b. Urban Skilled Nursing Non-Labor

Portion

$21.62 × 1.010021 = $21.84

C. Standardization for Wage Levels

After adjustment by the market basket

index, we divided each HHA’s per-visit
34352 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

costs into labor and nonlabor portions.

The labor portion of costs (77.668

percent as determined by the market

basket) represents the employee wage

and benefit factor plus the contract

services factor from the market basket.

We then divided the labor portion of

per-visit costs by the wage index

applicable to the HHA’s location to

arrive at an adjusted labor cost.

D. Adjustment for ‘‘Outliers’’

We transformed all per-visit cost data

into their natural logarithms and

grouped them by type of service and

MSA, NECMA, or non-MSA location, in

order to determine the mean cost and

standard deviation for each group. We

then eliminated all ‘‘outlier’’ costs,

retaining only those per-visit costs

within two standard deviations of the

mean in each service.

E. Basic Service Limit

We calculate a basic service limit

equal to 112 percent of the mean labor

and nonlabor portions of the per-visit

costs of freestanding HHAs for each type

of service. (See Table 6 in section IX.)

VIII. Computing the Adjusted Limit

A. Adjustment of Cost Limits by Wage

Index

To arrive at the adjusted limit, which

is to be applied to each service

furnished by an HHA, the HHA’s

intermediary first determines the

adjusted labor-related component by

multiplying the labor-related

component of the limit by the

appropriate wage index and by

multiplying the adjusted labor-related

component by the special labor

adjustment for budget neutrality. (See

example below and Tables 7a and 7b in

section X of this notice.) The sum of the

nonlabor component plus the laborrelated component is the adjusted limit

applicable to an HHA.

Example—Calculation of Adjusted Occupational Therapy Limit for a Freestanding HHA in Dallas, TX

Labor component (Table 6) ........... 83.41

Wage index value (Table 7a) ......... 0.9804

Labor portion ................................. 81.78

Special labor adjustment for budget neutrality ................................ 0.91

Adjusted labor portion .................. 74.42

Nonlabor component (Table 6) ..... 23.84

Adjusted occupational therapy

limit ............................................ 98.26

B. Adjustment for Reporting Year

If an HHA has a 12-month cost

reporting period beginning on or after

August 1, 1996, the adjusted per-visit

limit for each service is again revised by

an adjustment factor from Table 8 that

corresponds to the month and year in

which the cost reporting period begins.

Each factor represents the compounded

rate of monthly increase derived from

the projected annual increase in the

market basket index, and is used to

account for inflation in costs that will

occur after the date on which the limits

become effective.

For example, if the HHA in the

example above had a cost reporting

period beginning January 1, 1997, its

per-visit therapy limit would be further

adjusted as follows:

Computation of Revised Limit for

Occupational Therapy

Adjusted per-visit limit ............... 98.26

Adjustment factor from Table 8 1.01524

Revised per-visit limit ................. 99.76

In this example, the revised adjusted

per-visit limit for occupational therapy

applicable to this HHA for the cost

reporting period beginning January 1,

l997, is $99.76 per visit.

If an HHA uses a cost reporting period

that is not 12 months in duration, a

special calculation of the adjustment

factor must be made. This results from

the fact that projections are computed to

June 30, 1997. This calculation is done

using the methodology described in

section VII.B.

IX. Schedule of Limits

The schedule of limits set forth below

applies to cost reporting periods

beginning on or after July 1, 1996. The

intermediaries will compute the

adjusted limits using the wage index

published in Tables 7a and 7b of section

X and will notify each HHA they service

of its applicable cost per-visit limit for

each type of service. Each HHA’s

aggregate limit cannot be determined

prospectively, but depends on each

HHA’s Medicare visits for each type of

service for the cost reporting periods

subject to this notice.

The HHA costs that are subject to the

limits include the cost of medical

supplies routinely furnished in

conjunction with patient care. Durable

medical equipment, orthotics,

prosthetics, and other medical supplies

directly identifiable as services to an

individual patient are excluded from the

per-visit costs and are paid without

regard to this schedule of limits. (See

Chapter IV of the Home Health Agency

Manual (HCFA Pub. ll).)

The intermediary will determine the

limit for each HHA by multiplying the

number of Medicare visits for each type

of service furnished by the HHA, by the

respective per-visit cost limit. The sum

of these amounts is compared to the

HHA’s total allowable cost.

Example: HHA X, a freestanding

agency located in Richmond, VA,

furnished 5,000 covered skilled nursing

visits, 2,000 physical therapy visits, and

4,000 home health aide visits to

Medicare beneficiaries during its 12-

month cost reporting period beginning

July 1, 1996. The aggregate cost limit for

the HHA is calculated as follows:

DETERMINING THE AGGREGATE COST LIMIT

Type of visit Visits Nonlabor

portion

Adjusted

labor

portion

Adjusted

limit 1

Aggregate

limit

Skilled nursing .................................................................................................... 5,000 $21.62 $63.09 $84.71 $423,550

Physical therapy ................................................................................................. 2,000 23.59 69.09 92.65 185,360

Home health aide ............................................................................................... 4,000 10.56 30.60 41.16 164,640

Total Visits ............................................................................................... 11,000 .................. .................. .................. ..................

Aggregate cost limit ................................................................................. .................. .................. .................. .................. 773,5501

1 Includes special labor adjustment of 0.91 for budget neutrality.

Before the limits are applied during

settlement of the cost report, the HHA’s

actual costs are reduced by the amount

of individual items of cost (for example,

administrative compensation and

contract services) that are found to be

excessive under the Medicare principles

of provider payment. That is, the

intermediary reviews the various

reported costs, taking into account all

the Medicare payment principles; for

example, the cost guidelines for
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34353

physical therapy furnished under

arrangements (see 42 CFR 413.106) and

the limitation on costs that are

substantially out of line with those

comparable home health agencies (see

42 CFR 413.9).

TABLE 6.—PER VISIT LIMITS FOR HOME HEALTH AGENCIES

Type of visit Limit Labor

portion

Nonlabor

portion 1

MSA (NECMA) location:

Skilled nursing care .............................................................................................................................................. 98.19 76.57 21.62

Physical therapy ............................................................................................................................................ 107.43 83.84 23.59

Speech pathology ......................................................................................................................................... 107.99 84.11 23.88

Occupational therapy .................................................................................................................................... 107.25 83.41 23.84

Medical social services ................................................................................................................................. 142.05 110.59 31.46

Home health aide .......................................................................................................................................... 47.70 37.14 10.56

Non-MSA location:

Skilled nursing care .............................................................................................................................................. 109.62 89.53 20.09

Physical therapy ................................................................................................................................................... 119.65 97.61 22.04

Speech pathology ................................................................................................................................................. 130.61 106.31 24.30

Occupational therapy ........................................................................................................................................... 129.30 105.06 24.24

Medical social services ........................................................................................................................................ 184.03 149.82 34.21

Home health aide ................................................................................................................................................. 47.60 38.87 8.73

1 Nonlabor portion of limits for HHA located in Alaska, Hawaii, Puerto Rico, and the Virgin Islands are increased by multiplying them by the following cost-of-living adjustment factors:

Location Adjustment

factor

Alaska ...................................................................................................................................................................................................... 1.250

Hawaii:

Oahu ..................................................................................................................................................................................................... 1.225

Kauai .................................................................................................................................................................................................... 1.175

Maui, Lanai, and Molokai ..................................................................................................................................................................... 1.200

Hawaii (Island) ...................................................................................................................................................................................... 1.150

Puerto Rico .............................................................................................................................................................................................. 1.100

Virgin Islands ........................................................................................................................................................................................... 1.125

X. Wage Indexes

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS

Urban area (constituent counties or

county equivalents)

Wage

index

0040 Abilene, TX .......................... 0.8546

Taylor, TX

0060 Aguadilla, PR ...................... 0.4744

Aguada, PR

Aguadilla, PR

Moca, PR

0080 Akron, OH ........................... 0.9558

Portage, OH

Summit, OH

0120 Albany, GA .......................... 0.8608

Dougherty, GA

Lee, GA

0160 Albany-Schenectady-Troy,

NY ............................................... 0.8818

Albany, NY

Montgomery, NY

Rensselaer, NY

Saratoga, NY

Schenectady, NY

Schoharie, NY

0200 Albuquerque, NM ................ 0.9542

Bernalillo, NM

Sandoval, NM

Valencia, NM

0220 Alexandria, LA ..................... 0.7917

Rapides, LA

0240 Allentown-Bethlehem-Easton, PA ........................................ 1.0198

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Carbon, PA

Lehigh, PA

Northampton, PA

0280 Altoona, PA ......................... 0.9007

Blair, PA

0320 Amarillo, TX ......................... 0.8759

Potter, TX

Randall, TX

0380 AK Anchorage, AK .............. 1.3373

Anchorage,

0440 Ann Arbor, MI ...................... 1.2116

Lenawee, MI

Livingston, MI

Washtenaw, MI

0450 Anniston, AL ........................ 0.8158

Calhoun, AL

0460 Appleton-Oshkosh-Neenah,

WI ................................................ 0.8844

Calumet, WI

Outagamie, WI

Winnebago, WI

0470 Arecibo, PR ......................... 0.4498

Arecibo, PR

Camuy, PR

Hatillo, PR

0480 Asheville, NC ....................... 0.9218

Buncombe, NC

Madison, NC

0500 Athens, GA .......................... 0.9097

Clarke, GA

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Madison, GA

Oconee, GA

0520 *Atlanta, GA ........................ 1.0069

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 City- Cape May, NJ 1.0935

Atlantic City, NJ

Cape May, NJ

0600 Augusta-Aiken, GA-SC ....... 0.8955

Columbia, GA

McDuffie, GA

Richmond, GA
34354 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Aiken, SC

Edgefield, SC

0640 Austin-San Marcos, TX ....... 0.9255

Bastrop, TX

Caldwell, TX

Hays, TX

Travis, TX

Williamson, TX

0680 Bakersfield, CA ................... 1.0502

Kern, CA

0720 *Baltimore, MD .................... 0.9865

Anne Arundel, MD

Baltimore, MD

Baltimore City, MD

Carroll, MD

Harford, MD

Howard, MD

Queen Annes, MD

0733 Bangor, ME ......................... 0.9360

Penobscot, ME

0743 Barnstable-Yarmouth, MA ... 1.3457

Barnstable, MA

0760 Baton Rouge, LA ................. 0.8670

Ascension, LA

East Baton Rouge, LA

Livingston, LA

West Baton Rouge, LA

0840 Beaumont-Port Arthur, TX 0.8603

Hardin, TX

Jefferson, TX

Orange, TX

0860 Bellingham, WA ................... 1.2681

Whatcom, WA

0870 Benton Harbor, MI ............... 0.8258

Berrien, MI

0875 *Bergen-Passaic, NJ ........... 1.1677

Bergen, NJ

Passaic, NJ

0880 Billings, MT .......................... 0.8705

Yellowstone, MT

0920 Biloxi-Gulfport-Pascagoula,

MS ............................................... 0.8448

Hancock, MS

Harrison, MS

Jackson, MS

0960 Binghamton, NY .................. 0.9005

Broome, NY

Tioga, NY

1000 Birmingham, AL ................... 0.9144

Blount, AL

Jefferson, AL

St. Clair, AL

Shelby, AL

1010 Bismarck, ND ...................... 0.8299

Burleigh, ND

Morton, ND

1020 Bloomington, IN ................... 0.8429

Monroe, IN

1040 Bloomington-Normal, IL ...... 0.8740

McLean, IL

1080 Boise City, ID ...................... 0.9051

Ada, ID

Canyon, ID

1123 *Boston-Brockton-NashuaMA-NH ......................................... 1.1684

Bristol, MA

Essex, MA

Middlesex, MA

Norfolk, MA

Plymouth, MA

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Suffolk, MA

Worcester, MA

Hillsborough, NH

Merrimack, NH

Rockingham, NH

Strafford, NH

1125 Boulder-Longmont, CO ....... 0.9780

Boulder, CO

1145 Brazoria, TX ........................ 0.8814

Brazoria, TX

1150 Bremerton, WA .................... 1.0295

Kitsap, WA

1240 Brownsville-Harlingen-San

Benito, TX ................................... 0.8649

Cameron, TX

1260 Bryan-College Station, TX 0.8987

Brazos, TX

1280 *Buffalo-Niagara Falls, NY 0.9186

Erie, NY

Niagara, NY

1303 Burlington, VT ..................... 0.9252

Chittenden, VT

Franklin, VT

Grand Isle, VT

1310 Caguas, PR ......................... 0.4706

Caguas, PR

Cayey, PR

Cidra, PR

Gurabo, PR

San Lorenzo, PR

1320 Canton-Massillon, OH ......... 0.8749

Carroll, OH

Stark, OH

1350 Casper, WY ......................... 0.8429

Natrona, WY

1360 Cedar Rapids, IA ................. 0.8359

Linn, IA

1400 Champaign-Urbana, IL ........ 0.8867

Champaign, IL

1440 Charleston-North Charleston, SC ........................................ 0.8928

Berkeley, SC

Charleston, SC

Dorchester, SC

1480 Charleston, WV ................... 0.9498

Kanawha, WV

Putnam, WV

1520 *Charlotte-Gastonia-Rock

Hill, NC-SC .................................. 0.9661

Cabarrus, NC

Gaston, NC

Lincoln, NC

Mecklenburg, NC

Rowan, NC

Union, NC

York, SC

1540 Charlottesville, VA ............... 0.9179

Albemarle, VA

Charlottesville City, VA

Fluvanna, VA

Greene, VA

1560 Chattanooga, TN–GA .......... 0.9129

Catoosa, GA

Dade, GA

Walker, GA

Hamilton, TN

Marion, TN

1580 Cheyenne, WY .................... 0.7935

Laramie, WY

1600 *Chicago, IL ......................... 1.0632

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Cook, IL

DeKalb, IL

DuPage, IL

Grundy, IL

Kane, IL

Kendall, IL

Lake, IL

McHenry, IL

Will, IL

1620 Chico-Paradise, CA ............. 1.0531

Butte, CA

1640 *Cincinnati, OH–KY–IN ....... 0.9418

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 ................................................ 0.7542

Christian, KY

Montgomery, TN

1680 *Cleveland-Lorain-Elyria,

OH ............................................... 0.9835

Ashtabula, OH

Cuyahoga, OH

Geauga, OH

Lake, OH

Lorain, OH

Medina, OH

1720 Colorado Springs, CO ......... 0.9294

El Paso, CO

1740 Columbia, MO ..................... 0.9461

Boone, MO

1760 Columbia, SC ...................... 0.9033

Lexington, SC

Richland, SC

1800 Columbus, GA–AL.

Russell, AL 0.7756

Chattanoochee, GA

Harris, GA

Muscogee, GA

1840 *Columbus, OH ................... 0.9734

Delaware, OH

Fairfield, OH

Franklin, OH

Licking, OH

Madison, OH

Pickaway, OH

1880 Corpus Christi, TX ............... 0.8941

Nueces, TX

San Patricio, TX

1900 Cumberland, MD–WV ......... 0.8372

Allegany, MD

Mineral, WV

1920 *Dallas, TX .......................... 0.9804

Collin, TX

Dallas, TX

Denton, TX

Ellis, TX

Henderson, TX

Hunt, TX

Kaufman, TX

Rockwall, TX
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34355

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

1950 Danville, VA ......................... 0.8465

Danville City, VA

Pittsylvania, VA

1960 Davenport-Rock Island-Moline, IA–IL .................................... 0.8347

Scott, IA

Henry, IL

Rock Island, IL

2000 Dayton-Springfield, OH ....... 0.9428

Clark, OH

Greene, OH

Miami, OH

Montgomery, OH

2020 Daytona Beach, FL ............. 0.8902

Flagler, FL

Volusia, FL

2030 Decatur, AL ......................... 0.8180

Lawrence, AL

Morgan, AL

2040 Decatur, IL ........................... 0.7790

Macon, IL

2080 *Denver, CO ........................ 1.0447

Adams, CO

Arapahoe, CO

Denver, CO

Douglas, CO

Jefferson, CO

2120 Des Moines, IA .................... 0.8792

Dallas, IA

Polk, IA

Warren, IA

2160 *Detroit, MI .......................... 1.0831

Lapeer, MI

Macomb, MI

Monroe, MI

Oakland, MI

St. Clair, MI

Wayne, MI

2180 Dothan, AL .......................... 0.7751

Dale, AL

Houston, AL

2190 Dover, DE ............................ 0.8960

Kent, DE

2200 Dubuque, IA ........................ 0.8054

Dubuque, IA

2240 Duluth-Superior, MN–WI ..... 0.9660

St. Louis, MN

Douglas, WI

2281 Dutchess County, NY .......... 1.0754

Dutchess, NY

2290 Eau Claire, WI ..................... 0.8660

Chippewa, WI

Eau Claire, WI

2320 El Paso, TX ......................... 0.9266

El Paso, TX

2330 Elkhart-Goshen, IN .............. 0.8764

Elkhart, IN

2335 Elmira, NY ........................... 0.8460

Chemung, NY

2340 Enid, OK .............................. 0.8170

Garfield, OK

2360 Erie, PA ............................... 0.9196

Erie, PA

2400 Eugene-Springfield, OR ...... 1.1138

Lane, OR

2440 Evansville-Henderson, IN–

KY ................................................ 0.8899

Posey, IN

Vanderburgh, IN

Warrick, IN

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Henderson, KY

2520 Fargo-Moorhead, ND–MN ... 0.8912

Clay, MN

Cass, ND

2560 Fayetteville, NC ................... 0.8843

Cumberland, NC

2580 Fayetteville-Springdale-Rogers, AR ........................................ 0.7090

Benton, AR

Washington, AR

2620 Flagstaff, AZ–UT ................. 0.8619

Coconino, AZ

Kane, UT

2640 Flint, MI ............................... 1.0738

Genesee, MI

2650 Florence, AL ........................ 0.7700

Colbert, AL

Lauderdale, AL

2655 Florence, SC ....................... 0.8522

Florence, SC

2670 Fort Collins-Loveland, CO ... 1.0595

Larimer, CO

2680 *Ft. Lauderdale, FL ............. 1.0499

Broward, FL

2700 Fort Myers-Cape Coral, FL 0.9666

Lee, FL

2710 Fort Pierce-Port St. Lucie,

FL ................................................ 1.0401

Martin, FL

St. Lucie, FL

2720 Fort Smith, AR–OK ............. 0.7588

Crawford, AR

Sebastian, AR

Sequoyah, OK

2750 Fort Walton Beach, FL ........ 0.8705

Okaloosa, FL

2760 Fort Wayne, IN .................... 0.8691

Adams, IN

Allen, IN

DeKalb, IN

Huntington, IN

Wells, IN

Whitley, IN

2800 *Forth Worth-Arlington, TX 1.0059

Hood, TX

Johnson, TX

Parker, TX

Tarrant, TX

2840 Fresno, CA .......................... 1.0522

Fresno, CA

Madera, CA

2880 Gadsden, AL ....................... 0.8568

Etowah, AL

2900 Gainesville, FL .................... 0.9007

Alachua, FL

2920 Galveston-Texas City, TX ... 1.0304

Galveston, TX

2960 Gary, IN ............................... 0.9517

Lake, IN

Porter, IN

2975 Glens Falls, NY ................... 0.9276

Warren, NY

Washington, NY

2980 Goldsboro, NC .................... 0.8165

Wayne, NC

2985 Grand Forks, ND–MN ......... 0.8946

Polk, MN

Grand Forks, ND

2995 Grand Junction, CO ............ 0.8957

Mesa, CO

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

3000 Grand Rapids-MuskegonHolland, MI .................................. 1.0055

Allegan, MI

Kent, MI

Muskegon, MI

Ottawa, MI

3040 Great Falls, MT ................... 0.8913

Cascade, MT

3060 Greeley, CO ........................ 0.9146

Weld, CO

3080 Green Bay, WI .................... 0.8910

Brown, WI

3120 *Greensboro-WinstonSalem-High Point, NC ................. 0.9160

Alamance, NC

Davidson, NC

Davie, NC

Forsyth, NC Guilford, NC

Randolph, NC

Stokes, NC

Yadkin, NC

3150 Greenville, NC ..................... 0.9102

Pitt, NC

3160 Greenville-Spartanburg-Anderson, SC .................................. 0.9047

Anderson, SC

Cherokee, SC

Greenville, SC

Pickens, SC

Spartanburg, SC

3180 Hagerstown, MD ................. 0.9074

Washington, MD

3200 Hamilton-Middletown, OH ... 0.8782

Butler, OH

3240 Harrisburg-Lebanon-Carlisle, PA ....................................... 0.9972

Cumberland, PA

Dauphin, PA

Lebanon, PA

Perry, PA

3283 *Hartford, CT ....................... 1.2391

Hartford, CT

Litchfield, CT

Middlesex, CT

Tolland, CT

3285 Hattiesburg, MS .................. 0.7245

Forrest, MS

Lamar, MS

3290 Hickory-Morganton-Lenoir,

NC ............................................... 0.8677

Alexander, NC

Burke, NC

Caldwell, NC

Catawba, NC

3320 Honolulu, HI ........................ 1.1212

Honolulu, HI

3350 Houma, LA .......................... 0.7596

Lafourche, LA

Terrebonne, LA

3360 *Houston, TX ....................... 0.9874

Chambers, TX

Fort Bend, TX

Harris, TX

Liberty, TX

Montgomery, TX

Waller, TX

3400 Huntington-Ashland, WV–

KY–OH ........................................ 0.8997

Boyd, KY

Carter, KY
34356 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Greenup, KY

Lawrence, OH

Cabell, WV

Wayne, WV

3440 Huntsville, AL ...................... 0.8113

Limestone, AL

Madison, AL

3480 *Indianapolis, IN .................. 0.9757

Boone, IN

Hamilton, IN

Hancock, IN

Hendricks, IN

Johnson, IN

Madison, IN

Marion, IN

Morgan, IN

Shelby, IN

3500 Iowa City, IA ........................ 0.9371

Johnson, IA

3520 Jackson, MI ......................... 0.9132

Jackson, MI

3560 Jackson, MS ........................ 0.7543

Hinds, MS

Madison, MS

Rankin, MS

3580 Jackson, TN ........................ 0.8511

Madison, TN

3600 Jacksonville, FL ................... 0.8953

Clay, FL

Duval, FL

Nassau, FL

St. Johns, FL

3605 Jacksonville, NC .................. 0.6926

Onslow, NC

3610 Jamestown, NY ................... 0.7535

Chautaqua, NY

3620 Janesville-Beloit, WI ............ 0.8786

Rock, WI

3640 Jersey City, NJ .................... 1.1050

Hudson, NJ

3660 Johnson City-Kingsport-Bristol, TN–VA ................................... 0.8746

Carter, TN

Hawkins, TN

Sullivan, TN

Unicoi, TN

Washington, TN

Bristol City, VA

Scott, VA

Washington, VA

3680 Johnstown, PA .................... 0.8948

Cambria, PA

Somerset, PA

3710 Joplin, MO ........................... 0.7923

Jasper, MO

Newton, MO

3720 Kalamazoo-Battlecreek, MI 1.0657

Calhoun, MI

Kalamazoo, MI

Van Buren, MI

3740 Kankakee, IL ....................... 0.9114

Kankakee, IL

3760 *Kansas City, KS–MO ......... 0.9351

Johnson, KS

Leavenworth, KS

Miami, KS

Wyandotte, KS

Cass, MO

Clay, MO

Clinton, MO

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Jackson, MO

Lafayette, MO

Platte, MO

Ray, MO

3800 Kenosha, WI ........................ 0.8872

Kenosha, WI

3810 Killeen-Temple, TX .............. 1.0526

Bell, TX

Coryell, TX

3840 Knoxville, TN ....................... 0.8518

Anderson, TN

Blount, TN

Knox, TN

Loudon, TN

Sevier, TN

Union, TN

3850 Kokomo, IN ......................... 0.8834

Howard, IN

Tipton, IN

3870 La Crosse, WI–MN .............. 0.8519

Houston, MN

La Crosse, WI

3880 Lafayette, LA ....................... 0.8443

Acadia, LA

Lafayette, LA

St. Landry, LA

St. Martin, LA

3920 Lafayette, IN ........................ 0.8328

Clinton, IN

Tippecanoe, IN

3960 Lake Charles, LA ................ 0.8094

Calcasieu, LA

3980 Lakeland-Winter Haven, FL 0.8879

Polk, FL

4000 Lancaster, PA ...................... 0.9569

Lancaster, PA

4040 Lansing-East Lansing, MI ... 1.0105

Clinton, MI

Eaton, MI

Ingham, MI

4080 Laredo, TX .......................... 0.6834

Webb, TX

4100 Las Cruces, NM .................. 0.8861

Dona Ana, NM

4120 *Las Vegas, NV–AZ ............ 1.0934

Mohave, AZ

Clark, NV

Nye, NV

4150 Lawrence, KS ...................... 0.8549

Douglas, KS

4200 Lawton, OK ......................... 0.8594

Comanche, OK

4243 Lewiston-Auburn, ME .......... 0.9433

Androscoggin, ME

4280 Lexington, KY ...................... 0.8348

Bourbon, KY

Clark, KY

Fayette, KY

Jessamine, KY

Madison, KY

Scott, KY

Woodford, KY

4320 Lima, OH ............................. 0.8863

Allen, OH

Auglaize, OH

4360 Lincoln, NE .......................... 0.9093

Lancaster, NE

4400 Little Rock-North Little

Rock, AR ..................................... 0.8527

Faulkner, AR

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Lonoke, AR

Pulaski, AR

Saline, AR

4420 Longview-Marshall, TX ........ 0.8727

Gregg, TX

Harrison, TX

Upshur, TX

4480 *Los Angeles-Long Beach,

CA ............................................... 1.2491

Los Angeles, CA

4520 Louisville, KY–IN ................. 0.9327

Clark, IN

Floyd, IN

Harrison, IN

Scott, IN

Bullitt, KY

Jefferson, KY

Oldham, KY

4600 Lubbock, TX ........................ 0.8443

Lubbock, TX

4640 Lynchburg, VA ..................... 0.8319

Amherst, VA

Bedford, VA

Bedford City, VA

Campbell, VA

Lynchburg City, VA

4680 Macon, GA .......................... 0.8991

Bibb, GA

Houston, GA

Jones, GA

Peach, GA

Twiggs, GA

4720 Madison, WI ........................ 1.0055

Dane, WI

4800 Mansfield, OH ..................... 0.8373

Crawford, OH

Richland, OH

4840 Mayaguez, PR ..................... 0.4644

Anasco, PR

Cabo Rojo, PR

Hormigueros, PR

Mayaguez, PR

Sabana Grande, PR

San German, PR

4880 McAllen-Edinburg-Mission,

TX ................................................ 0.8669

Hidalgo, TX

4890 Medford-Ashland, OR ......... 0.9944

Jackson, OR

4900 Melbourne-Titusville-Palm

Bay, FL ........................................ 0.9323

Brevard, FL

4920 *Memphis, TN–AR–MS ....... 0.8399

Crittenden, AR

DeSoto, MS

Fayette, TN

Shelby, TN

Tipton, TN

4940 Merced, CA ......................... 1.0877

Merced, CA

5000 *Miami, FL ........................... 1.0163

Dade, FL

5015 *Middlesex-SomersetHunterdon, NJ ............................. 1.0809

Hunterdon, NJ

Middlesex, NJ

Somerset, NJ

5080 *Milwaukee-Waukesha, WI 0.9498

Milwaukee, WI

Ozaukee, WI
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34357

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Washington, WI

Waukesha, WI

5120 *Minneapolis-St. Paul, MN–

WI ................................................ 1.0744

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 ........................... 0.7801

Baldwin, AL

Mobile, AL

5170 Modesto, CA ....................... 1.1161

Stanislaus, CA

5190 *Monmouth-Ocean, NJ ........ 1.0562

Monmouth, NJ

Ocean, NJ

5200 Monroe, LA .......................... 0.7900

Ouachita, LA

5240 Montgomery, AL .................. 0.7878

Autauga, AL

Elmore, AL

Montgomery, AL

5280 Muncie, IN ........................... 0.9125

Delaware, IN

5330 Myrtle Beach, SC ................ 0.7961

Horry, SC

5345 Naples, FL ........................... 0.9871

Collier, FL

5360 *Nashville, TN ..................... 0.9266

Cheatham, TN

Davidson, TN

Dickson, TN

Robertson, TN

Rutherford TN

Sumner, TN

Williamson, TN

Wilson, TN

5380 *Nassau-Suffolk, NY ........... 1.3590

Nassau, NY

Suffolk, NY

5483 *New Haven-BridgeportStamford-Danbury-Waterbury,

CT ................................................ 1.2534

Fairfield, CT

New Haven, CT

5523 New London-Norwich, CT ... 1.1899

New London, CT

5560 *New Orleans, LA ............... 0.9454

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 .................... 1.3815

Bronx, NY

Kings, NY

New York, NY

Putnam, NY

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Queens, NY

Richmond, NY

Rockland, NY

Westchester, NY

5640 *Newark, NJ ........................ 1.1407

Essex, NJ

Morris, NJ

Sussex, NJ

Union, NJ

Warren, NJ

5660 Newburgh, NY-PA ............... 1.0619

Orange, NY

Pike, PA

5720 *Norfolk-Virginia BeachNewport News, VA–NC ............... 0.8411

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 ...................... 1.5202

Alameda, CA

Contra Costa, CA

5790 Ocala, FL ............................. 0.8942

Marion, FL

5800 Odessa-Midland, TX ........... 0.8753

Ector, TX

Midland, TX

5880 *Oklahoma City, OK ............ 0.8358

Canadian, OK

Cleveland, OK

Logan, OK

McClain, OK

Oklahoma, OK

Pottawatomie, OK

5910 Olympia, WA ....................... 1.1109

Thurston, WA

5920 Omaha, NE–IA .................... 0.9794

Pottawattamie, IA

Cass, NE

Douglas, NE

Sarpy, NE

Washington, NE

5945 *Orange County, CA ........... 1.2299

Orange, CA

5960 *Orlando, FL ........................ 0.9515

Lake, FL

Orange, FL

Osceola, FL

Seminole, FL

5990 Owensboro, KY ................... 0.7498

Daviess, KY

6015 Panama City, FL ................. 0.8182

Bay, FL

6020 Parkersburg-Marietta, WV–

OH ............................................... 0.7751

Washington, OH

Wood, WV

6080 Pensacola, FL ..................... 0.8183

Escambia, FL

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Santa Rosa, FL

6120 Peoria-Pekin, IL ................... 0.8619

Peoria, IL

Tazewell, IL

Woodford, IL

6160 *Philadelphia, PA–NJ .......... 1.1112

Burlington, NJ

Camden, NJ

Gloucester, NJ

Salem, NJ

Bucks, PA

Chester, PA

Delaware, PA

Montgomery, PA

Philadelphia, PA

6200 *Phoenix-Mesa, AZ ............. 0.9808

Maricopa, AZ

Pinal, AZ

6240 Pine Bluff, AR ...................... 0.7985

Jefferson, AR

6280 *Pittsburgh, PA .................... 0.9743

Allegheny, PA

Beaver, PA

Butler, PA

Fayette, PA

Washington, PA

Westmoreland, PA

6323 Pittsfield, MA ....................... 1.0838

Berkshire, MA

6360 Ponce, PR ........................... 0.4780

Guayanilla, PR

Juana Diaz, PR

Penuelas, PR

Ponce, PR

Villalba, PR

Yauco, PR

6403 Portland, ME ....................... 0.9744

Cumberland, ME

Sagadahoc, ME

York, ME

6440 *Portland-Vancouver, OR–

WA ............................................... 1.1248

Clackamas, OR

Columbia, OR

Multnomah, OR

Washington, OR

Yamhill, OR

Clark, WA

6483 Providence-Warwick, RI ...... 1.1027

Bristol, RI

Kent, RI

Newport, RI

Providence, RI

Washington, RI

6520 Provo-Orem, UT .................. 0.9843

Utah, UT

6560 Pueblo, CO .......................... 0.8508

Pueblo, CO

6580 Punta Gorda, FL ................. 0.9402

Charlotte, FL

6600 Racine, WI ........................... 0.8704

Racine, WI

6640 Raleigh-Durham-Chapel Hill,

NC ............................................... 0.9539

Chatham, NC

Durham, NC

Franklin, NC

Johnston, NC

Orange, NC

Wake, NC
34358 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

6660 Rapid City, SD .................... 0.8267

Pennington, SD

6680 Reading, PA ........................ 0.9570

Berks, PA

6690 Redding, CA ........................ 1.1796

Shasta, CA

6720 Reno, NV ............................. 1.1087

Washoe, NV

6740 Richland-Kennewick-Pasco,

WA ............................................... 1.0011

Benton, WA

Franklin, WA

6760 Richmond-Petersburg, VA 0.9055

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 ............................................... 1.1616

Riverside, CA

San Bernardino, CA

6800 Roanoke, VA ....................... 0.8483

Botetourt, VA

Roanoke, VA

Roanoke City, VA

Salem City, VA

6820 Rochester, MN .................... 1.0545

Olmsted, MN

6840 *Rochester, NY ................... 0.9585

Genesee, NY

Livingston, NY

Monroe, NY

Ontario, NY

Orleans, NY

Wayne, NY

6880 Rockford, IL ......................... 0.8872

Boone, IL

Ogle, IL

Winnebago, IL

6895 Rocky Mount, NC ................ 0.8760

Edgecombe, NC

Nash, NC

6920 *Sacramento, CA ................ 1.2539

El Dorado, CA

Placer, CA

Sacramento, CA

6960 Saginaw-Bay City-Midland,

MI ................................................ 0.9489

Bay, MI

Midland, MI

Saginaw, MI

6980 St. Cloud, MN ...................... 0.9549

Benton, MN

Stearns, MN

7000 St. Joseph, MO ................... 0.8457

Andrews, MO

Buchanan, MO

7040 *St. Louis, MO–IL ................ 0.8880

Clinton, IL

Jersey, IL

Madison, IL

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

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 ........................... 0.9590

Marion, OR

Polk, OR

7120 Salinas, CA ......................... 1.4263

Monterey, CA

7160 *Salt Lake City-Ogden, UT 0.9681

Davis, UT

Salt Lake, UT

Weber, UT

7200 San Angelo, TX ................... 0.7777

Tom Green, TX

7240 *San Antonio, TX ................ 0.8414

Bexar, TX

Comal, TX

Guadalupe, TX

Wilson, TX

7320 *San Diego, CA ................... 1.1844

San Diego, CA

7360 *San Francisco, CA ............. 1.4413

Marin, CA

San Francisco, CA

San Mateo, CA

7400 *San Jose, CA ..................... 1.4429

Santa Clara, CA

7440 *San Juan-Bayamon, PR .... 0.4514

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 ObispoAtascadero-Paso Robles, CA ..... 1.1405

San Luis Obispo, CA

7480 Santa Barbara-Santa MariaLompoc, CA ................................ 1.1136

Santa Barbara, CA

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

7485 Santa Cruz-Watsonville, CA 1.3944

Santa Cruz, CA

7490 Santa Fe, NM ...................... 1.1108

Los Alamos, NM

Santa Fe, NM

7500 Santa Rosa, CA .................. 1.2693

Sonoma, CA

7510 Sarasota-Bradenton, FL ...... 0.9737

Manatee, FL

Sarasota, FL

7520 Savannah, GA ..................... 0.8968

Bryan, GA

Chatham, GA

Effingham, GA

7560 Scranton—Wilkes-Barre—

Hazleton, PA ............................... 0.8724

Columbia, PA

Lackawanna, PA

Luzerne, PA

Wyoming, PA

7600 *Seattle-Bellevue-Everett,

WA ............................................... 1.1305

Island, WA

King, WA

Snohomish, WA

7610 Sharon, PA .......................... 0.8903

Mercer, PA

7620 Sheboygan, WI .................... 0.7981

Sheboygan, WI

7640 Sherman-Denison, TX ......... 0.8780

Grayson, TX

7680 Shreveport-Bossier City, LA 0.9007

Bossier, LA

Caddo, LA

Webster, LA

7720 Sioux City, IA–NE ............... 0.8436

Woodbury, IA

Dakota, NE

7760 Sioux Falls, SD ................... 0.8761

Lincoln, SD

Minnehaha, SD

7800 South Bend, IN .................... 0.9475

St. Joseph, IN

7840 Spokane, WA ...................... 1.0377

Spokane, WA

7880 Springfield, IL ...................... 0.8940

Menard, IL

Sangamon, IL

7920 Springfield, MO ................... 0.7896

Christian, MO

Greene, MO

Webster, MO

8003 Springfield, MA .................... 1.0517

Hampden, MA

Hampshire, MA

8050 State College, PA ................ 1.0162

Centre, PA

8080 Steubenville-Weirton, OH–

WV ............................................... 0.8455

Jefferson, OH

Brooke, WV

Hancock, WV

8120 Stockton-Lodi, CA ............... 1.1536

San Joaquin, CA

8140 Sumter, SC .......................... 0.8344

Sumter, SC

8160 Syracuse, NY ...................... 0.9531

Cayuga, NY

Madison, NY

Onondaga, NY
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34359

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

Oswego, NY

8200 Tacoma, WA ....................... 1.0828

Pierce, WA

8240 Tallahassee, FL ................... 0.8321

Gadsden, FL

Leon, FL

8280 *Tampa-St. PetersburgClearwater, FL ............................. 0.9262

Hernando, FL

Hillsborough, FL

Pasco, FL

Pinellas, FL

8320 Terre Haute, IN ................... 0.8672

Clay, IN

Vermillion, IN

Vigo, IN

8360 Texarkana, AR-Texarkana,

TX ................................................ 0.8198

Miller, AR

Bowie, TX

8400 Toledo, OH .......................... 1.0424

Fulton, OH

Lucas, OH

Wood, OH

8440 Topeka, KS ......................... 0.9735

Shawnee, KS

8480 Trenton, NJ ......................... 1.0033

Mercer, NJ

8520 Tucson, AZ .......................... 0.9289

Pima, AZ

8560 Tulsa, OK ............................ 0.8245

Creek, OK

Osage, OK

Rogers, OK

Tulsa, OK

Wagoner, OK

8600 Tuscaloosa, AL ................... 0.8090

Tuscaloosa, AL

8640 Tyler, TX .............................. 0.9430

Smith, TX

8680 Utica-Rome, NY .................. 0.8514

Herkimer, NY

Oneida, NY

8720 Vallejo-Fairfield-Napa, CA ... 1.3483

Napa, CA

Solano, CA

8735 Ventura, CA ......................... 1.1924

Ventura, CA

8750 Victoria, TX .......................... 0.8435

Victoria, TX

8760 Vineland-Millville-Bridgeton,

NJ ................................................ 0.9966

Cumberland, NJ

8780 Visalia-Tulare-Porterville,

CA ............................................... 1.0446

Tulare, CA

8800 Waco, TX ............................ 0.7898

McLennan, TX

8840 *Washington, DC–MD–VA–

WV ............................................... 1.1116

District of Columbia, DC

Calvert, MD

Charles, MD

Frederick, MD

Montgomery, MD

Prince Georges, MD

Alexandria City, VA

Arlington, VA

Clarke, VA

Culpepper, VA

TABLE 7A.—WAGE INDEX FOR URBAN

AREAS—Continued

Urban area (constituent counties or

county equivalents)

Wage

index

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 ..... 0.8600

Black Hawk, IA

8940 Wausau, WI ......................... 1.0034

Marathon, WI

8960 West Palm Beach-Boca

Raton, FL .................................... 1.0217

Palm Beach, FL

9000 Wheeling, OH–WV .............. 0.7518

Belmont, OH

Marshall, WV

Ohio, WV

9040 Wichita, KS .......................... 0.9562

Butler, KS

Harvey, KS

Sedgwick, KS

9080 Wichita Falls, TX ................. 0.7826

Archer, TX

Wichita, TX

9140 Williamsport, PA .................. 0.8508

Lycoming, PA

9160 Wilmington-Newark, DE–MD 1.1539

New Castle, DE

Cecil, MD

9200 Wilmington, NC ................... 0.9299

New Hanover, NC

Brunswick, NC

9260 Yakima, WA ........................ 0.9951

Yakima, WA

9270 Yolo, CA .............................. 1.1615

Yolo, CA

9280 York, PA .............................. 0.9165

York, PA

9320 Youngstown-Warren, OH .... 0.9555

Columbiana, OH

Mahoning, OH

Trumbull, OH

9340 Yuba City, CA ..................... 1.0611

Sutter, CA

Yuba, CA

9360 Yuma, AZ ............................ 0.9769

Yuma, AZ

*Large Urban Area

TABLE 7B.—WAGE INDEX FOR RURAL

AREAS

Nonurban area Wage

index

Alabama .......................................... 0.7164

Alaska ............................................. 1.2034

Arizona ............................................ 0.7995

Arkansas ......................................... 0.6897

California ......................................... 1.0096

TABLE 7B.—WAGE INDEX FOR RURAL

AREAS—Continued

Nonurban area Wage

index

Colorado ......................................... 0.7988

Connecticut ..................................... 1.3117

Delaware ......................................... 0.9019

Florida ............................................. 0.8668

Georgia ........................................... 0.7721

Hawaii ............................................. 0.9847

Idaho ............................................... 0.8378

Illinois .............................................. 0.7497

Indiana ............................................ 0.8067

Iowa ................................................ 0.7352

Kansas ............................................ 0.7229

Kentucky ......................................... 0.7650

Louisiana ......................................... 0.7275

Maine .............................................. 0.8425

Maryland ......................................... 0.8463

Massachusetts ................................ 1.0577

Michigan .......................................... 0.8744

Minnesota ....................................... 0.8127

Mississippi ....................................... 0.6697

Missouri ........................................... 0.7186

Montana .......................................... 0.8091

Nebraska ......................................... 0.7219

Nevada ............................................ 0.8788

New Hampshire .............................. 1.0013

New Jersey 1 ................................... ..............

New Mexico .................................... 0.8329

New York ........................................ 0.8647

North Carolina ................................. 0.7999

North Dakota ................................... 0.7265

Ohio ................................................ 0.8286

Oklahoma ........................................ 0.6985

Oregon ............................................ 0.9486

Pennsylvania ................................... 0.8521

Puerto Rico ..................................... 0.4326

Rhode Island 1 ................................ ..............

South Carolina ................................ 0.7738

South Dakota .................................. 0.6987

Tennessee ...................................... 0.7409

Texas .............................................. 0.7316

Utah ................................................ 0.8652

Vermont .......................................... 0.9043

Virginia ............................................ 0.7788

Washington ..................................... 0.9775

West Virginia ................................... 0.8036

Wisconsin ........................................ 0.8391

Wyoming ......................................... 0.8013

1All counties within the State are classified

urban.

TABLE 8.—COST REPORTING YEAR

ADJUSTMENT FACTOR 1

If the HHA cost reporting period

begins

The adjustment factor

is

August 1, 1996 ......................... 1.00251

September 1, 1996 ................... 1.00505

October 1, 1996 ........................ 1.00759

November 1, 1996 .................... 1.01012

December 1, 1997 .................... 1.01266

January 1, 1997 ........................ 1.01524

February 1,1997 ....................... 1.01788

March 1, 1997 ........................... 1.02056

April 1, 1997 ............................. 1.02326

May 1, 1997 .............................. 1.02599

June 1, 1997 ............................. 1.02875

1Based on compounded projected market

basket inflation rates.
34360 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

These adjustment factors are subject

to change based on later estimates of

cost increases.

If for any reason we do not publish a

new schedule of limits to be effective on

July 1, 1997 or do not announce other

changes in the current schedule by that

date, the current limits will continue in

effect. Intermediaries will be notified of

the adjustment factors to be applied

until a new schedule of limits or other

provision is issued.

TABLE 9.—MONTHLY INDEX LEVELS

FOR CALCULATING INFLATION FACTORS TO BE APPLIED TO HOME

HEALTH AGENCY COST LIMITS

Month Index

level

July 1996 ........................................ 1.13366

August 1996 .................................... 1.13700

September 1996 ............................. 1.13999

October 1996 .................................. 1.14299

November 1996 .............................. 1.14600

December 1996 .............................. 1.14899

January 1997 .................................. 1.15199

February 1997 ................................ 1.15500

March 1997 ..................................... 1.15700

April 1997 ........................................ 1.15900

May 1997 ........................................ 1.16100

June 1997 ....................................... 1.16466

July 1997 ........................................ 1.16832

August 1997 .................................... 1.17200

September 1997 ............................. 1.17499

October 1997 .................................. 1.17799

November 1997 .............................. 1.18100

December 1997 .............................. 1.18466

January 1998 .................................. 1.18832

February 1998 ................................ 1.19200

March 1998 ..................................... 1.19433

April 1998 ........................................ 1.19666

May 1998 ........................................ 1.19900

Source: DR/McGraw-Hill HCC, 1st QTR

1996; @USSIM/TREND 25YR0296 @CISSIM/

CONTROL961.

XI. Regulatory Impact Statement

For notices such as this, we generally

prepare an initial regulatory flexibility

analysis that is consistent with the

Regulatory Flexibility Act (RFA) (5

U.S.C. 601 through 612) unless we

certify that the notice will not have a

significant economic impact on a

substantial number of small entities. For

purposes of the RFA, all HHAs are

treated as small entities.

As discussed below, the aggregate

impact of this notice is relatively small,

and we have no evidence that the

economic impact on most HHAs will be

significant. Moreover, this notice is

necessary to implement the provisions

of section 1861(v)(1)(L) of the Act; thus

no alternatives to the provisions set

forth in this notice are available.

However, because this notice may have

some effect on a large number of

providers, we are providing a voluntary

regulatory flexibility analysis.

This notice with comment period sets

forth a schedule of HHA cost limits for

cost reporting periods beginning on or

after July 1, 1996. The methodology

used to develop the schedule of limits

set forth in this notice is the same as

that used in setting the limits effective

July 1, 1993. (As discussed in section

IV.A of this notice, we are no longer

providing for an add-on to the HHA cost

limits for those HHAs that incur costs

associated with the OSHA universal

precaution requirements, since these

updated limits are computed using a

data base that includes the costs of

complying with the OSHA standards.)

In accordance with section

1861(v)(1)(L)(i) of the Act, we are

continuing to set the limits not to

exceed 112 percent of the mean of the

labor-related and nonlabor per-visit

costs for freestanding HHAs. As

required by section 1861(v)(1)(L)(iii) of

the Act, we are using the most recent

hospital wage index to calculate the

HHA cost limits, that is, the hospital

wage index effective for discharges on

or after October 1, 1995, which is based

on 1992 wage survey data. The wage

index is used to adjust the labor-related

portion of the limits to reflect differing

wage levels among areas. As discussed

in section II of this notice, we are

applying a budget neutrality adjustment

factor of 0.91 to the labor-related portion

of the limits to ensure that aggregate

payments to HHAs are not affected by

the updating of the wage index.

We continue to use the latest settled

cost report data to develop the HHA

cost-per-visit limit values for each type

of home health service: skilled nursing

care, physical therapy, speech

pathology, occupational therapy,

medical social services, and home

health aide. Thus, for this notice, we

have updated the cost-per-visit limits by

using actual cost-per-visit data from

settled Medicare cost reports for periods

beginning on or after June 1, 1991, and

settled by October 1, 1995. The majority

of the cost reports were from FY 1993.

The data have been adjusted by the most

recent market basket factors to reflect

the expected cost increases occurring

between the cost reporting periods for

the data contained in the data base and

June 30, 1997. The intermediary

determines the aggregate cost limit for

each HHA by multiplying the number of

Medicare visits for each type of service

furnished by the HHA by the respective

per-visit cost limit. Each HHA’s

aggregate limit cannot be determined

prospectively, but depends on each

HHA’s Medicare visits for each type of

service and actual costs for the cost

reporting period subject to this notice.

The database used to calculate these

limits consists of cost reporting data

from 3,190 freestanding HHAs,

compared with 2,992 freestanding

HHAs used in calculating the limits in

effect for cost reporting periods

beginning on or after July 1, 1993. We

estimate that the revised HHA cost

limits implemented in this notice with

public comment period will result in

the following costs to the Medicare

program:

TABLE 10.—HHA COST LIMITS

[Medicare Program Costs] 1

Fiscal year Costs

(in millions)

1996 .......................................... 0

1997 .......................................... 10

1Figures are rounded to the nearest million.

The costs associated with the new

HHA cost limits represent the difference

between projected aggregate Medicare

expenditures under the new limits and

projected aggregate expenditures using

the limits in effect for cost reporting

periods beginning on or after July 1,

1993, updated by the market basket

increases since those limits took effect.

This notice does not provide for a

permanent extension of the OBRA ’93

provision that there be no changes in

the home health agency cost limits for

cost reporting periods beginning on or

after July 1, 1994, and before July 1,

1996. Because this change would

require statutory authority, President

Clinton’s FY 1997 Budget includes a

proposal to do so.

We are unable to identify the effects

of changes to the cost limits on

individual HHAs. In general, we believe

that most HHAs will experience small

revenue increases under the new limits;

the degree of that increase will vary

depending on the proportion of an

HHA’s revenues that come from

Medicare, the distribution of services

provided by the HHA, and the HHA’s

ability to operate within the cost limits.

Table 11 below illustrates the

proportion of HHAs that are likely to be

affected by the limits:

TABLE 11.—HHAs EXCEEDING THE

COST LIMITS

HHAs in

database

HHAs exceeding

the limits

Percent

of HHAs

exceeding the

limits

Total

HHAs 4987 1720 34.5
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34361

TABLE 11.—HHAs EXCEEDING THE

COST LIMITS—Continued

HHAs in

database

HHAs exceeding

the limits

Percent

of HHAs

exceeding the

limits

Freestanding ...... 3190 773 24.2

Hospitalbased 1797 947 52.7

Section 1102(b) of the act requires the

Secretary to prepare a regulatory impact

analysis if a final notice 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. For purposes of section

1102(b) of the Act, we define a small

rural hospital as a hospital located

outside a Metropolitan Statistical Area

with fewer than 50 beds.

We are not preparing a rural impact

statement because the Secretary has

determined, and certifies, that this

notice will not have a significant impact

on a substantial number of rural

hospitals.

In accordance with the provisions of

Executive Order 12866, this notice was

reviewed by the Office of Management

and Budget.

XII. Other Required Information

A. Waiver of Proposed Notice and 30–

Day Delay in Effective Date

In adopting notices such as this, we

ordinarily publish a proposed notice in

the Federal Register with a 60-day

period for public comment as required

under section 1871(b)(1) of the Act. We

also normally provide a delay of 30 days

in the effective date for documents such

as this. However, we may waive these

procedures if we find good cause that

prior notice and comment or a delay in

the effective date are impracticable,

unnecessary, or contrary to public

interest.

Section 1861(v)(1)(L)(iii) of the Act

requires that the Secretary establish

revised HHA cost limits for cost

reporting periods beginning on or after

July 1, 1991 and annually thereafter

(except for cost reporting periods

beginning on or after July 1, 1994 and

before July 1, 1996). As discussed in

section III above, in accordance with the

statute, we have used the same

methodology to develop the schedule of

limits that was used in setting the limits

effective for cost reporting periods

beginning on or after July 1, 1993. The

cost limits have been updated by the

appropriate market basket adjustment

factor to reflect the cost increases

occurring between the cost reporting

periods for the data contained in the

data base and June 30, 1997. In addition,

as required under section

1861(v)(1)(L)(iii) of the Act, we have

updated the wage index using the most

recent hospital wage index.

If HHAs are to receive timely the

benefits of these new cost limits based

on the updated wage index and market

basket adjustment factors, it is necessary

that these limits be published in time to

take effect for cost reporting periods

beginning on or after July 1, 1996.

Because the methodology used to

develop this schedule of limits is for the

most part dictated by the statute and has

been previously published for public

comment, we believe that in this

instance it would be impracticable,

unnecessary, and contrary to the public

interest to publish a proposed notice or

to provide for a 30-day delay in the

effective date of this notice. Therefore,

we find good cause to waive publication

of a proposed notice and the 30-day

delay in the effective date. However, we

are providing a 60-day period for public

comment, as indicated at the beginning

of this notice.

B. Paperwork Reduction Act

This final notice does not impose

information collection requirements.

Consequently, it does not need to be

reviewed by the Office of Management

and Budget under the authority of the

Paperwork Reduction Act of 1995.

C. Public Comments

Because of the large number of items

of correspondence we normally receive

on a notice with comment period, we

are not able to acknowledge or respond

to them individually. However, we will

consider all comments concerning the

provisions of this notice that we receive

by the date and time specified in the

‘‘DATES’’ section of this notice, and we

will respond to those comments in a

subsequent notice.

Appendix—Technical Features of the

HHA Market Basket Index

As discussed in the preamble of this

rule, we are rebasing and revising the

home health agency market basket. This

appendix describes the technical

features of the 1993-based index that we

are proposing for this notice. We present

this description of the market basket in

three steps:

• A synopsis of the structural

differences between the 1976- and the

1993-based market baskets.

• A description of the methodology

used to develop the cost category

weights in the 1993-based market

basket.

• A description of the data sources

used to measure price change for each

component of the 1993-based market

basket, making note of the differences

from the price proxies used in the 1976-

based market basket.

I. Synopsis of Structural Changes

Adopted in the Rebased 1993 Home

Health Agency Market Basket

Three major structural differences

exist between the 1976-based and the

1993-based home health agency market

baskets.

1. More recent home health agency

expenditure data are being used in the

revised and rebased home health agency

market basket.

The 1976-based market basket

contained cost shares that were derived

from 1976 Medicare cost reports and

other available health industry surveys.

The 1993-based market basket uses data

from the latest settled Medicare Cost

Reports for Freestanding Home Health

Agencies whose cost reporting periods

began after June 1, 1991 and were

settled by October 1, 1995 (one per

HHA). These data were primarily

reports from Federal fiscal year 1993;

earlier and later data were aged forward

and backward to Federal fiscal year

1993 using price changes. Additional

information from the U.S. Department of

Commerce Bureau of Economic

Analysis (BEA) 1987 Input-Output

Tables was used for some subcategories.

It was aged to 1993 for relative price

changes.

2. Some cost categories have been

disaggregated and some cost categories

have been combined. These category

changes reflect the availability of data in

the cost reports and in the BEA InputOutput Tables.

3. We will use Blended HHA

Occupational Wage and Benefits

Indexes. This parallels the use of

Blended Wage and Salary and Benefits

Indexes in the PPS and Excluded

Hospital market baskets, but with

adjustments for the occupational mix of

home health agencies.

II. Methodology for Developing the Cost

Category Weights

Cost category weights for the 1993-

based market basket were developed in

two stages. First, base weights for nine

main categories (Wages and Salaries,

Employee Benefits, Transportation,

Operation and Maintenance,

Administrative and General, Insurance,

Fixed Capital, Movable Capital, and a

residual All Other) were derived from

the Home Health Agency Medicare Cost

Reports described above. A weight for
34362 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

Contract Service Labor was derived

from the HHA Medicare Cost Reports,

and allocated to (a) Wages & Salaries, (b)

Employee Benefits, (c) Other

Administrative and General, and (d)

Other Expenses. Contract Services costs

were allocated to the above four

categories with proportionally higher

weight given to (a) Wages and Salaries

and (b) Employee Benefits to reflect that

a substantial portion of contract services

are from individual independent

contractors with lower overhead than

the average home health agency.

Second, the weight for Administrative

and General was divided into

subcategories using cost shares from the

1987 Input-Output Table for the Other

Medical and Health Services industry,

produced by the U.S. Department of

Commerce, Bureau of Economic

Analysis, aged to 1993 using price

changes. The Other Medical and Health

Services industry is the residual of the

Health Services industry less the

Doctors and Dentists, Hospitals, and

Nursing and Personal Care Facilities

industries. It includes SIC 804, Other

Health Practitioners; SIC 807, Medical

and Dental Laboratories; SIC 808, Home

Health Agencies; SIC 809 Health and

Allied Services, not elsewhere

classified; and SIC 074, Veterinary

Services. The largest share of

employment in these industries is in

home health agencies.

Below we describe the source of the

nine main category weights and their

subcategories in the 1993-based market

basket.

1. Wages and Salaries, including an

allocation for contract services’ labor:

The wages and salaries cost category is

one of the nine base weights derived

from using the Medicare Cost Reports.

Contract Services, which is also derived

from the Medicare Cost Reports, is split

among the (a) Wages and Salaries, (b)

Employee Benefits, (c) Other

Administrative and General, and (d)

Other Expenses cost categories. An

example of Contract Service Labor is

registered nurses who are employed and

paid by firms which contract for their

work with home health agencies or a

registered nurse who is an independent

contractor and works out of his or her

personal residence. The wages and

salaries cost category was disaggregated

into four occupational subcategories

(professional and technical, executive

and administrative, administrative

support, home health aides, and all

other service occupations) to reflect the

mix of occupational inputs used by

home health agencies. The 1993-based

weights were developed from the

Medicare Cost Reports. The 1976-based

market basket had a separate cost

category for Contracted Services’ Labor.

2. Employee Benefits, including an

allocation for contract services’ labor:

The employee benefits cost category is

one of the nine base weights derived

from the Medicare cost reports. A share

of contract services’ labor was allocated

to this cost category. Like wages and

salaries, the employee benefit weight in

the 1993-based market basket is a

composite of four labor subcategories.

These were developed from the

Medicare cost reports.

3. Transportation: The weight for

Transportation was derived from the

Medicare Cost Reports. The 1976-based

market basket had a similar cost

category.

4. Operations and Maintenance: The

weight for Operations and Maintenance

was derived from the Medicare Cost

Reports. The 1976-based market basket

had Utilities and Miscellaneous Cost

Categories which have been replaced.

5. Administrative and General,

including an allocation for non-labor

associated with contract labor services:

The weight for Administrative and

General was derived from the Medicare

cost reports. The subcategories of

Telephone, Paper and Printing, Postage,

and residual Other Administrative and

General expenses were derived from the

1987 BEA Input-Output Tables, moved

forward to 1993 using price changes. A

share of contract services non-labor

expenses (implied other expenses) was

allocated to the Other Administrative

and General subcategory. The 1976-

based market basket contained an Office

Administration Costs category.

6. Capital-related: The weights for the

subcategories for Insurance, Fixed

Capital, and Movable Capital were

derived from the Medicare cost reports.

The 1976-based market basket did not

contain insurance, fixed capital or

movable capital as separate categories,

but did contain a Miscellaneous Costs,

an Office Administration Costs, a Rental

and Leasing, and a Medical Nursing

Supplies cost category. Capital-related

costs include interest expenses.

7. Other Expenses: The weight for

Other Expenses was derived from the

Medicare Cost Reports. A share of

contract services non-labor expenses

(implied other expenses) was allocated

to the Other Expenses cost category. The

1976-based market basket had a

Miscellaneous Costs cost category.

III. Price Proxies Used To Measure Cost

Category Growth

1. Wages and Salaries, including an

allocation for contract services’ labor:

For measuring price growth in the 1993-

based market basket, price proxies are

applied to the five occupational

subcategories within the wages and

salaries component, as is done in the

hospital market baskets, weighted to

reflect the home health agency

occupational mix. The Professional and

Technical occupational subcategory is

represented by a blend of health

industry and economy-wide price

proxies. Therefore, there are five price

proxies for four occupational

subcategories (the Professional and

Technical occupational subcategory has

a blend of two). Table 4 at the end of

this appendix describes the wages and

salaries component of the market basket.

2. Employee Benefits, including an

allocation for contract services’ labor:

For measuring price growth in the 1993-

based market basket, price proxies are

applied to the four occupational

subcategories within the employee

benefits component, as is done in the

hospital market baskets, weighted to

reflect the home health agency

occupational mix. The Professional and

Technical occupational subcategory is

represented by a blend of health

industry and economy-wide price

proxies. Therefore there are five price

proxies for four occupational

subcategories (the Professional and

Technical subcategory has a blend of

two). Table 5 at the end of this appendix

describes the employee benefits

component of the market basket.

3. Operations and Maintenance: The

percentage change in the price of Fuel

and Other Utilities as measured by the

Consumer Price Index was applied to

this component. This is a revision from

the 1976-based index in which the

percentage change in the price of

utilities was measured by a composite

fuel and other utilities index.

4. Telephone: The percentage change

in the price of Telephone Service as

measured by the Consumer Price Index

was applied to this component. This is

a revision from the 1976-based index

when the cost of telephone service was

not specifically measured.

5. Paper and Printing: The percentage

change in the price of Paper and

Printing as measured by the Consumer

Price Index for Household Paper

Products and Stationery Supplies was

applied to this component. This is a

revision from the 1976-based index

when the cost of paper and printing was

not specifically measured.

6. Postage: The percentage change in

the price of Postage as measured by the

Consumer Price Index was applied to

this component. This is a revision from

the 1976-based index when the cost of

postage was not specifically measured.

7. Other Administrative and General,

including an allocation for non-labor
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34363

expenses associated with contract

services: The percentage change in the

price of services as measured by the

Consumer Price Index was applied to

this component. In the 1976-based

market basket the CPI for Services was

used as a proxy for Office

Administration costs.

8. Insurance: The percentage change

in the price of Household Insurance as

measured by the Consumer Price Index

was applied to this component. This is

a revision from the 1976-based market

basket in which the price of insurance

was not specifically measured.

9. Transportation: The percentage

change in the price of Transportation as

measured by the Consumer Price Index

was applied to this component. The

same proxy was used for Transportation

in the 1976-based market basket.

10. Fixed capital: The percentage

change in the price of Owner’s

Equivalent Rent as measured by the

Consumer Price Index was applied to

this component. The percentage change

in the price of Residential Rent as

measured by the Consumer Price Index

was used as a proxy for Rental and

Leasing in the 1976-based market

basket.

11. Movable Capital: The percentage

change in the price of Machinery and

Equipment as measured by the Producer

Price Index was applied to this

component. In the 1976-based market

basket the percentage change in the

price of Medical Equipment and

Supplies as measured by the Consumer

Price Index was applied to the Medical

Nursing Supplies component.

12. Other Expenses, including an

allocation for non-labor expenses

associated with contract services: The

percentage change in the price of All

Items Less Food and Energy as

measured by the Consumer Price Index

was applied to this component. This is

a revision from the 1976-based index,

when the percentage change in the price

of All Items as measured by the

Consumer Price Index was applied to

the Miscellaneous Costs component.

A comparison of price proxies used in

the 1993-based and the 1976-based

home health agency market baskets

follows:

APPENDIX TABLE 1.—A COMPARISON OF PRICE PROXIES USED IN THE 1993–BASED AND 1976–BASED HOME HEALTH

AGENCY MARKET BASKETS

Cost category 1993–Based price proxy 1976–Based price proxy

Compensation:

Wages and Salaries .................................. HHA Occupational Wage Index ........................ AHE Hospitals (Private nonsupervisory workers).

Employee Benefits ..................................... HHA Occupational Benefits Index .................... BEA Supplements to Wages & Salaries per

Worker (BLS); (BEA Aggregate Supplements/number of workers from BLS).

Operations and Maintenance .................... CPI–U Fuel & Other Utilities ............................. Index composed of CPI–U Water & Sewage;

IPD Fuel & Oil Coal (PCE); IPD Electricity

(PCE); IPD Natural Gas (PCE).

Administrative and General ....................... ........................................................................... CPI–U Services (category: Office Administration Costs).

Telephone .................................................. CPI–U Telephone .............................................

Paper and Printing ..................................... CPI–U Household Paper, Paper Products &

Stationery Supplies.

Postage ...................................................... CPI–U Postage .................................................

Other Administrative and General ............. CPI–U Services ................................................

Transportation ............................................ CPI–U Private Transportation .......................... CPI–U Transportation.

Capital-Related:

Insurance ................................................... CPI–U Household Insurance ............................

Fixed Capital .............................................. CPI–U Owner’s Equivalent Rent ...................... CPI–U Residential Rent category: Rental &

Leasing.

Movable Capital ......................................... PPI Machinery & Equipment ............................ CPI–U Nonprescription Medical Equipment &

Supplies.

Other Expenses ......................................... CPI–U All Items Less Food & Energy .............. CPI–U All Items.

Contracted Services .................................. Contained within Wages & Salaries, Employee

Benefits, Other Administrative & General &

Other Expenses cost categories; see those

price proxies

Composite All Other HHA Cost Category

Weights with associated price proxy variables.

We allocated the Contract Services’

share of home health agency expenses

among (a) Wages and Salaries, (b)

Employee Benefits, (c) Other

Administrative and General, and (d)

Other Expenses. The split chosen is one

of three alternatives that we examined.

In Alternative A, we split the Contract

Services cost share only between (a)

Wages and Salaries and (b) Employee

Benefits. In Alternative B, we split the

Contract Services cost share among (a)

Wages and Salaries, (b) Employee

Benefits, (c) Other Administrative and

General, and (d) Other Expenses. In

Alternative C, the option selected, we

split the Contract Services cost share

among (a) Wages and Salaries, (b)

Employee Benefits, (c) Other

Administrative and General, and (d)

Other Expenses, but we gave

proportionally more to (a) Wages and

Salaries and (b) Employee Benefits, and

less to (c) Other Administrative and

General and (d) Other Expenses. This

third middle-ground option recognizes

that personnel in Contract Services may

be employees of a firm contracting with

home health agencies or may be

independent contractors, working out of

their personal residences, with

relatively small non-labor expenses.

Results of the three alternatives

appear in Appendix Table 2, while a

comparison of historical and forecasted

percent changes are shown in Appendix

Table 3.
34364 Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices

APPENDIX TABLE 2.—THREE ALTERNATIVES FOR ALLOCATION OF CONTRACT SERVICES; COST SHARE

Cost category

Alternative A: Split of

contract services’ cost

share between (a)

wages and salaries and

(b) employee benefits

Alternative B: Split of

contract services’ cost

share among (a) wages

and salaries, (b) employee benefits, (c)

other administrative and

general, and (d) other

expenses

Alternative C: Split of

contract services’ cost

share among (a) wages

and salaries, (b) employee benefits, (c)

other administrative and

general, and (d) other

expenses, with smaller

allocation to (c) and (d)

and larger allocation to

(a) and (b) (selected)

Compensation .............................................................................. 79.224 76.479 77.668

Wages & Salaries ......................................................................... 65.512 63.243 64.226

Employee Benefits ....................................................................... 13.712 13.327 13.442

Operations & Maintenance ........................................................... 0.832 0.832 0.832

Administrative & General ............................................................. 8.791 10.163 9.569

Telephone ..................................................................................... 0.725 0.725 0.725

Paper & Printing ........................................................................... 0.529 0.529 0.529

Postage ........................................................................................ 0.724 0.724 0.724

Other Administrative & General ................................................... 6.813 8.165 7.591

Transportation .............................................................................. 3.405 3.405 3.405

Capital-Related ............................................................................. 3.204 3.204 3.204

Insurance ...................................................................................... 0.560 0.560 0.560

Fixed Capital ................................................................................ 1.764 1.764 1.764

Movable Capital ............................................................................ 0.880 0.880 0.880

All Other Expenses ...................................................................... 4.544 5.916 5.322

Total ................................................................................... 100.000 100.000 100.000

APPENDIX TABLE 3.—A COMPARISON OF THREE ALTERNATIVES FOR ALLOCATION OF CONTRACT SERVICES’ COST SHARE

FOR THE 1993-BASED HOME HEALTH AGENCY MARKET BASKET, PERCENT CHANGE, 1993–1998

Fiscal Years beginning July 1

Alternative A: Split of

Contract Services’ cost

share between (a)

Wages and Salaries and

(b) Employee Benefits

Alternative B: Split of

Contract Services’ cost

share among (a) Wages

and Salaries, (b) Employee Benefits, (c)

Other Administrative and

General, and (d) Other

Expenses

Alternative C: Split of

Contract Services’ cost

share among (a) Wages

and Salaries, (b) Employee Benefits, (c)

Other Administrative and

General, and (d) Other

Expenses, with smaller

allocation to (c) and (d)

and larger allocation to

(a) and (b) (Selected)

Historical:

July 1992, FY 1993 ............................................................... 3.40 3.40 3.40

July 1993, FY 1994 ............................................................... 3.00 3.00 3.00

July 1994, FY 1995 ............................................................... 2.90 2.90 2.90

Forecasted:

July 1995, FY 1996 ............................................................... 2.70 2.70 2.70

July 1996, FY 1997 ............................................................... 3.10 3.10 3.10

July 1997, FY 1998 ............................................................... 3.20 3.20 3.20

Historical Average: 1993–1995 .................................................... 3.10 3.10 3.10

Forecasted Average: 1996–1998 ................................................. 3.00 3.00 3.00

Source: DRI/McGraw Hill HCC, 1st Qtr. 1996;@USSIM/TREND25 YR0296@CISSIM/CONTROL961.

Released by HCFA, OACT, Office of National Health Statistics.

Note that there is no difference in historical performance or forecasts among the three alternatives.

The components of the HHA Occupational Wages and Salaries and Occupational Benefit Indexes are listed below:

APPENDIX TABLE 4.— HCFA HHA OCCUPATIONAL WAGES AND SALARIES INDEX

Cost category Weight Price proxy.

Skilled Nursing & Therapists & Other Professional/Technical, Including an allocation for Contract Services’ Labor.45.758 50% ECI for Wages & Salaries in Private Industry for Professional. Specialty & Technical Workers and 50% ECI for Wages

& Salaries for Civilian Hospital Workers.

Managerial/Supervisory, including an allocation for Contract Services’ Labor.5.527 ECO for Wages & Salaries in Private Industry for Executive, Administrative & Managerial Workers.

Clerical, including an allocation for Contract Services’ Labor ........ 15.019 ECI for Wages & Salaries in Private Industry for Administrative

Support, Including Clerical Workers.

Service, including an allocation for Contract Services’ Labor ........ 33.696 ECI for Wages & Salaries in Private Industry Service Occupations
Federal Register / Vol. 61, No. 127 / Monday July 1, 1996 / Notices 34365

APPENDIX TABLE 4.— HCFA HHA OCCUPATIONAL WAGES AND SALARIES INDEX—Continued

Cost category Weight Price proxy.

Total ..................................................................................... 100.00

The total weight for wages and salaries in the 1993-based Home Health Agency market basket is 64.226 percent.

APPENDIX TABLE 5.—HCFA HHA OCCUPATIONAL BENEFITS INDEX (EMPLOYEE BENEFITS COMPONENT OF THE 1993–

BASED MARKET BASKET)

Cost category Weight Price proxy

Skilled Nursing & Therapists & Other Professional/Technical, including an allocation for Contract Services’ Labor.44.182 50% ECI for Benefits in Private Industry for Professional. Specialty & Technical Workers and 50% ECI for Benefits for Civilian Hospital Workers.

Managerial/Supervisory, including an allocation for Contract Services’ Labor.5.097 ECI for Benefits in Private Industry for Executive, Administrative

& Managerial Workers.

Clerical, including an allocation for Contract Services’ Labor ........ 15.848 ECI for Benefits in Private Industry for Administrative Support,

Including Clerical Workers.

Service, including an allocation for Contract Services’ Labor ........ 34.873 ECI for Benefits in Private Industry Service Occupations.

Total ..................................................................................... 100.00

The total weight for employee benefits

in the 1993-based Home Health Agency

market basket is 13.442 percent.

Authority: Section 1861(v)(1)(L) of the

Social Security Act (42 U.S.C.

1395x(v)(1)(L)); section 4207(d) of Pub. L.

101–508 (42 U.S.C. 1395x (note)).

(Catalog of Federal Domestic Assistance

Program No. 93.773 Medicare—Hospital

Insurance)

Dated: June 24, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing

Administration.

Dated: June 26, 1996.

Donna E. Shalala,

Secretary.

[FR Doc. 96–16883 Filed 6–27–96; 4:08 pm]

BILLING CODE 4120–01–P