`[Federal Register Volume 61, Number 127 (Monday, July 1, 1996)]
[Notices]
[Pages 34344-34365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16883]



[[Page 34343]]


_______________________________________________________________________

Part IX





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



Medicare Program; Schedule of Limits on Home Health Agency Costs Per 
Visit for Cost Reporting Periods Beginning On or After July 1, 1996; 
Notice

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

[[Page 34344]]



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-
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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

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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 blood-borne 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 cost-per-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

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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 economy-wide 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 labor-related 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 labor-related 
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

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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 labor-related 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

[[Page 34348]]

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           
----------------------------------------------------------------------------------------------------------------
                                                                                                    1976-based  
                                                                                                  market basket,
                                                                                   Rebased 1993    adjusted for 
                                                                                    Home Health   consistency of
                                 Cost categories                                   Agency market  contract labor
                                                                                      basket       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
----------------------------------------------------------------------------------------------------------------


[[Page 34349]]


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

                        Table 2.--1993-Based Cost Categories, Weights, and Price Proxies                        
----------------------------------------------------------------------------------------------------------------
                                                       1993-based                                               
                   Cost Category                      market basket                  Price proxy                
                                                         weight                                                 
----------------------------------------------------------------------------------------------------------------
Compensation, including allocated Contract                   77.668  ...........................................
 Services' Labor.                                                                                               
    Wages and Salaries, including allocated                  64.226  HHA Occupational Wage Index.               
     Contract Services' Labor.                                                                                  
    Employee benefits, including allocated Contract          13.442  HHA Occupational Benefits Index.           
     Services' Labor.                                                                                           
Operations & Maintenance...........................           0.832  CPI-U Fuel & Other Utilities.              
Administrative & General, including allocated                 9.569  ...........................................
 Contract Services' Non-Labor.                                                                                  
    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                 7.591  CPI-U Services.                            
     allocated Contract services Non-Labor.                                                                     
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                  5.322  CPI-U All Items Less Food & Energy.        
 Services' Non-Labor.                                                                                           
                                                    ----------------                                            
      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   
------------------------------------------------------------------------
                                            1993-based      1976-based  
              Cost category                market basket   market basket
                                              weight          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 
------------------------------------------------------------------------
\1\Included 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.

[[Page 34350]]

     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   
----------------------------------------------------------------------------------------------------------------
                                                                Home Health     Home Health                     
                                                               Agency market   Agency market   Difference (1993-
                Fiscal years beginning July 1                   basket, FY      basket, CY     based minus 1976-
                                                                 1993 base       1976 base           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 Cost-per-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:

[[Page 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 
----------------------------------------------------------------------------------------------------------------
\1\ By 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  x  .992751 = $76.01

    b. Urban Skilled Nursing Nonlabor Portion

    $21.62  x  .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  x  1.010021 = $77.34

    b. Urban Skilled Nursing Non-Labor Portion

    $21.62  x  1.010021 = $21.84

C. Standardization for Wage Levels

    After adjustment by the market basket index, we divided each HHA's 
per-visit

[[Page 34352]]

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 
labor-related 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                                      
----------------------------------------------------------------------------------------------------------------
                                                                               Adjusted                         
                    Type of visit                       Visits     Nonlabor      labor     Adjusted    Aggregate
                                                                    portion     portion    limit \1\     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

[[Page 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          
------------------------------------------------------------------------
                                                     Labor     Nonlabor 
             Type of visit                Limit     portion     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:                          


------------------------------------------------------------------------
                                                              Adjustment
                          Location                              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                 
------------------------------------------------------------------------
                                                                  Wage  
    Urban area (constituent counties or county equivalents)       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
  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                                                            
  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                                                          

[[Page 34354]]

                                                                        
  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-Nashua-MA-NH...........................    1.1684
  Bristol, MA                                                           
  Essex, MA                                                             
  Middlesex, MA                                                         
  Norfolk, MA                                                           
  Plymouth, MA                                                          
  Suffolk, MA                                                           
  Worcester, MA                                                         
  Hillsborough, NH                                                      
  Merrimack, NH                                                         
  Rockingham, NH                                                        
  Strafford, NH                                                         
1125  Boulder-Longmont, CO....................................    0.9780
  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
  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                                                          

[[Page 34355]]

                                                                        
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                                                           
  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                                                              
3000  Grand Rapids-Muskegon-Holland, 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-Winston-Salem-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                                                            

[[Page 34356]]

                                                                        
  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                                                           
  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                                                          
  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-Somerset-Hunterdon, NJ.......................    1.0809
  Hunterdon, NJ                                                         
  Middlesex, NJ                                                         
  Somerset, NJ                                                          
5080  *Milwaukee-Waukesha, WI.................................    0.9498
  Milwaukee, WI                                                         
  Ozaukee, WI                                                           

[[Page 34357]]

                                                                        
  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-Bridgeport-Stamford-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                                                            
  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 Beach-Newport 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                                                          
  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                                                              

[[Page 34358]]

                                                                        
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                                                           
  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 Obispo-Atascadero-Paso Robles, CA..............    1.1405
  San Luis Obispo, CA                                                   
7480  Santa Barbara-Santa Maria-Lompoc, CA....................    1.1136
  Santa Barbara, CA                                                     
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                                                          

[[Page 34359]]

                                                                        
  Oswego, NY                                                            
8200  Tacoma, WA..............................................    1.0828
  Pierce, WA                                                            
8240  Tallahassee, FL.........................................    0.8321
  Gadsden, FL                                                           
  Leon, FL                                                              
8280  *Tampa-St. Petersburg-Clearwater, 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                                                         
  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                 
------------------------------------------------------------------------
                                                                  Wage  
                         Nonurban area                            index 
------------------------------------------------------------------------
Alabama.......................................................    0.7164
Alaska........................................................    1.2034
Arizona.......................................................    0.7995
Arkansas......................................................    0.6897
California....................................................    1.0096
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 
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.                 


           Table 8.--Cost Reporting Year Adjustment Factor \1\          
------------------------------------------------------------------------
                                                                 The    
          If the HHA cost reporting period begins             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
------------------------------------------------------------------------
\1\ Based on compounded projected market basket inflation rates.        


[[Page 34360]]


    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               
------------------------------------------------------------------------
                                                                  Index 
                             Month                                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\                      
------------------------------------------------------------------------
                                                              Costs  (in
                        Fiscal year                           millions) 
------------------------------------------------------------------------
1996.......................................................            0
1997.......................................................          10 
------------------------------------------------------------------------
\1\ Figures 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               
------------------------------------------------------------------------
                                                                Percent 
                                                       HHAs     of HHAs 
                                          HHAs in   exceeding  exceeding
                                          database     the        the   
                                                      limits     limits 
------------------------------------------------------------------------
Total HHAs.............................       4987       1720       34.5

[[Page 34361]]

                                                                        
Freestanding...........................       3190        773       24.2
Hospital-based.........................       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 Input-Output 
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

[[Page 34362]]

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

[[Page 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            
------------------------------------------------------------------------
                                1993-Based price      1976-Based price  
        Cost category                 proxy                 proxy       
------------------------------------------------------------------------
Compensation:                                                           
    Wages and Salaries......  HHA Occupational      AHE Hospitals       
                               Wage Index.           (Private           
                                                     nonsupervisory     
                                                     workers).          
    Employee Benefits.......  HHA Occupational      BEA Supplements to  
                               Benefits Index.       Wages & Salaries   
                                                     per Worker (BLS);  
                                                     (BEA Aggregate     
                                                     Supplements/number 
                                                     of workers from    
                                                     BLS).              
    Operations and            CPI-U Fuel & Other    Index composed of   
     Maintenance.              Utilities.            CPI-U Water &      
                                                     Sewage; IPD Fuel & 
                                                     Oil Coal (PCE); IPD
                                                     Electricity (PCE); 
                                                     IPD Natural Gas    
                                                     (PCE).             
    Administrative and        ....................  CPI-U Services      
     General.                                        (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  CPI-U Services......  ....................
     General.                                                           
    Transportation..........  CPI-U Private         CPI-U               
                               Transportation.       Transportation.    
Capital-Related:                                                        
    Insurance...............  CPI-U Household       ....................
                               Insurance.                               
    Fixed Capital...........  CPI-U Owner's         CPI-U Residential   
                               Equivalent Rent.      Rent category:     
                                                     Rental & Leasing.  
    Movable Capital.........  PPI Machinery &       CPI-U               
                               Equipment.            Nonprescription    
                                                     Medical Equipment &
                                                     Supplies.          
    Other Expenses..........  CPI-U All Items Less  CPI-U All Items.    
                               Food & Energy.                           
    Contracted Services.....  Contained within      Composite All Other 
                               Wages & Salaries,     HHA Cost Category  
                               Employee Benefits,    Weights with       
                               Other                 associated price   
                               Administrative &      proxy variables.   
                               General & Other                          
                               Expenses cost                            
                               categories; see                          
                               those price proxies                      
------------------------------------------------------------------------

    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.

[[Page 34364]]



              Appendix Table 2.--Three Alternatives for Allocation of Contract Services; Cost Share             
----------------------------------------------------------------------------------------------------------------
                                                                                         Alternative C: Split of
                                                                                         contract services' cost
                                                                Alternative B: Split of   share among (a) wages 
                                                                contract services' cost     and salaries, (b)   
                                       Alternative A: Split of   share among (a) wages    employee benefits, (c)
                                       contract services' cost     and salaries, (b)       other administrative 
            Cost category              share between (a) wages   employee benefits, (c)    and general, and (d) 
                                         and salaries and (b)     other administrative     other expenses, with 
                                          employee benefits       and general, and (d)    smaller allocation to 
                                                                     other expenses       (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                     
----------------------------------------------------------------------------------------------------------------
                                                                                         Alternative C: Split of
                                                                                         Contract Services' cost
                                                                Alternative B: Split of   share among (a) Wages 
                                                                Contract Services' cost     and Salaries, (b)   
                                       Alternative A: Split of   share among (a) Wages    Employee Benefits, (c)
                                       Contract Services' cost     and Salaries, (b)       Other Administrative 
    Fiscal Years beginning July 1      share between (a) Wages   Employee Benefits, (c)    and General, and (d) 
                                         and Salaries and (b)     Other Administrative     Other Expenses, with 
                                          Employee Benefits       and General, and (d)    smaller allocation to 
                                                                     Other Expenses       (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 [email protected]/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/     45.758  50% ECI for Wages & Salaries in Private Industry 
 Technical, Including an allocation for Contract                for Professional. Specialty & Technical Workers 
 Services' Labor.                                               and 50% ECI for Wages & Salaries for Civilian   
                                                                Hospital Workers.                               
Managerial/Supervisory, including an allocation         5.527  ECO for Wages & Salaries in Private Industry for 
 for Contract Services' Labor.                                  Executive, Administrative & Managerial Workers. 
Clerical, including an allocation for Contract         15.019  ECI for Wages & Salaries in Private Industry for 
 Services' Labor.                                               Administrative Support, Including Clerical      
                                                                Workers.                                        
Service, including an allocation for Contract          33.696  ECI for Wages & Salaries in Private Industry     
 Services' Labor.                                               Service Occupations                             
                                                   -----------                                                  

[[Page 34365]]

                                                                                                                
      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/     44.182  50% ECI for Benefits in Private Industry for     
 Technical, including an allocation for Contract                Professional. Specialty & Technical Workers and 
 Services' Labor.                                               50% ECI for Benefits for Civilian Hospital      
                                                                Workers.                                        
Managerial/Supervisory, including an allocation         5.097  ECI for Benefits in Private Industry for         
 for Contract Services' Labor.                                  Executive, Administrative & Managerial Workers. 
Clerical, including an allocation for Contract         15.848  ECI for Benefits in Private Industry for         
 Services' Labor.                                               Administrative Support, Including Clerical      
                                                                Workers.                                        
Service, including an allocation for Contract          34.873  ECI for Benefits in Private Industry Service     
 Services' Labor.                                               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`