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APPENDIX D. MEDICARE REIMBURSEMENT TO

HOSPITALS AND PHYSICIANS

CONTENTS

Part I: Hospitals

General Summary

Basic Payment System

Update Factors

Prospective Payment System Update Factors and Increases in Operating Payments

Source and Calculation of the Hospital Wage Index

Sample Payment Calculation

Additional Payment Amounts

Graduate Medical Education

Disproportionate Share Hospitals

ESRD Beneficiary Discharges

Outliers

Payment for Capital

Payments on a Reasonable Cost Basis

Physicians in Teaching Hospitals

Qualified Nonphysician Anesthetists in Certain Rural Hospitals

Organ Acquisition Costs

Passthrough Payments for Hemophilia Inpatients

Bad Debts of Medicare Beneficiaries

Special Treatment of Certain Facilities Under PPS

Sole Community Hospitals

Medicare Dependent Hospitals

Referral Centers

Critical Access Hospitals

Geographic Reclassification of Hospitals

Hospitals Excluded From the Prospective Payment System

PPS-Exempt Hospitals

State Systems

Administration

Prospective Payment Assessment Commission/Medicare

Payment Advisory Commission

Administrative and Judicial Review

Review Activities

Historical Trends in PPS Payments, Costs, and Margins

Medicare Payments to Hospitals

Trends in PPS Operating Payments and Costs

PPS Inpatient Margins

Inpatient Margins by Hospital Type

Total Margins

Additional Hospital Data

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Part II: Physicians

Physician Payment Reform

Medicare Fee Schedule

Relative Value Unit

Geographic Adjustment Factor

Conversion Factor

Payment Formula

Sustainable Growth Rate and Conversion Factor Updates

Limits on Beneficiary Liability

Initial Impact of the Balanced Budget Act on Medicare Payments to Physicians

Historical Data

Assignment Rate Experience

Participating Physician Program Data

Distribution of Physician Services

References

PART I: HOSPITALS

GENERAL SUMMARY

Medicare pays for inpatient hospital care using prospectively set

rates established by the prospective payment system (PPS). PPS

started for hospital cost reporting periods beginning on or after October 1, 1983. PPS was enacted by the Social Security Amendments

of 1983 (Public Law 98–21). This appendix describes the major reimbursement provisions of PPS.

Medicare payments are made at predetermined, specific rates

which represent the average cost, nationwide, of treating a Medicare patient according to his or her medical condition. The classification system used to group hospital inpatients according to their

diagnoses is known as diagnosis-related groups (DRGs). Payments

to hospitals will vary depending on whether a hospital is located

in a large urban area (greater than 1 million population, or 970,000

in New England) or other area of the country, as determined by the

Office of Management and Budget metropolitan statistical area

(MSA) system.

During a 4-year transition period, a declining portion of the total

prospective payment was based on a hospital’s historical reasonable

costs and an increasing portion was based on a combination of regional and national Federal DRG rates. Since the fifth year of the

program (fiscal year 1988), Medicare payments have been generally

determined under a national DRG payment methodology. If a hospital can treat a patient for less than the payment amount, it can

keep the savings. If the treatment costs more, the hospital must

absorb the loss. A hospital is prohibited from charging Medicare

beneficiaries any amounts (except for deductibles, copayment

amounts, and services not covered by Medicare) which represent

any difference between the hospital’s cost of providing covered care

and the Medicare DRG payment amount.

Certain hospital costs are excluded from the PPS and are paid

on a reasonable cost basis, subject to rate of increase limits. AuVerDate 20-JUL-2000 13:14 Sep 29, 2000 Jkt 061710 PO 00000 Frm 01082 Fmt 6601 Sfmt 6601 J:\SKAYNE\GB96\61710.019 WAYS3 PsN: WAYS3
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thority is provided for States to establish their own all-payer hospital payment systems if they meet certain Federal requirements.

BASIC PAYMENT SYSTEM

Unless excluded from PPS, each Medicare participating hospital

is paid a predetermined payment rate per discharge for each type

of patient treated. Types of patients are defined by the DRG patient classification system which assigns each hospital inpatient to

one of 499 patient categories (DRGs) based on the diagnosis and

the type of treatment received (medical or surgical).

A hospital’s DRG payment is the product of two components: (1)

a standardized amount which is adjusted by the hospital’s area average wage level; and (2) the DRG’s relative weight. The standardized amount is intended to represent the cost of a typical (average)

Medicare inpatient case. Two separate standardized amounts are

calculated: one amount applies to hospitals in large urban areas

and the other amount applies to hospitals in other areas. The DRG

weight represents the relative costliness of an average case in the

particular DRG compared to the cost of the average Medicare case.

UPDATE FACTORS

PPS payment rates are updated each year using an ‘‘update factor.’’ The annual update factor applied to the standardized amounts

is determined, in part, by the projected increase in the hospital

market basket index (MBI). The MBI measures the cost of goods

and services purchased by hospitals, yielding one price inflator for

all hospitals in a given year. Table D–1 shows the categories of expense used in developing the index. The update factor may include

adjustments for increases in hospital productivity, technological

change, and other factors that affect the level of operating cost per

discharge. The annual update factor may also be adjusted to correct for increases in average payments per case attributable to increases in case mix due to improvements in coding and reporting

accuracy.

Before fiscal year 1988, the same factor was used for all hospitals; however, in subsequent years separate factors were applied

to hospitals according to their locations. However, beginning October 1, 1995, a single update factor applied for all hospitals in all

areas. Table D–2 compares the hospital market basket increases to

actual updates for past years and shows the increases in PPS payments per case that resulted from the updates and other policy

changes.

The Balanced Budget Act of 1997 (BBA 1997) sets the update for

fiscal year 1998 at 0 percent; fiscal year 1999 at the MBI minus

1.9 percent; fiscal year 2000 at the MBI minus 1.8 percent; fiscal

years 2001 and 2002 at the MBI minus 1.1 percent; and for fiscal

year 2003 and each subsequent fiscal year, at the MBI percentage

increase for all hospitals in all areas.

TABLE D–1.—HOSPITAL PROSPECTIVE PAYMENT SYSTEM INPUT PRICE INDEX (‘‘THE MARKET BASKET’’) EXPENSE CATEGORIES AND RATES OF 

CHANGE, FISCAL YEARS 1993–2001

Expense category

Baseyear

1992

weights 1

(percent)

Federal fiscal year percentage rates of price change

1993 2 1994 2 1995 2 1996 2 1997 2 1998 2 1999 2 2000 3 

Wages and salaries 4 ........................................ 50.24 3.1 3.0 2.7 2.9 2.8 3.5 3.2 3.5 

Employee benefits 4 .......................................... 11.15 5.7 4.2 2.7 2.1 1.5 2.4 2.6 3.5 

Professional fees: Nonmedical 4 ....................... 2.13 4.2 3.4 2.6 3.0 2.6 3.2 3.0 3.4 

Utilities ............................................................. 1.54 3.7 2.5 0.3 1.4 2.3 0.3

¥0.6 2.9 

Electricity ................................................. 0.93 2.2 1.5 2.4 0.2 0.1

¥0.8

¥1.1 1.5 

Fuel oil, coal, etc ..................................... 0.37 6.1 3.2

¥6.7 2.6 7.7 0.2

¥1.7 6.4 

Water and sewerage ................................ 0.25 5.9 5.2 3.5 3.9 2.5 3.8 2.3 2.4 

Liability insurance ............................................ 1.19 3.4

¥0.7

¥3.4

¥1.1

¥1.5

¥0.4 1.3 2.3 

All other ............................................................ 33.75 2.1 1.6 4.5 1.9 1.1 2.3 1.5 2.7 

All other products .................................... 24.83 1.8 1.2 5.1 1.8 0.3 1.9 1.1 2.5 

Pharmaceuticals ............................. 4.16 5.0 3.5 2.5 3.8 2.6 13.8 8.4 2.8 Food: Direct purchase ..................... 2.31 1.0 1.9 0.1 5.0 1.8

¥1.7

¥0.7 1.3 

Food: Contract service .................... 1.07 1.7 1.7 2.2 2.3 2.9 2.6 2.5 2.7 Chemicals ....................................... 3.67 1.4 0.5 14.7

¥1.0 0.3

¥2.8

¥4.2 6.0 

Medical instruments ....................... 3.08 2.3 0.8 1.1 1.4

¥0.8

¥1.3

¥0.3

¥0.6 

Photographic supplies .................... 0.39

¥1.0 0.4 0.6 2.9 0.3

¥0.4

¥0.5

¥1.3 

Rubber and plastics ....................... 4.75 0.9 0.8 5.6 0.6

¥0.6

¥0.4

¥0.5 2.1 

Paper ............................................... 2.08

¥0.3 0.1 13.3 2.5

¥4.9 2.3 0.0 4.3 

Apparel ............................................ 0.87 1.3 0.2 0.5 0.7 0.5 0.7 0.5

¥0.3 

Machinery and equipment .............. 0.21 0.4 0.8 1.0 0.5

¥0.5

¥0.8

¥0.6

¥0.2 

Miscellaneous ................................. 2.24 1.6 0.4 1.7 2.4 1.3

¥0.9 1.0 2.9 

All other services ..................................... 8.93 2.9 2.6 2.6 2.0 3.2 3.3 2.7 3.2 

Telephone ........................................ 0.58 0.2 1.8 0.8 1.2 1.9 0.4

¥0.4 0.8 

Postage 4 ......................................... 0.27 0.0 0.0 7.7 2.4 0.0 0.0 2.2 0.7 All other labor intensive 4 ............... 7.28 3.2 2.7 2.5 2.0 3.5 3.8 3.0 3.5 All other nonlabor intensive ........... 0.80 3.0 2.6 2.8 2.8 2.7 1.6 1.9 2.9 

Total ....................................... 100.00 3.1 2.6 3.1 2.4 2.0 2.9 2.5 3.2 

1Weights may not sum due to rounding.2 Historical data, subject to revision of underlying series.3 Projected data, subject to change in future forecasts.4 Considered labor related.

Source: Health Care Financing Administration, Office of the Actuary.

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TABLE D–2.—COMPARISON OF INCREASE IN PPS HOSPITAL MARKET BASKET INDEX, AVERAGE PPS UPDATE, AND INCREASE IN PPS PAYMENTS PER CASE, FISCAL YEARS

1984–97

[In percent]

Fiscal year

Forecasted

increase in market

basket index 1

Average update 2

Increase in operating payments

per case 3

1984 ............................................... 4.9 4.7 18.5

1985 ............................................... 4.0 4.5 10.5

1986 ............................................... 4.3 0.5 3.2

1987 ............................................... 3.7 1.2 5.4

1988 ............................................... 4.7 1.5 6.0

1989 ............................................... 5.4 3.3 6.6

1990 ............................................... 5.5 4.7 6.5

1991 ............................................... 5.2 3.4 6.0

1992 ............................................... 4.4 3.0 5.2

1993 ............................................... 4.1 2.7 3.8

1994 ............................................... 4.3 2.0 3.6

1995 ............................................... 3.6 2.0 4.0

1996 ............................................... 3.5 1.5 4.2

1997 ............................................... 2.5 2.0 2.5

1 Based on data available when final prospective payment system rates were set.

2 From 1988 to 1995, there were separate updates for hospitals in large urban, other urban, and rural

areas. Update for 1990 adjusted to reflect 1.22 percent across-the-board reduction in DRG weights. 3 Data on prospective payment system operating payments for 1984 through 1997 are for hospital accounting years beginning during each Federal fiscal year. Changes are based on cohorts of hospitals

with Medicare Cost Reports in two consecutive years.

Source: Medicare Payment Advisory Commission.

PROSPECTIVE PAYMENT SYSTEM UPDATE FACTORS AND INCREASES IN

OPERATING PAYMENTS

Public Law 98–21 required the Secretary to adjust the DRG definitions and relative weights in fiscal year 1986 and at least every

4 years thereafter to reflect changes in treatment patterns, technology, and other factors which may change the relative use of hospital resources. Public Law 99–509, however, required the Secretary to adjust the DRG definitions and relative weights each

year, beginning in fiscal year 1988.

The Omnibus Budget Reconciliation Act (OBRA) of 1989 required

the Secretary to reduce the relative weight for each DRG by 1.22

percent for discharges in fiscal year 1990. In addition, the Secretary was prohibited from adjusting DRG relative weights on

other than a budget neutral basis beginning in fiscal year 1991.

Table D–3 shows the 25 DRGs accounting for the largest numbers of Medicare inpatient discharges during fiscal year 1997. DRG

relative weights appear in table D–17 at the end of part I of this

appendix.

TABLE D–3.—MEDICARE SHORT-STAY HOSPITAL DIAGNOSIS-RELATED GROUPS RANKED BY DISCHARGE, FISCAL YEAR 1997

[In thousands of dollars]

Rank

DRG

number Description Discharges 1 Percent Total payments 2 Total Medicare payments Total b

paym

1 127 Heart failure and shock ......................................................... 725,256 6.1 $3,617,653 $3,255,544 $2 089 Simple pneumonia and pleurisy 4 .......................................... 472,587 4.0 2,486,332 2,214,672 

3 088 Chronic obstructive pulmonary disease ................................. 391,747 3.3 1,784,597 1,568,248 4 014 Specific cerebrovascular disorders except transient

ischemic attack ................................................................. 377,861 3.2 2,209,676 1,979,829 

5 209 Major joint and limb reattachment procedures ..................... 365,405 3.1 3,785,782 3,540,052 6 430 Psychoses ............................................................................... 303,463 2.5 1,988,671 1,789,701 7 174 Gastrointestinal hemorrhage with complicating conditions .. 250,987 2.1 1,199,479 1,060,110 8 079 Respiratory infections and inflammations 4 .......................... 248,773 2.1 1,967,563 1,836,680 

9 296 Nutritional and miscellaneous metabolic disorders 4 ............ 238,230 2.0 1,057,169 938,326 

10 112 Vascular procedures except major reconstruction without

pump .................................................................................. 238,146 2.0 2,470,711 2,345,799 

11 182 Esophagitis, gastroenteritis, and miscellaneous digestive

diseases 4 ........................................................................... 237,375 2.0 877,168 747,053 

12 416 Septicemia, age +17 ............................................................. 232,695 1.9 1,717,950 1,593,369 13 462 Rehabilitation ......................................................................... 225,553 1.9 2,240,215 2,187,896 14 138 Cardiac arrhythmia and conduction disorders, with complicating condition ............................................................. 210,855 1.8 813,788 698,436 15 320 Kidney and urinary tract infections 4 ..................................... 179,001 1.5 796,524 697,926 

16 132 Atherosclerosis with complicating conditions ....................... 175,844 1.5 552,874 461,773 17 121 Circulatory disorders with acute myocardial infarction, with

cardiovascular catheter discharged alive ......................... 166,418 1.4 1,123,013 1,121,533 

18 124 Circulatory disorders excluding acute myocardial infarction,

with cardiovascular catheter with complex diagnosis ..... 155,525 1.3 992,867 909,723 

TABLE D–3.—MEDICARE SHORT-STAY HOSPITAL DIAGNOSIS-RELATED GROUPS RANKED BY DISCHARGE, FISCAL YEAR 1997—Continued

[In thousands of dollars]

Rank

DRG

number Description Discharges 1 Percent Total payments 2 Total Medicare payments Total b

paym

19 148 Major small and large bowel procedures with complicating

conditions ........................................................................... 148,685 1.2 2,572,174 2,478,138 

20 015 Transient ischemic attack and precerebral occlusions ......... 146,785 1.2 505,418 414,602 21 143 Chest pain .............................................................................. 145,286 1.2 367,102 278,867 22 210 Hip and femur procedures except major joint 4 .................... 142,808 1.2 1,253,713 1,164,275 

23 478 Other vascular procedures with complicating conditions ..... 126,327 1.1 1,528,418 1,461,624 24 475 Respiratory system diagnosis with ventilator support .......... 110,465 0.9 2,132,273 2,065,892 25 140 Angina pectoris ...................................................................... 108,593 0.9 302,437 242,698 

Total, all DRGs .............................................................. 11,952,088 100.0 88,340,773 81,588,972 6,

1 Based on the stay records for 100 percent of Medicare aged and disabled beneficiaries as recorded in the MEDPAR file.2 Total payments represent total hospital revenue for Medicare enrollee utilization, including Medicare payments and beneficiary obligations. Excluded bills for no pa

managed care utilization and no-pay Medicare secondary payer bills. 3 Beneficiary payments are the responsibility of the beneficiary or other third party payor.

4 Age +17 with complicating conditions.

Source: Health Care Financing Administration.

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SOURCE AND CALCULATION OF THE HOSPITAL WAGE INDEX

The hospital wage index is used to adjust the national standardized amount to account for the wage level in the hospital’s area.

This is accomplished by multiplying the labor-related component of

the national standardized payment amount by a wage index. The

wage index is intended to measure the average wage level for hospital workers in each urban area (metropolitan statistical area or

MSA) or rural area (non-MSA parts of States) relative to the national average wage level.

The Secretary is required to update the wage index annually beginning October 1, 1993. The Secretary is required to base the update on a survey of wages and wage-related costs of short-term

acute care hospitals. Tables D–14, D–15, and D–16, at the end of

part I of this appendix, give the current wage index values for

urban areas, for all rural areas in a State, and a special index for

hospitals that are reclassified.

Calculation of the index begins with the area average hospital

hourly wage. For each MSA or non-MSA area (i.e., all non-MSA

counties in a State), total county compensation and total paid

hours data are summed separately over all counties included in the

area. Then aggregate hospital compensation for the area is divided

by aggregate paid hours of hospital employment in the area to

produce the area average hourly wage. The hospital wage index is

calculated by dividing the average hourly wage for each area by the

national average hourly wage (determined by dividing national aggregate compensation by national aggregate paid hours of employment).

This procedure results in an index number, such as 0.8884

(Asheville, North Carolina) or 1.2284 (Sacramento, California), for

each MSA or non-MSA area in the United States. Since the national average wage level is represented by an index value of 1.000,

the wage index value for any area has a direct and simple interpretation. The value of 1.2284 for Sacramento means that the hourly

wage rate for hospital workers is 22.84 percent higher in the Sacramento MSA than nationwide.

Thus, in computing the hospital payment rates applicable for

hospitals in the Sacramento MSA, the labor-related component of

the national large urban adjusted standardized payment amount

($2,809.18) is multiplied by 1.2284 in order to adjust for the higher

level of hourly wage rates in this area. Similarly, the calculation

of the labor portion of the rates for hospitals in Asheville would involve a reduction in the published labor-related component of the

national adjusted standardized payment amount, to reflect the fact

that hourly wage levels in this MSA are 11.16 percent lower than

the national average (as indicated by the wage index value of

0.8884).

SAMPLE PAYMENT CALCULATION

The Federal large urban and other area payment amounts per

discharge for fiscal year 2000 were published in the Federal Register on July 30, 1999 (table D–4). The payment rates for most hospitals are computed using the national adjusted operating standardized amounts. Puerto Rico has its own adjusted operating standVerDate 20-JUL-2000 13:14 Sep 29, 2000 Jkt 061710 PO 00000 Frm 01089 Fmt 6601 Sfmt 6601 J:\SKAYNE\GB96\61710.019 WAYS3 PsN: WAYS3
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ardized amounts for DRG payment purposes. BBA 1997 changes

the way the standardized amount for Puerto Rico is determined

from a 25 percent Federal, 75 percent local blend rate, to a 50 percent Federal, 50 percent local rate.

TABLE D–4.—NATIONAL AND REGIONAL ADJUSTED STANDARDIZED AMOUNTS, LABOR/

NONLABOR, FISCAL YEAR 2000

Large urban areas Other areas

Labor related Nonlabor

related Labor related Nonlaborrelated

National average ....................... $2,809.18 $1,141.85 $2,764.70 $1,123.76

Puerto Rico:

National ............................ 2,785.40 1,132.18 2,785.40 1,132.84

Puerto Rico ....................... 1,336.54 538.00 1,315.38 529.48

Source: Federal Register, 1999.

Each payment amount is divided into a labor-related component

and a nonlabor-related component. The sum of these components

represents the standardized amount that would apply for a hospital

located in an area with a wage index of 1.0 (i.e., average wage

rates for hospital workers in the area match the national average

of hospital wage rates across all areas).

The basic payment to a hospital for a case in a particular DRG

is the applicable national payment amount, adjusted by the local

wage index value and multiplied by the weighting factor for the

DRG.

For an example of a payment calculation, assume a hospital is

located in Washington, DC. Such a hospital would be in a large

urban area. Payment is based on the large urban national standardized amount. First, the labor-related portion of this amount

($2,809.15 in fiscal year 2000) is multiplied by the appropriate

wage index (1.1053 for Washington, DC):

$2,809.18 × 1.1053 = $3,104.99

To this total is added the nonlabor-related portion of the standardized amount:

$3,104.99 + $1,141.85 = $4,246.84

For each discharge, this new total is then multiplied by the relative weight factor for the DRG to which the case has been assigned. These weights range from a low of 0.0968 for DRG 448 (allergic reactions, age 0–17) to a high of 17.7902 for DRG 103 (heart

transplant). The payment rates for the sample hospital in fiscal

year 2000 would therefore vary from a low of $411.09 ($4,246.84

× 0.0968) to a high of $75,552.13 ($4,246.84 × 17.7902).

Certain hospitals receive other adjustments to their base payment rates under PPS. Hospitals in Alaska and Hawaii have a

cost-of-living adjustment to recognize the higher cost of nonlabor

input there. In addition, sole community hospitals (SCHs) have the

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option of payments based on their own updated base-year costs or

the PPS rate (see discussion of sole community hospitals below).

Hospitals also can be reclassified into areas where they are not located for the purpose of qualifying for a higher standardized payment amount or wage index. These factors may substantially increase payments to some hospitals, although by definition they

have no impact on total PPS payments.

In addition to the basic payment amount for each case, additional payments may be made to teaching hospitals and hospitals

that serve a disproportionate share of low-income patients. Any

hospital may receive additional payments for outliers (cases with

extraordinarily high costs relative to other cases in the DRG) and

for treatment of beneficiaries with end-stage renal disease (ESRD).

Finally, certain hospital costs are excluded from PPS and reimbursed separately. The next sections of this appendix discuss additional PPS payments and the separate reimbursement of excluded

costs.

ADDITIONAL PAYMENT AMOUNTS

In addition to the DRG prospective payment rates, Medicare payments are made to hospitals for four additional items or services.

GRADUATE MEDICAL EDUCATION

Financing of graduate medical education (GME), the period of

training following medical school, is provided predominantly

through inpatient revenues (both hospital payments and faculty

physician fees) and a complex mix of Federal and State government

funds. The Federal Government is the largest single explicit financing source for GME through the Medicare Program and through its

support of residencies in Veterans Administration hospitals. Medicare recognizes the costs of GME under two mechanisms: direct

medical education payments and an indirect medical education

(IME) adjustment.

Direct medical education costs

The direct costs of approved medical education programs (such as

the salaries of residents and teachers and other education costs for

residents, for nurses, and for allied health professionals trained in

provider-operated programs) are excluded from the PPS. The direct

medical education costs for the training of nurses and allied health

professionals in provider-operated programs are paid for on a reasonable cost basis. Residency training programs for physicians are

funded through formula payments based on each hospital’s per

resident costs.

Medicare’s payment to each hospital equals the hospital’s cost

per full-time equivalent (FTE) resident, times the weighted average

number of FTE residents, times the percentage of inpatient days

attributable to Medicare part A beneficiaries. Each hospital’s per

FTE resident amount is calculated using data from the hospital’s

cost reporting period that began in fiscal year 1984, increased by

1 percent for hospital cost reporting periods beginning July 1, 1985,

and updated in subsequent cost reporting periods by the change in

the Consumer Price Index (CPI). After July 1, 1986, only residents

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in their initial residency period are counted as a full FTE. The

number of years considered as an initial residency period varies by

physician specialty. It includes the minimum number of years of

formal training necessary to satisfy specialty requirements for

board eligibility plus 1 year, but not to exceed 5 years; residents

in geriatrics or preventive medicine are allowed 2 additional years.

Residents who are not in their initial residency period are counted

as one-half of an FTE. Residents who are foreign or international

medical graduates are not counted as FTE residents unless they

have passed certain examinations.

OBRA 1993 provided that the amounts paid per resident for the

direct costs of GME would not be updated by the CPI for cost reporting periods beginning during fiscal years 1994 and 1995, except

for primary care residents and residents in obstetrics and gynecology. Primary care residents are defined to include family medicine, general internal medicine, general pediatrics, preventive medicine, geriatric medicine, and osteopathic general practice. For fiscal year 1997, the per resident amount was updated by the CPI.

BBA 1997 made several changes to the way in which Medicare

makes payments for direct GME costs. BBA 1997 includes: (1) a

cap on the total number of residents reimbursed under Medicare at

the level that existed for the cost reporting period ending on or before December 31, 1996; (2) payments (for both direct and indirect

GME) to teaching hospitals for the utilization attributed to

Medicare+Choice enrollees; (3) payments to qualified nonhospital

providers for their direct GME costs (federally qualified health centers, rural health clinics, MedicarePlus organizations, and other appropriate providers); (4) incentive payments to teaching hospitals

that voluntarily agree to reduce the number of medical residents

in training; (5) a demonstration project under which direct GME

payments are to be made to qualifying consortia that consist of a

teaching hospital and one or more specified entities who operate an

approved medical residency training program; (6) a study on the

variations in the costs of hospital overhead and supervisory physician medical education costs among hospitals; and (7) the requirement that the Medicare Payment Advisory Commission (MedPAC)

make recommendations on long-term payment policies regarding

teaching hospitals and GME.

Teaching hospitals’ per resident costs vary greatly between hospitals. The Balanced Budget Refinement Act (BBRA) of 1999 will

reduce some of the variation in Medicare reimbursement for these

amounts. Starting in fiscal year 2001, hospitals with per resident

amounts below 70 percent of the national average will be increased

to 70 percent of the geographically adjusted value. Approximately

265 hospitals will receive increased payments under this provision.

Those teaching hospitals with per resident amounts above 140 percent of the national average (adjusted for geographic location) will

not receive an inflation update for 2 years (fiscal years 2001 and

2002) and will receive a lower update than other hospitals (CPI

minus 2 percent) for 3 years (fiscal years 2002-5). About 130 hospitals with per resident amounts over 140 percent of the locality

adjusted will be affected by these provisions. Hospitals that have

per resident amounts that fall between 70 and 140 percent of the

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national average adjusted for local cost differences will not be affected by these provisions.

Indirect medical education costs

Additional payments are made to hospitals under PPS for the indirect costs attributable to approved medical education programs.

These indirect costs may be due to a variety of factors, including

the extra demands placed on the hospital staff as a result of the

teaching activity or additional tests and procedures that may be ordered by residents. Congressional reports on the PPS authorizing

legislation indicate that the IME payments are also to account for

factors not necessarily related to medical education which may increase costs in teaching hospitals, such as more severely ill patients, increased use of diagnostic testing, and higher staff-to-patient ratios.

The additional payment to a hospital is based on a formula that

has provided an increase of approximately 7.7 percent in the Federal portion of the DRG payment for each 0.1 increase in the hospital’s intern and resident-to-bed ratio on a curvilinear basis (i.e.,

the increase in the payment is less than proportional to the increase in the ratio of interns and residents to bed size). BBA 1997

includes reductions in the IME adjustment from 7.7 to 7.0 percent

in fiscal year 1998; to 6.5 percent in fiscal year 1999; to 6.0 percent

in fiscal year 2000; and to 5.5 percent in fiscal year 2001 and subsequent years.

BBRA 1999 delayed the reduction in the IME adjustment to 5.5

percent until fiscal year 2002. Teaching hospitals will receive 6.5

percent in fiscal year 2000; 6.25 percent in fiscal year 2001 and 5.5

percent in fiscal year 2002 and in subsequent years.

DISPROPORTIONATE SHARE HOSPITALS

Public Law 99–272 (Consolidated Omnibus Budget Reconciliation

Act) provided that additional payments would be made to hospitals

that serve a disproportionate share of low-income patients. The adjustment was extended several times until OBRA 1990 (Public Law

101–508) made it a permanent payment adjustment. A hospital’s

disproportionate patient percentage is defined as the hospital’s

total number of inpatient days attributable to Federal Supplemental Security Income Medicare beneficiaries divided by the total

number of Medicare patient days, plus the number of Medicaid patient days divided by the total patient days.

Table D–5 shows the minimum disproportionate patient percentages required to qualify for the adjustment and the formulas for

computing the adjustment effective October 1, 1993. For discharges

occurring after September 1994, hospitals with a disproportionate

share greater than 20.2 percent would receive a disproportionate

share adjustment equal to 5.88 percent plus 0.825 percent of the

difference between 20.2 percent and the hospital’s disproportionate

share patient percentage.

BBA 1997 includes reductions in the current disproportionate

share hospital (DSH) payment formula amounts of 1 percent for fiscal year 1998; 2 percent in fiscal year 1999; 3 percent in fiscal year

2000; 4 percent in fiscal year 2001; 5 percent in fiscal year 2002;

and 0 percent in fiscal year 2003 and each subsequent fiscal year.

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BBA 1997 also requires the Secretary to submit to the House Ways

and Means and Senate Finance Committees, no later than 1 year

after enactment, a report that contains a new formula for determining additional DSH payments to hospitals. As of April 1, 2000,

the report had not been issued.

TABLE D–5.—CRITERIA TO QUALIFY FOR DISPROPORTIONATE SHARE ADJUSTMENT AND

FORMULAS FOR COMPUTING ADDITIONAL PAYMENT, EFFECTIVE OCTOBER 1, 1993

Type of hospital Qualifying disproportionate

patient percentage (P)

Formula or fixed percentage

adjustment

Urban, 100 or more beds ... 15 percent ......................... (P–15)(0.6) 0.65 + 2.5.

Urban, 100 or more beds ... 20.2 percent ...................... (P–20.2) 0.8 + 5.88.

Urban, 100 or more beds ... 30 percent of inpatient

revenue from State or

local indigent care

funds.

35 percent.

Urban, under 100 beds ...... 40 percent ......................... 5 percent.

Rural, over 500 beds ......... Not specified in law; regulations set threshold at

15 percent.

Same as urban, 100 or

more beds.

Rural, over 100 beds ......... 30 percent ......................... 4 percent.

Rural, under 100 beds ....... 45 percent ......................... 4 percent.

Rural, sole community hospital.30 percent ......................... 10 percent.

Rural, rural referral center

and—

(a) not a sole community hospital,

100 or more beds.

30 percent ......................... (P–30)(0.6) + 4.0.

(b) not a sole community hospital,

under 100 beds.

45 percent ......................... (P–30)(0.6) + 4.0.

(c) also a sole community hospital.30 percent ......................... Greater of 10 percent or

(P–30)(0.6) + 4.0.

Note.—The disproportionate patient percentage (P) is equal to the sum of (a) the number of Medicare

inpatient days provided to Supplemental Security Income recipients divided by total Medicare inpatient

days, and (b) the number of inpatient days provided to Medicaid beneficiaries divided by total inpatient

days.

Source: Prospective Payment Assessment Commission.

BBRA 1999 froze the reduction in the DSH payment formula to

3 percent for fiscal year 2001 and changed the reduction to 4 percent for fiscal year 2002. The Secretary is also required to collect

hospital cost data on uncompensated inpatient/outpatient care, including non-Medicare bad debt and charity care as well as Medicaid and indigent care charges.

ESRD BENEFICIARY DISCHARGES

Effective with cost reporting periods beginning on or after October 1, 1984, additional payments are made to hospitals for inpatient dialysis provided to ESRD beneficiaries if total discharges of

such beneficiaries from non-ESRD related DRGs account for 10

1095

percent or more of the hospital’s total Medicare discharges. A hospital meeting the criteria is paid an additional payment for each

ESRD beneficiary discharge based on the estimated weekly cost of

dialysis and the average length of stay of its ESRD beneficiaries.

In fiscal year 1996, 35 hospitals received approximately $7 million

in ESRD exception payments.

OUTLIERS

Additional amounts are paid to hospitals for atypical cases

(known as ‘‘outliers’’) which have either extremely long length of

stay (day outliers) or extraordinarily high costs (cost outliers) compared to most discharges classified in the same DRG. The law requires that total outlier payments to all hospitals covered by the

system represent no less than 5 percent and no more than 6 percent of the total estimated PPS payments for the fiscal year. Effective with discharges occurring on or after October 1, 1984, a transferring hospital may qualify for an additional payment for extraordinarily high-cost cases meeting the criteria for cost outliers.

Outlier payments are financed by an offsetting overall reduction in

the base payment amount per discharge. Effective October 1, 1986,

Public Law 99–509 established separate urban and rural set-aside

factors for financing outlier payments. The separate set-aside factors for rural and urban hospitals for financing outlier payments

ended when the other urban/rural payment differential was eliminated in fiscal year 1995, as enacted in OBRA 1990.

Public Law 100–203 increased payments for outlier cases classified in DRGs relating to patients with burns from April 1, 1988,

through September 30, 1989. This legislation also prohibited the

Secretary from issuing any final regulations before September 1,

1988, which changed the method of payment for outlier cases (other

than burn cases).

The Secretary published new outlier rules on September 30,

1988, effective for discharges on or after October 1, 1988. The new

rules modified the thresholds used in determining whether a case

is an outlier and increased the allowable payment amounts for cost

outliers. The effect of the changes increased the proportion of all

outlier payments going to cost outliers. Previously, about 85 percent of outlier payments were made for length-of-stay (LOS)

outliers and 15 percent for cost outliers. Under the new rules, 60

percent of payments were made for cost outliers and 40 percent for

LOS outliers. (Cases that meet both length-of-stay and cost outlier

criteria are paid under the policy that produces the higher payment.)

To determine the amount of additional payments for outlier

cases, the LOS for each case in a diagnosis-related group (DRG) is

first compared against the applicable LOS threshold for the category. If the LOS for a case exceeds the threshold, then the case

qualifies as a day outlier. In this instance, the hospital is paid its

regular payment rate per discharge (for this DRG), plus a per diem

amount (44 percent of the hospital’s per diem rate for the DRG) for

each Medicare covered day above the LOS threshold.

If the case does not qualify as a day outlier, then it may qualify

as a cost outlier. The case will qualify for extra payments on this

basis if the hospital’s Medicare covered charges for the case, adVerDate 20-JUL-2000 13:14 Sep 29, 2000 Jkt 061710 PO 00000 Frm 01095 Fmt 6601 Sfmt 6601 J:\SKAYNE\GB96\61710.019 WAYS3 PsN: WAYS3
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justed to operating costs (and reduced by its indirect teaching and

disproportionate share adjustments, if applicable), exceed its cost

outlier threshold for the DRG. In this instance, the hospital is paid

its regular payment rate per discharge for the DRG, plus the Federal portion of 75 percent of the difference between its adjusted

(and reduced) charges for the case and the cost outlier threshold.

In October 1991, Medicare began a transition from cost-based to

prospective payment for hospital capital expenses (see below). In

the August 30, 1991, final rule implementing this change, the Secretary established a unified outlier payment system for capital and

operating costs. For day outliers, payments for covered days were

set equal to a percentage of the combined per diem operating and

capital payment rates for the DRG. For cost outliers, payments are

made only if the combined operating and capital cost for the case

exceed the cost outlier threshold for the DRG. As in the case of operating cost payments, standardized capital payment amounts are

reduced to establish a pool for outlier payments.

OBRA 1993 legislated two changes in outlier policy that became

effective in fiscal year 1995. First, day outliers were phased out

over a period of 4 years. By fiscal year 1999, all outlier payments

were based solely on cost. Second, cost-outlier thresholds are based

on a fixed amount beyond the payment rate for each case so that

hospitals incur the same loss on every case before outlier payments

are applied.

BBA 1997 eliminates the use of the IME adjustment and DSH

payments as part of costs that trigger outlier payments, effective

beginning in fiscal year 1998. The new calculation has the effect of

increasing outlier payments to hospitals receiving IME and DSH

payments because it increases the hospitals’ costs with respect to

the outlier threshold.

PAYMENT FOR CAPITAL

Until fiscal year 1992, Medicare paid a share of hospitals’ reasonable capital-related costs, based on services used by beneficiaries as

a proportion of total services furnished by the hospital. (Payments

in recent years have been subject to fixed percentage reductions described below.) Four basic types of costs are allowable for Medicare

reimbursement:

1. Interest on mortgages, bonds, or other borrowing used to finance capital investments or current operations. Interest costs

are generally offset by any interest income earned by the hospital on investments;

2. Depreciation, figured on a straight line basis, for plant and

equipment, but not for land;

3. Rental payments for plant and equipment;

4. Property taxes and insurance premiums related to capital assets.

One other type of capital cost was formerly recognized under

Medicare, but has not been reimbursable for hospital services since

fiscal year 1989: return on equity for investor-owned hospitals. Return on equity payments provided a return to investors equivalent

to what they would have earned if they had used their money for

some other purpose.

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When the new prospective payment system (PPS) was enacted in

1983, Congress excluded capital costs. However, the Secretary was

instructed to report to Congress on methods for including capital

in PPS and was authorized (but not required) to implement prospective payment for capital on or after October 1, 1986.

The Secretary’s authority to include capital in PPS was postponed twice. The Supplemental Appropriations Act of 1986 (Public

Law 99–349) delayed prospective capital payment until October 1,

1987. OBRA 1987 (Public Law 100–203) delayed prospective payment until October 1, 1991. However, the Secretary was required,

not merely authorized, to implement a prospective system by that

date. The system was required to provide that capital payments be

made on a per-discharge basis, with adjustments based on each discharge’s classification under the DRGs or some similar system. At

the Secretary’s discretion, the system could include adjustments to

reflect variations in costs of construction or borrowing, exceptions

(including exceptions for hospitals with existing obligations), and

adjustments to reflect hospital occupancy rates.

While prospective payment for capital was delayed (see below),

Congress included in budget reconciliation legislation fixed percentage reductions in amounts otherwise payable by Medicare for capital costs. These cuts began in fiscal year 1987, with a 3.5-percent

reduction. Medicare would compute its share of total costs for each

hospital and then reduce that computed share by 3.5 percent. The

percentage reduction increased to 7 percent for the first quarter of

fiscal year 1988, 12 percent for the rest of that fiscal year, and 15

percent for fiscal year 1989 through fiscal year 1991. Delays in

completing budget legislation meant that there were brief intervals

in 1987 and 1989 when no reduction was taken. The reductions

originally applied only to capital costs related to inpatient care. Beginning in fiscal year 1990, capital payments for outpatient hospital services were also reduced. The reductions did not apply to

certain types of rural hospitals defined in Medicare law, including

SCHs, essential access community hospitals, and rural primary

care hospitals.

OBRA 1990 (Public Law 101–508) continued capital payment reductions through fiscal year 1995, with the reduction percentage

lowered to 10 percent for fiscal years 1992 through 1995. Because

prospective payment began in fiscal year 1992, the reductions were

not applied directly to each hospital’s computed capital costs. Instead, the Secretary was required to set payments under the new

system (or under the new system and PPS combined) in such a way

as to achieve an aggregate inpatient hospital capital spending reduction of 10 percent, as compared to what would have been spent

under the reasonable cost system.

The administration’s rules for prospective payment for capital

costs were published in the Federal Register on August 30, 1991.

The rule provides for a 10-year transition to fully prospective payment beginning October 1, 1991.

Under the rule, the Secretary establishes a standard per case

capital payment rate, based on average capital costs per case in fiscal year 1989 and updated for inflation and other factors. Through

fiscal year 1995, the base rate was adjusted in order to meet the

requirement that capital payment rates be set in such a way as to

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achieve an aggregate saving of 10 percent relative to what would

have been paid under a full cost system. Beginning with fiscal year

1996, that requirement expired. As a result, the standardized payment rates increased by more than 20 percent. The capital standard Federal payment rate for fiscal year 2000 is $377.03 ($174.81

for Puerto Rico). The rates are adjusted using the DRG weights

and a geographic factor based on area wage indices. Tables D–14,

D–15, and D–16 at the end of part I of this appendix give the current geographic adjustment factors (GAFs) for urban areas, for all

rural areas in a State, and the factors for hospitals that have reclassified.

In addition, hospitals in large urban areas receive a 3-percent increase and hospitals in Alaska and Hawaii receive a cost-of-living

adjustment. A disproportionate share adjustment is provided for

urban hospitals with more than 100 beds. A hospital receives approximately a 2.1 percentage point increase in capital payments for

each 10 percent increment in its disproportionate share percentage.

An adjustment is also made for the indirect costs of medical education. This adjustment is based on the ratio of residents to average daily inpatient census. Capital payments increase approximately 2.8 percentage points for each 10 percent increment in the

residents to average daily census ratio. Additional capital payments are issued for outlier cases.

During a transition period that ends September 30, 2000, each

individual hospital’s capital payment rate is a blended rate based

partly on its own historic capital costs and partly on the Federal

rate. In fiscal year 1996, rates were 50 percent hospital-specific and

50 percent Federal. The hospital-specific portion will drop by 10

percent a year, until fully Federal rates take effect in fiscal year

2001.

OBRA 1993 (Public Law 103–66) reduced the Federal rate for inpatient capital expenses by 7.4 percent to correct for inflation forecast errors.

The transition rules include two provisions to assist hospitals

most disadvantaged by the shift to prospective payment: a ‘‘hold

harmless’’ payment system and exception payments for certain facilities. Hospitals with base year capital costs above average continue to be paid on a cost basis for the portion of their costs related

to ‘‘old’’ capital investments (generally assets put in use or obligated by the end of 1990). The rest of the hospital’s capital payments are based on the prospective rates. For example, if 75 percent of a hospital’s costs are for depreciation and interest on a pre1990 building, the hospital is paid Medicare’s share of those costs

(subject to the current 10-percent reduction). For ‘‘new’’ capital, it

receives a portion of the prospective rate based on the hospital’s

own ratio of new to total capital. In this case, because old capital

accounts for 75 percent of costs, the hospital’s new capital payment

is 25 percent of the prospective rate for each case treated. This

hold harmless payment system will continue until the end of the

10-year transition, or until a hospital’s old capital costs drop to the

point at which it is more advantageous for the hospital to shift to

fully prospective payment.

Exception payments are made to hospitals whose capital payments under the new system fall significantly short of their actual

1099

capital costs. Most hospitals are assured of receiving a minimum

of 70 percent of costs. Specified urban hospitals with a disproportionate share of low-income patients receive at least 80 percent of

costs, and rural SCHs at least 90 percent. Computation of exception payments is cumulative. If a hospital received more than the

minimum in 1 year but a shortfall the next, the surplus from the

first year would be applied before any additional payment would be

made in the second year.

The Balanced Budget Act (BBA) of 1997 requires the Secretary

to rebase the capital payment rates for discharges occurring on or

after October 1, 1997 by the actual rates in effect in fiscal year

1995, so that aggregate capital payments will equal 90 percent of

what payments would have been under reasonable cost payments,

with an additional reduction in the capital payment rate of 2.1 percent from October 1, 1997 through September 30, 2002. BBA 1997

eliminates the allowance for return on equity capital. In addition,

when a facility undergoes a change of ownership, the BBA 1997

provides for a depreciation adjustment of the historical cost of the

asset recognized by Medicare, less depreciation allowed, to the

owner of record as of the date of enactment, or to the first owner

of record of the asset in the case of an asset not in existence as

of the date of enactment.

Table D–6 shows the average capital payments per case received

by PPS hospitals in each year since the implementation of PPS for

inpatient operating costs in 1984. The decrease in average capital

payments per case in 1988 reflects the provision in OBRA 1986 and

1987 that reduced Medicare payments below costs. The decrease in

1994 reflects the provision in OBRA 1993 that corrected for previous errors in setting the base capital payment rates. Capital payments generally have stayed between 8 and 9 percent of total inpatient payments. The proportion of capital costs covered by those

payments fell from 100 percent under cost-based reimbursement to

a low of 87.4 percent in 1990. The implementation of capital PPS

initially resulted in increased payment-to-cost ratios, but those fell

as the payment rates were adjusted to reflect more accurate data.

The jump in the payment-to-cost ratio in 1995—when Medicare inpatient capital payments exceeded cost for the first time ever—reflects the elimination of the budget neutrality requirement in fiscal

year 1996.

The per case capital payment amount varies widely by hospital

group, as shown in table D–7. Urban hospitals had an average payment rate of $727 in 1997, for example, while rural hospitals received only $436 per case. Major teaching hospitals were paid

$1,017 for each case, while nonteaching hospitals got $561. However, the share of capital payments as a proportion of total PPS inpatient payments, which include both operating and capital payments, was very similar for different types of hospitals. Despite

urban hospitals’ much higher average payment, almost twice that

paid to rural hospitals, the urban payment equalled 113 percent of

their capital costs, while rural hospitals were paid 111.9 percent of

their capital costs.

1100

TABLE D–6.—PPS CAPITAL PAYMENTS PER CASE, SHARE OF TOTAL PPS INPATIENT

PAYMENTS, AND RATIO OF PAYMENTS TO COSTS, 1984–97

Year Capital payments per case

In percent

Share of total

PPS inpatient

payments

Payment-to-cost

ratio

1984 ..................................................... $310 8.1 100.0

1985 ..................................................... 371 8.6 100.0

1986 ..................................................... 409 9.1 99.3

1987 ..................................................... 426 9.0 97.5

1988 ..................................................... 423 8.5 90.2

1989 ..................................................... 463 8.6 87.9

1990 ..................................................... 476 8.3 87.4

1991 ..................................................... 510 8.4 87.6

1992 ..................................................... 586 9.1 97.2

1993 ..................................................... 589 8.9 95.2

1994 ..................................................... 585 8.5 92.7

1995 ..................................................... 628 8.8 101.6

1996 ..................................................... 702 9.4 119.0

1997 ..................................................... 666 8.8 112.9

Note.—Data on prospective payment system capital costs and payments are for hospital accounting

years beginning during each Federal fiscal year. Hospitals in Massachusetts and New York excluded from

data in 1984 and 1985; hospitals in New Jersey excluded from data in 1984 through 1988; hospitals in

Maryland excluded from data in all years.

Source: Medicare Payment Advisory Commission analysis of Medicare Cost Report data from the Health

Care Financing Administration.

TABLE D–7.—PROSPECTIVE PAYMENT SYSTEM CAPITAL PAYMENTS PER CASE, SHARE

OF TOTAL PPS INPATIENT PAYMENTS, AND RATIO OF PAYMENTS TO COSTS, BY HOSPITAL GROUP, 1997

Hospital group Capital payments per case

In percent

Capital payments as a percentage of total

PPS inpatient

payments

Payment-to-cost

ratio

Urban ................................................... $726.51 8.8 113.0

Rural .................................................... 436.09 8.9 111.9

Large urban ......................................... 779.82 8.7 114.2

Other urban .......................................... 659.12 8.9 111.4

Rural referral ....................................... 522.88 9.0 108.0

Sole community .................................... 413.64 8.5 111.7

Other rural ........................................... 383.29 8.9 116.1

Major teaching ..................................... 101.67 8.0 117.4

Other teaching ..................................... 715.56 8.7 113.8

Nonteaching ......................................... 561.46 9.2 110.6

Disproportionate share large urban .... 831.71 8.4 113.5

Disproportionate share other urban .... 677.41 8.6 112.8

Disproportionate share rural ................ 446.47 8.9 112.3

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TABLE D–7.—PROSPECTIVE PAYMENT SYSTEM CAPITAL PAYMENTS PER CASE, SHARE

OF TOTAL PPS INPATIENT PAYMENTS, AND RATIO OF PAYMENTS TO COSTS, BY HOSPITAL GROUP, 1997—Continued

Hospital group Capital payments per case

In percent

Capital payments as a percentage of total

PPS inpatient

payments

Payment-to-cost

ratio

Nondisproportionate share ................... 602.22 9.2 111.9

Teaching and disproportionate share .. 828.78 8.3 114.4

Teaching only ....................................... 740.88 8.9 116.4

Disproportionate share only ................. 594.31 9.0 111.0

Nonteaching nondisproportionate

share ................................................ 537.6 9.4 110.3

Voluntary .............................................. 683.49 8.8 114.4

Proprietary ............................................ 681.06 9.5 104.4

Urban government ............................... 698.11 7.9 112.8

Rural government ................................ 390.11 8.6 116.2

All hospitals ......................................... 666.43 8.8 112.9

Source: Medicare Payment Advisory Commission analysis of Medicare Cost Report data from the Health

Care Financing Administration.

PAYMENTS ON A REASONABLE COST BASIS

Costs for certain items are excluded from the PPS and thus are

not included in the prospective payment rates. As explained in the

sections below, Medicare pays for its share of several costs according to the former reasonable cost-based system.

PHYSICIANS IN TEACHING HOSPITALS

Physician services in hospitals are paid under the physician fee

schedule. If a teaching hospital so elects, the direct medical and

surgical services of physicians in such hospitals would be paid for

on the basis of reasonable costs.

QUALIFIED NONPHYSICIAN ANESTHETISTS IN CERTAIN RURAL

HOSPITALS

Anesthesia services furnished by hospital-employed nonphysician

anesthetists (certified registered nurse anesthetists and anesthesiologist’s assistants) or obtained under arrangement may be paid

on a reasonable cost basis, if the rural or nonurban hospital demonstrates to its intermediary that it meets established criteria regarding employment arrangements and volume of services provided. In fiscal year 1999, 639 hospitals received approximately

$33.9 million in Medicare payments for these services.

1102

ORGAN ACQUISITION COSTS

The estimated net expenses associated with Medicare organ acquisition in certified transplantation centers are excluded from the

PPS and paid on a reasonable cost basis.

PASSTHROUGH PAYMENTS FOR HEMOPHILIA INPATIENTS

The Omnibus Budget Reconciliation Act (OBRA) of 1989 excluded

the cost of administering blood clotting factors for hemophilia inpatients from PPS, for items furnished from June 19, 1990, through

December 19, 1991. OBRA 1993 further extended this provision

through fiscal year 1994. The price per unit for the blood clotting

factors was set at a predetermined rate, in consultation with the

Prospective Payment Assessment Commission (ProPAC), and the

cost of administering the blood clotting factors was determined by

multiplying a predetermined price per unit of blood clotting factor

by the number of units provided to the individual. BBA 1997

makes the payment for the costs of administering blood clotting

factor permanent effective October 1, 1997.

BAD DEBTS OF MEDICARE BENEFICIARIES

An additional payment is made to hospitals for bad debts attributable to unpaid deductible and copayment amounts related to covered services received by Medicare beneficiaries.

The Secretary is prohibited from making any change in the policy in effect on August 1, 1987, including changes in hospital documentation requirements. OBRA 1989 prohibited the Secretary from

requiring hospitals to change their bad debt collection policy if a

fiscal intermediary accepted the policy in accordance with the rules

in effect as of August 1, 1987, for indigency determination procedures, for recordkeeping, and for determining whether to refer a

claim to an external collection agency. For such facilities, the Secretary also may not collect from the hospital on the basis of an expectation of a change in the hospital’s collection policy. BBA 1997

reduces bad debt payments by 25 percent in fiscal year 1998; 40

percent in fiscal year 1999; and 45 percent in fiscal year 2000 and

each subsequent fiscal year.

SPECIAL TREATMENT OF CERTAIN FACILITIES UNDER

PPS

SOLE COMMUNITY HOSPITALS

Sole community hospitals (SCHs) are hospitals that, because of

factors such as isolated location, weather conditions, travel conditions, or absence of other hospitals, are the sole source of inpatient

services reasonably available in a geographic area, or are located

more than 35 road miles from another hospital. In addition, the

Secretary is authorized to designate a hospital as an SCH if, by

reason of factors such as travel time to the nearest alternative

source of appropriate inpatient care, location, weather conditions,

travel conditions, or absence of other like hospitals, the Secretary

determines that it is the sole source of inpatient hospital services

reasonably available to individuals in a geographic area.

1103

OBRA 1989 established new payment provisions that apply to all

SCHs for cost reporting periods beginning after April 1, 1990. An

SCH may receive the higher of the following rates as the basis of

reimbursement: a target amount based on 100 percent hospitalspecific prospective rates based on fiscal year 1982 costs updated

to the present; a target amount based on hospital-specific prospective rates based on fiscal year 1987 costs updated to the present;

or the Federal PPS rate. Current SCHs not meeting the criteria are

allowed to continue to qualify for payments as an SCH.

OBRA 1989 made permanent the provision by which an SCH

may request additional payments if the hospital experiences a decrease of more than 5 percent in its total inpatient cases due to circumstances beyond its control. An SCH may receive such payments

if it meets SCH criteria but is not being paid as an SCH. BBRA

1999 authorizes a SCH that was paid using a target amount based

on its 1982 or 1987 hospital specific rates during cost reporting periods beginning during 1999 to rebase its target amount and use

1996 hospital specific rates. The rebased target amount for qualifying hospitals will be fully implemented for discharges during fiscal

year 2004 and subsequently. BBRA 1999 also provided a full market basket index (MBI) update for SCH discharges in fiscal year

2001. As of January 1999, 785 hospitals were classified as SCHs.

MEDICARE DEPENDENT HOSPITALS

OBRA 1989 created a new classification of hospitals termed

Medicare dependent hospitals (MDH). MDHs are hospitals that are

located in a rural area, have 100 beds or less, are not classified as

a sole community provider, and for which not less than 60 percent

of inpatient days or discharges in the hospital cost reporting period

that began during fiscal year 1987 were attributable to Medicare.

These hospitals are reimbursed in the same fashion as sole community providers during cost reporting periods beginning on or after

April 1, 1990, and ending on or before March 31, 1993. OBRA 1993

(Public Law 103–66) extended additional payments to MDHs

through September 30, 1994, on a phase-down basis. BBA 1997 extends the MDH Program through October 1, 2001. BBRA 1999 extended the MDH Program through October 1, 2006. As of January

1999, 356 hospitals were classified as MDHs.

REFERRAL CENTERS

The Secretary is authorized to provide exceptions and adjustments as appropriate for rural referral centers (RRCs). These centers are defined as:

1. Rural hospitals having 275 or more beds;

2. Hospitals having at least 50 percent of their Medicare patients

referred from other hospitals or from physicians not on the

hospital’s staff, at least 60 percent of their Medicare patients

residing more than 25 miles from the hospital, and at least 60

percent of the services furnished to Medicare beneficiaries are

furnished to those who live 25 miles or more from the hospital;

or

3. Rural hospitals meeting the following criteria for hospital cost

reporting periods beginning on or after October 1, 1985:

1104

—A case-mix index equal to or greater than the median case

mix for all urban hospitals (the national standard), or the

median case mix for urban hospitals located in the same census region, excluding hospitals with approved teaching programs. The case-mix index is a measure of the relative costliness of the hospital’s mixture of cases among the DRGs compared to the national average mixture of Medicare cases;

—A minimum of 5,000 discharges, the national discharge criterion (3,000 in the case of osteopathic hospitals), or the median number of discharges in urban hospitals for the region

in which the hospital is located; and

—At least one of the following three criteria: more than 50 percent of the hospital’s medical staff are specialists, at least 60

percent of discharges are for inpatients who reside more

than 25 miles from the hospital, or at least 40 percent of inpatients treated at the hospital have been referred either

from physicians not on the hospital’s staff or from other hospitals.

Referral centers are paid prospective payments based on the applicable urban payment amount rather than the rural payment

amount, as adjusted by the hospital’s area wage index. The applicable amount is the ‘‘other urban’’ rate (i.e., the rate for urban areas

with 1 million or fewer people) for all referral centers except those

(if any) located in metropolitan statistical areas (MSAs) greater

than 1 million.

OBRA 1993 extended the classification through fiscal year 1994

for those referral centers classified as of September 30, 1992. BBA

1997 provides that hospitals designated as RRCs since fiscal year

1991 are permanently classified as RRCs. BBA 1997 also provides

that any hospital ever classified as an RRC cannot be denied a request for geographic reclassification on the basis of any comparison

of its average hourly wage with the average hourly wage of hospitals in the area where the RRC is located.

Although referral centers have lost some of the benefit of their

classification status because of the equalization of the other urban

and rural payment rates in fiscal year 1995, referral centers continue to be entitled to preferential consideration before the Medicare Geographic Classification Review Board (see below). As of January 1999, 231 hospitals were classified as referral centers.

CRITICAL ACCESS HOSPITALS

BBA 1997 provided for the Medicare Rural Hospital Flexibility

Program which creates a new category of rural hospitals, critical

access hospitals (CAHs) and authorizes a grant program of $25 million annually for 5 years to establish networks for improving access

to health care services in rural communities. Based on earlier demonstration programs of rural primary care hospitals and medical

assistance facilities, CAHs provide emergency, outpatient and limited inpatient services in rural areas. To qualify as a CAH, the

rural, nonprofit or public hospital must be located more than 35

miles from another hospital or designated by the State as a necessary provider of health care; provide 24-hour emergency services;

and operate a limited number of inpatient beds in which hospital

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cumstances. Generally, a rural hospital designated as a CAH receives reasonable, cost based reimbursement for care rendered to

Medicare beneficiaries. Before a hospital can be designated as a

CAH, the State must submit and have approved a rural health

plan implementing the Medicare Rural Hospital Flexibility Program.

The Balanced Budget Refinement Act of 1999 (BBRA 1999) modified the CAH Program and provided that: the 96-hour length-ofstay limitation is applied on an average annual basis; for-profit

and, under certain circumstances, hospitals that have closed within

the past 10 years may be designated as CAHs; and CAHs may elect

either a cost-based hospital outpatient service payment plus a fee

schedule payment for professional services or an all-inclusive rate.

As of September 1999, 11 States were in the process of drafting

rural health plans; 2 States, New Jersey and Rhode Island, are ineligible for program participation because they have no rural areas;

and 35 States have HCFA approved rural health plans. Fifty-eight

CAHs have been designated. Twelve medical assistance facility

hospitals in Montana converted to CAHs on October 1, 1999; and

85 hospitals are in the process of applying for CAH designation.

GEOGRAPHIC RECLASSIFICATION OF HOSPITALS

OBRA 1989 (Public Law 101–239) established the Medicare Geographic Classification Review Board to consider appeals by hospitals for a change in classification from rural to urban, or from

one urban area to another urban area. The Board was created to

determine whether a hospital should be redesignated to an area

with which it has close proximity for purposes of using the other

area’s standardized amount, wage index, or both. For geographic

reclassifications effective for discharges in fiscal year 1994 and subsequent years, a hospital may seek reclassification to only one area.

Urban hospitals must be no more than 15 miles from the area to

which they seek reassignment, and rural hospitals must be no

more than 35 miles from such an area.

A hospital may qualify for the payment rate of another area if

it proves that its incurred costs are comparable to those of hospitals in that area. To use an area’s wage index, a hospital must

demonstrate that: (1) its average hourly wage is equal to at least

84 percent of the average hourly wage of hospitals in the area to

which it seeks redesignation; and (2) its average hourly wage

weighted for occupational categories is at least 90 percent of the

average hourly wage of hospitals in the area to which its seeks redesignation. For geographic reclassifications effective for discharges

in fiscal year 1994 and subsequent years, the wage index guidelines were revised to specify, in addition, that a hospital cannot be

reclassified unless its average hourly wage is at least 108 percent

of the average hourly wage of the area in which it is located.

Effective for fiscal year 1996 and subsequent years, a hospital

may not be reclassified for purposes of using another area’s standardized amount if the area to which the hospital seeks reclassification does not have a higher standardized amount than that currently received by the hospital. In addition, a hospital that seeks

reclassification for the purpose of using another area’s wage index

may apply for reclassification only to an area that has a higher

1106

pre-reclassified average hourly wage than that of the hospital’s

original geographic area. BBA 1997 provides that hospitals can request geographic reclassification for the purposes of receiving additional disproportionate share hospital (DSH) payments for the period ending 30 months after enactment. Aside from reclassifications

through the Medicare Geographic Classification Review Board, hospitals have also been reclassified by law (OBRA 1987, Public Law

100–203).

Public Law 100–203 provided for the reclassification of rural hospitals as urban if the county in which the hospital was located was

adjacent to two or more MSAs and met criteria regarding commuting patterns of its residents to the central counties of the adjacent

MSAs. BBRA 1999 provided for an update of the standards used

for the geographic reclassification of ‘‘rural deemed urban’’ hospitals.

BBRA 1999 also provided that certain urban hospitals could be

reclassified as rural hospitals if the hospital is located in a rural

census tract of an MSA (as determined under the most recent Goldsmith Modification); is located in an area designated by State law

or regulation as a rural area; the hospital would qualify as a referral center or as an SCH if the hospital were located in a rural area

or the hospital meets other criteria as specified by the Secretary.

Finally, BBRA 1999 reclassified certain counties to accommodate

the circumstances of specific hospitals as well.

HOSPITALS EXCLUDED FROM THE PROSPECTIVE

PAYMENT SYSTEM

PPS-EXEMPT HOSPITALS

The following hospitals are by law excluded from the PPS and

are paid on the basis of reasonable costs, subject to the Tax Equity

and Fiscal Responsibility Act of 1982 (TEFRA) rate of increase limits: psychiatric hospitals, rehabilitation hospitals, psychiatric or rehabilitation units which are distinct parts of a hospital, alcohol and

drug abuse hospitals and such distinct units of hospitals (for cost

reporting periods beginning before October 1, 1987), children’s hospitals (with patients averaging under 18 years of age), long-term

hospitals (with an average inpatient length of stay greater than 25

days), and cancer hospitals (hospitals extensively involved in treatment for and research on cancer) classified as such before December 31, 1990. In addition, the act provides an exemption for any

hospital classified as a cancer hospital before December 31, 1991,

that is located in a State that has a PPS waiver under section

1814(b). In addition, there are special cases in which the PPS is not

applied, such as emergency services provided to Medicare beneficiaries in hospitals not participating in Medicare.

OBRA 1990 increased the cost limits imposed on hospitals exempt from PPS. Under prior law, hospitals with costs in excess of

the cost limits imposed by the TEFRA would be reimbursed for

their cost up to the TEFRA limit. Under OBRA 1990, hospitals

with costs exceeding the cost limits imposed by TEFRA receive 50

percent of the costs that exceed the limit, up to a maximum of 110

percent of the limit. In addition, the Secretary is directed to deVerDate 20-JUL-2000 13:14 Sep 29, 2000 Jkt 061710 PO 00000 Frm 01106 Fmt 6601 Sfmt 6601 J:\SKAYNE\GB96\61710.019 WAYS3 PsN: WAYS3
1107

velop a new prospective payment methodology for exempt hospitals,

or to substantially modify the current target-rate system.

OBRA 1993 provided for an update factor to the cost limits of

market basket minus 1.0 percentage point for fiscal years 1994

through 1997. Hospitals with operating costs in fiscal year 1990

that exceeded the target amount by more than 10 percent are exempt from the update reduction, with partial reductions applied to

hospitals near the threshold. Hospitals reimbursed under approved

State cost control systems are also excluded from the prospective

rates.

For PPS-exempt facilities, BBA 1997 sets the fiscal year 1998 update at 0 percent, and for fiscal years 1999–2002, the update factor

will vary depending on a hospital’s target amount and costs. For

hospitals with costs: (1) that equal or exceed their target amounts

by 10 percent or more, the update will be equal to the market basket; (2) that exceed their target, but by less than 10 percent, the

update factor will be equal to zero or, if greater, the market basket

minus 0.25 percentage points for each percentage point by which

costs are less than 10 percent over the target; (3) that are either

at their target, or below (but not below 2⁄3 of the target amount for

the hospital), the update factor will be equal to zero or, if greater,

the market basket percentage minus 2.5 percentage points; or (4)

that do not exceed 2⁄3 of their target amount, the update factor will

be equal to 0 percent.

In addition, BBA 1997 includes several provisions affecting Medicare payments to PPS-exempt hospitals and units. BBA 1997 reduces the capital payment update amount for PPS-exempt hospitals and units by 15 percent for fiscal years 1998–2002. BBA

1997 establishes a cap on PPS-exempt TEFRA limits, also known

as target amounts, for PPS-exempt hospitals or units for cost reporting periods beginning on or after October 1, 1997 and before

October 1, 2002. The Secretary is required to estimate the 75th

percentile of the target amounts for hospitals for cost reporting periods ending during fiscal year 1996, and then update the amount

up to the first cost reporting period beginning on or after October

1, 1997, by a factor equal to the market basket percentage increase.

For cost reporting periods beginning during each of fiscal years

1999–2002, the Secretary is required to update the amount by a

factor equal to the market basket increase. BBRA 1999 adjusts the

labor-related portion of the 75 percent cap to reflect differences between the wage-related costs in the area of the hospital and the national average of such costs within the same class of hospitals beginning for cost reporting periods on or after October 1, 1999.

BBA 1997 provides for changing bonus payments to PPS-exempt

facilities to equal the lesser of: (1) 15 percent of the amount by

which the target amount exceeds the amount of operating costs, or

(2) 2 percent of the target amount. In addition, for cost reporting

periods beginning on or after October 1, 1997, BBA 1997 provides

for continuous improvement bonus payments for certain eligible

hospitals. BBRA 1999 increases the amount of bonus payments

that may be made to eligible long-term care and psychiatric providers. Eligible providers may receive up to a 1.5 percent bonus payment for cost reporting periods beginning on or after October 1,

2000, and before September 30, 2001, and up to a 2 percent bonus

1108

payment for cost reporting periods beginning on or after October 1,

2001, and before September 30, 2002.

BBA 1997 establishes different payment and target amount rules

for new PPS-exempt hospitals or distinct-part units within hospitals that first received Medicare payments on or after October 1,

1997. BBA 1997 provides PPS-exempt hospitals and distinct units

of hospitals that received Medicare payments for services furnished

before January 1, 1990, with the option of rebasing the hospital’s

target amount for the 12-month cost reporting period beginning

during fiscal year 1998.

BBA 1997 also requires the Secretary to establish a case-mix adjusted PPS for rehabilitation hospitals and distinct-part units, effective beginning in fiscal year 2001. The Secretary is required to

establish: (1) classes of discharges of rehabilitation facilities by patient case-mix groups based on impairment, age, related prior hospitalization, comorbidities, and functional capability of the discharged individual and other appropriate factors; and (2) a method

of classifying specific discharges from rehabilitation facilities within these groups. BBRA 1999 requires the Secretary to base the PPS

for rehabilitation hospitals and distinct part units on discharges.

The Secretary is also required to establish classes of patient discharges of rehabilitation facilities by functional related groups,

based on impairment, age, comorbidities, and functional capability

of the patient as well as other factors deemed appropriated to improve the explanatory power of functional independence measurefunction related groups. BBRA 1999 also clarifies that payments to

rehabilitation facilities may be adjusted to account for the early

transfer of patients to another site of care. The Secretary is also

required to submit a study to Congress not later than 3 years after

the implementation of PPS on its impact on utilization and access

to rehabilitation services.

BBA 1997 requires the Secretary to collect data to develop, establish, administer and evaluate a case mix adjusted PPS for long

term care hospitals. BBRA 1999 requires the Secretary to report to

the appropriate congressional committees by October 1, 2001, on a

discharge-based PPS for long term care hospitals which would be

implemented in a budget-neutral fashion for cost reporting periods

beginning on or after October 1, 2002. The Secretary may require

long term care hospitals to submit information to develop the payment system. BBRA 1999 also requires the Secretary to report to

the appropriate congressional committees by October 1, 2001, on a

per diem-based PPS with an adequate patient classification system

for psychiatric hospitals (and distinct part units) which would be

implemented in a budget-neutral fashion for cost reporting periods

beginning on or after October 1, 2002. The Secretary may require

psychiatric hospitals and units to submit information to develop

the payment system.

STATE SYSTEMS

Section 1886(c) of the Social Security Act (as added by TEFRA)

gave the Secretary of the U.S. Department of Health and Human

Services (DHHS) discretion to reimburse hospitals in a State according to the State’s hospital reimbursement control system rather

than according to Medicare’s reimbursement methods if the State

1109

requests this change and if DHHS determines that the State system meets certain requirements. Currently, only Maryland has a

waiver to operate its own system.

Public Laws 98–21 and 98–369 added several more requirements

for State systems. According to final regulations published by

DHHS on April 24, 1986 (51 F.R. 15481) implementing these legislative changes, DHHS has the discretion to allow Medicare hospital

reimbursement to be made in accordance with a State reimbursement control system if the chief executive officer of the State requests approval of the State system, and provided that the State

system:

1. Applies to substantially all non-Federal acute care hospitals in

the State;

2. Applies to at least 75 percent of all inpatient revenues or expenses for the State;

3. Provides assurances that payers, hospital employees and patients in the State will be treated equitably under its system;

4. Provides assurances that its system will not result in greater

Medicare expenditures over 36-month periods;

5. Does not preclude health maintenance organizations or competitive medical plans from negotiating directly with hospitals

concerning payment for inpatient services;

6. Limits hospital charges to Medicare beneficiaries to

deductibles, coinsurance, and services for which the beneficiary

would not be entitled to have payment made under Medicare

part A; and prohibits payment under part B of Medicare for

nonphysician services provided to hospital inpatients unless

this prohibition is waived.

Public Law 101–239 (OBRA 1989) required the Secretary’s test

of effectiveness of a State cost containment system to be based on

the aggregate rate of increase from October 1, 1984, to the most recent date for which annual data are available. This provision also

extended the waiver for the New York rural hospital payment demonstration.

Special provisions apply to States that have existing demonstration projects approved by HCFA under section 402 of the Social Security Amendments of 1967 or section 222(a) of the Social Security

Amendment of 1972 for the operation of State reimbursement control systems. DHHS approval of a State’s application to continue

the operation of a system upon expiration of the demonstration

project is mandatory if, and for so long as, the system meets the

minimum requirements described in the six items listed above.

Public Law 101–508 revised the Secretary’s test of effectiveness

of a State cost containment system to be based on the rate of increase in costs per hospital inpatient admission as compared to the

rate of increase in such costs with respect to all hospitals between

January 1, 1981, and the present. In addition, OBRA 1990 provided that a State no longer qualifying for a prospective payment

system (PPS) waiver be provided with a reasonable period, not to

exceed 2 years, for transition from the State system to the national

payment system, and required restoration of the waiver if the State

returned to compliance during the transition period.

1110

ADMINISTRATION

PROSPECTIVE PAYMENT ASSESSMENT COMMISSION/MEDICARE

PAYMENT ADVISORY COMMISSION

The Prospective Payment Assessment Commission (ProPAC) was

a commission composed of 17 independent experts charged with advising the Congress on PPS and Medicare payment policies. BBA

1997 replaced ProPAC and the Physician Payment Review Commission with a 15-member Medicare Payment Advisory Commission (MedPAC). MedPAC is required to submit annual reports to

Congress on March 1 and June 1 concerning the Medicare Program.

ADMINISTRATIVE AND JUDICIAL REVIEW

Administrative and judicial appeals are allowed under procedures and authorities already established under the Medicare Program. However, the law precludes administrative and judicial review of: (1) the ‘‘budget neutrality’’ adjustment (see above), and (2)

the diagnosis-related group (DRG) payment amounts, including the

establishment of DRGs, the methodology for classifying discharges

within DRGs, and the DRG weighting factors.

REVIEW ACTIVITIES

Public Law 97–248, known as TEFRA, replaced the existing Professional Standards Review Organization Program with the Utilization and Quality Control Peer Review Program. The Secretary of

DHHS was required to enter into performance-based contracts with

physician-sponsored or physician-access organizations known as

peer review organizations (PROs). As a condition of receiving payments under the PPS, hospitals are required to enter into an agreement with a PRO under which the PRO reviews the validity of diagnostic and procedural information provided by the hospitals; the

completeness, adequacy and quality of care provided; and the appropriateness of admissions patterns, discharges, lengths of stay,

transfers, and services furnished in outlier cases.

Since 1982, the statute governing the PRO Program has been

amended numerous times, and as of October 1999 the PROs are operating under the sixth ‘‘scope of work.’’

HISTORICAL TRENDS IN PPS PAYMENTS, COSTS, AND

MARGINS

MEDICARE PAYMENTS TO HOSPITALS

In fiscal year 2000, hospitals will be paid an estimated $93.2 billion for Medicare-covered inpatient hospitalization as shown in

table D–8. The largest share of this amount, $71.5 billion, will be

for PPS inpatient operating costs. The Medicare Program will provide more than 90 percent of these payments and the remaining

amount will come from beneficiaries for deductibles and coinsurance. PPS hospitals will also receive some $6.1 billion in capital

payments. Another $13.6 billion will be paid for operating and capital costs related to services provided in PPS-excluded facilities,

which include psychiatric and rehabilitation hospitals and distinctVerDate 20-JUL-2000 13:14 Sep 29, 2000 Jkt 061710 PO 00000 Frm 01110 Fmt 6601 Sfmt 6601 J:\SKAYNE\GB96\61710.019 WAYS3 PsN: WAYS3
1111

part units as well as long-term and children’s hospitals. Hospitals

will also receive $2.0 billion for the direct costs of training programs, including those for interns and residents and for nursing

and allied health personnel.

TABLE D–8.—TOTAL MEDICARE PAYMENTS TO HOSPITALS FOR INPATIENT

HOSPITALIZATION BY PAYMENT TYPE, FISCAL YEAR 2000

[In billions of dollars]

Payment category Amount Amount

Program ..................................................................................... 71.8

Operating .......................................................................... 65.7

Capital .............................................................................. 6.1

Beneficiary copayments ............................................................ 5.8

Total PPS ................................................................. $77.6

Program ..................................................................................... 12.6

Operating .......................................................................... 11.9

Capital .............................................................................. 0.8

Beneficiary copayments ............................................................ 1.0

Total PPS-excluded .................................................. 13.6

Interns and residents ................................................................ 1.7

Nursing and allied health .......................................................... 0.3

Total direct medical education ............................... 2.0

Total ............................................................... 93.2

Source: Congressional Budget Office.

TRENDS IN PPS OPERATING PAYMENTS AND COSTS

The increase in PPS operating payments per case has differed

from the update factor in every year, as shown in table D–9. In the

first 2 years of prospective payment, payments per discharge rose

sharply, by 18.5 percent and 10.5 percent, respectively. This is attributable to two factors: overestimation of the base year hospital

costs upon which the initial PPS rates were set due to the use of

unaudited Medicare Cost Reports, and a large increase in the aggregate case mix index in the early years because of more emphasis

on accurate DRG coding and complete documentation of the medical record.

After an increase of 3.2 percent in 1986, payments per case grew

at an annual rate of 5.9 percent from 1987 through 1992, as a result of large increases in both the PPS MBI and the aggregate

Medicare case-mix index. From 1993 through 1998, the PPS update

was lower with zero percent update in 1998. Lower updates coupled with a declining case mix index (table D–13) has resulted in

smaller increases in PPS payments per case.

1112

TABLE D–9.—COMPARISON OF INCREASES IN HOSPITAL MARKET BASKET, AVERAGE PPS

UPDATES, PPS OPERATING PAYMENTS PER CASE, AND PPS OPERATING COSTS PER

CASE, FISCAL YEARS 1984–98

[In percent]

Fiscal

year

Forecasted

increase in

PPS market basket 1

Annual increase in

PPS market basket

PPS update Increase in

PPS operating payments per

case 3

Increase in

PPS operating

costs per

case

ProPAC

recommendation 2

HCFA recommendation

Actual update

1984 .. 4.9 5.1 NA 4.7 4.7 18.5 1.8

1985 .. 4.0 4.0 NA 4.5 4.5 10.5 11.0

1986 .. 4.3 3.0 1.5 0.0 0.5 3.2 9.6

1987 .. 3.7 3.3 1.7 0.5 1.2 5.4 9.1

1988 .. 4.7 4.8 2.3 0.8 1.5 6.0 9.0

1989 .. 5.4 5.5 4.2 2.7 3.3 6.6 9.2

1990 .. 5.5 4.6 4.1 4.0 4 4.7 6.5 8.9

1991 .. 5.2 4.4 4.7 3.7 3.4 5.9 7.0

1992 .. 4.4 3.2 3.0 3.0 3.0 5.2 4.7

1993 .. 4.1 3.1 2.8 2.7 2.7 3.8 1.2

1994 .. 4.3 2.6 3.6 5 2.6 2.0 3.6 ¥1.1

1995 .. 3.6 3.1 2.6 2.0 2.0 4.0 ¥1.1

1996 .. 3.5 2.4 1.7 1.5 1.5 4.2 ¥0.6

1997 .. 2.5 2.0 1.0 1.0 2.0 2.5 0.1

1998 .. 2.9 2.9 0.0 0.0 0.0 1.7 NA

1 Based on data available when final PPS rule was issued.

2 Based on ProPAC’s annual Report and Recommendations to the Congress and market basket forecast

when final PPS rule was issued. 3 Increases for 1984–95 based on data from Medicare Cost Reports, which correspond to hospital cost

reporting periods, rather than Federal fiscal years. Increases for 1996–98 based on PPS update and estimated case-mix index increase. 4 Actual updates for fiscal year 1990 adjusted to reflect 1.22 percent across-the-board reduction in

DRG weights. 5 Annual update based on HCFA’s recommendation that rates be frozen at 1993 level through January

1, 1994.

NA—Not available.

Source: Medicare Payment Advisory Commission.

Following an increase of only 1.8 percent in the first year of PPS,

PPS operating costs per discharge rose by about 11 percent in the

second year, and about 9 percent from 1986 through 1990. However, the 7.0-percent growth in operating costs per case in 1991

was the smallest since the first year of PPS, and the rise of 1.2 percent in 1993 was below general inflation. Costs per case actually

decreased from 1994 through 1996, with a small increase (0.1 percent) in 1997.

Cost growth experience has not been uniform across hospitals, as

shown in table D–10. Through 1990, urban and rural hospitals had

about the same rate of increase. In the first year, both groups reacted to prospective payment by holding their cost growth far below

the rates prevailing before PPS, while annual cost increases in the

following 6 years were much higher for both groups. From 1991

through 1995, however, urban hospitals held their cost growth to

1.9 percent annually, while rural hospital costs rose at a 3.4-

1113

percent rate. That pattern continued throughout 1996 and 1997

with costs per case increasing in rural hospitals at a higher rate

than in urban hospitals.

TABLE D–10.—ANNUAL RATE OF CHANGE IN PPS OPERATING COSTS PER CASE BY

HOSPITAL GROUP AND PERIOD, 1984–97

[In percent]

Hospital group

Period

1984 1985–90 1991–95 1996 1997

Urban ...................................... 1.6 9.4 1.9 ¥0.9 0.0

Rural ....................................... 1.5 9.2 3.4 1.3 1.5

Large urban ............................ 0.6 9.2 1.5 ¥0.9 ¥0.1

Other urban ............................ 3.2 9.8 2.4 ¥0.6 0.2

Rural referral .......................... 1.5 9.7 3.4 0.0 1.0

Sole community ...................... 1.3 8.6 3.6 2.3 1.4

Other rural .............................. 1.4 9.2 3.3 1.7 1.7

Major teaching ....................... 1.3 9.1 1.7 ¥0.3 ¥0.4

Other teaching ........................ 1.3 9.4 2.2 ¥0.7 0.1

Nonteaching ............................ 1.9 9.5 2.0 ¥0.7 0.6

Disproportionate share large

urban .................................. 0.0 9.0 1.4 ¥1.0 0.1

Disproportionate share other

urban .................................. 3.2 9.7 2.6 ¥0.5 0.2

Disproportionate share rural .. 0.3 9.7 3.4 0.5 1.8

Nondisproportionate share ..... 2.4 9.6 2.2 ¥0.3 0.0

Teaching and disproportionate

share .................................. 0.7 9.2 2.0 ¥0.4 0.0

Teaching only ......................... 2.6 9.7 2.4 ¥0.7 ¥0.7

Disproportionate share only ... 1.8 9.5 1.8 ¥1.5 0.4

Nonteaching nondisproportionate share ............................ 2.0 9.4 2.1 ¥0.2 0.8

Voluntary ................................. 1.8 9.3 2.2 ¥0.3 0.0

Proprietary .............................. 0.7 10.0 0.3 ¥3.7 0.7

Urban government .................. 2.4 9.6 2.1 ¥0.6 0.1

Rural government ................... 1.5 9.3 3.9 2.0 1.7

All hospitals ........................... 1.8 9.5 2.1 ¥0.6 0.1

Note.—Data on PPS operating costs and payments are for hospital accounting years beginning during

each Federal fiscal year. Changes based on cohorts of hospitals with Medicare Cost Reports in two consecutive years. Hospitals in Massachusetts and New York excluded from data in 1984 and 1985; hospitals in New Jersey excluded from data in 1984 through 1988; hospitals in Maryland excluded from data

in all years.

Source: Medicare Payment Advisory Commission analysis of Medicare Cost Report data from the Health

Care Financing Administration.

The recent low rate of cost growth among hospitals in large

urban areas may reflect the fact that the most rapid changes in the

health care system appear to be occurring in the largest cities.

From 1991 through 1995, these hospitals’ costs per discharge rose

at a rate 0.9 percentage points below that for other urban hospitals

1114

and 1.9 percentage points below that for rural hospitals. Large

urban hospitals continue to show greater success in controlling increases in cost per case in 1996 and 1997 than those categories of

hospitals.

The pattern of cost increases also varies substantially by ownership. In the first year of PPS, when hospitals perceived potential

pressure to control costs, proprietary facilities had by far the smallest increase of any group. Once this pressure lessened, costs increased sharply through 1990 for all groups, including the proprietaries. However, from 1991 on, proprietary hospitals reined in

their costs to a far greater extent than the other groups. That pattern continued in 1996 but did not hold true in 1997. In 1997, voluntary and urban government hospitals displayed smaller increases in operating costs per case than proprietary hospitals.

PPS INPATIENT MARGINS

The PPS inpatient margin compares combined Medicare operating and capital payments with the corresponding costs. In 1997,

the aggregate PPS margin rose for the sixth consecutive year as

shown in table D–11. This contrasts with a declining trend through

the first 8–9 years of prospective payment, during which the margin fell to a low of ¥2.4 percent in 1991. The turnaround is attributable to the sharp slowdown in hospital cost growth with the continuation of current trends. The aggregate PPS inpatient margin

for 1997 is 17.0 percent, the highest PPS inpatient margin in the

14 years of prospective payment.

INPATIENT MARGINS BY HOSPITAL TYPE

PPS inpatient margins vary by hospital group. The margin for

urban hospitals was 14.5 percent in the first year—exceeding that

for rural hospitals by 6.8 percentage points. Beginning in fiscal

year 1986, the Congress enacted a series of policy changes designed

to increase payment for rural hospitals. By 1988, although the difference between the two groups had decreased to 4.5 percentage

points, rural hospitals had negative margins while urban ones were

still receiving payments that exceeded their costs. The disparity

narrowed to 0.5 percentage points by 1992, but has widened as

urban hospitals have constrained their costs more than rural hospitals.

TABLE D–11.—PPS INPATIENT (OPERATING PLUS CAPITAL) MARGINS, BY HOSPITAL GROUP, FIRST 14 YEARS OF PPS, 1984–97

[In percent]

Hospital group 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 

Urban .................................................... 14.5 13.9 9.8 6.8 3.3 0.8

¥1.2

¥2.2

¥0.9 1.3 5.7 10.7 16.4 

Rural ..................................................... 7.7 7.4 2.2 0.2

¥1.2

¥2.9

¥3.7

¥3.7

¥1.4

¥0.7 0.2 5.1 9.8 

Large urban .......................................... 15.0 13.9 10.0 6.8 3.1 0.7

¥0.7

¥1.4 0.4 2.8 7.8 12.7 18.7 

Other urban .......................................... 13.8 14.0 9.4 6.8 3.7 0.9

¥1.9

¥3.4

¥2.9

¥1.0 2.5 7.8 12.8 

Rural referral ........................................ 9.9 12.9 7.9 6.1 3.9 1.2 0.0

¥0.6 2.9 2.6 2.8 6.1 9.9 

Sole community .................................... 8.0 6.4 2.1 0.3

¥1.2

¥2.6

¥1.2

¥0.8 2.5 3.8 4.4 7.3 11.3 

Other rural ............................................ 7.0 6.0 0.3

¥1.9

¥3.2

¥4.5

¥6.0

¥6.0

¥4.8

¥3.8

¥2.5 3.7 8.9 

Major teaching ..................................... 18.6 19.9 15.2 12.9 10.0 7.9 7.2 7.5 9.3 10.9 16.4 20.5 25.1 Other teaching ...................................... 14.9 14.5 10.5 7.2 3.9 1.4

¥1.0

¥2.2

¥1.2 0.8 4.6 9.3 14.5 

Nonteaching .......................................... 11.2 10.0 5.2 2.5

¥0.7

¥3.3

¥5.2

¥6.4

¥5.0

¥3.0 0.4 6.0 11.6 

Disproportionate share large urban ..... 15.3 14.2 10.8 8.3 5.5 3.5 3.0 2.8 5.0 7.8 13.1 17.6 22.9 Disproportionate share other urban ..... 13.5 14.2 10.0 7.8 5.0 2.4 0.0

¥1.3

¥1.0 0.9 4.5 10.0 14.8 

Disproportionate share rural ................ 8.5 8.2 2.8 0.4

¥0.5

¥2.1

¥2.2

¥1.8 0.2 0.5 2.2 7.6 12.3 

Nondisproportionate share ................... 12.6 11.9 7.0 3.6

¥0.3

¥2.9

¥5.5

¥6.7

¥5.5

¥4.0

¥0.7 4.4 10.4 

Teaching and disproportionate share .. 15.8 15.9 12.4 10.0 7.6 5.3 4.1 3.6 5.0 7.3 11.8 16.2 21.0 Teaching only ....................................... 16.1 16.3 11.3 7.0 2.2

¥0.1

¥3.2

¥4.0

¥2.9

¥1.7 2.2 7.0 13.5 

Disproportionate share only ................. 11.6 10.7 6.1 3.6 0.6

¥1.6

¥3.0

¥3.7

¥2.3

¥0.1 3.9 10.0 15.6 

Nonteaching nondisproportionate share 10.8 9.5 4.5 1.5

¥1.8

¥4.6

¥6.9

¥8.4

¥7.2

¥5.4

¥2.5 2.7 8.2 

Voluntary ............................................... 14.0 13.7 9.6 6.5 3.1 0.7

¥1.3

¥2.5

¥1.1 0.6 4.3 9.0 14.6 

Proprietary ............................................ 12.9 11.0 6.3 3.4 0.0

¥3.9

¥5.7

¥4.4

¥2.2 1.8 8.6 15.6 21.5 

Urban government ................................ 13.5 14.1 9.1 7.6 4.8 3.6 2.7 1.4 2.2 4.9 9.7 14.5 18.8 Rural government ................................. 6.6 5.1

¥0.6

¥2.3

¥2.3

¥3.7

¥4.0

¥4.4

¥2.6

¥2.0

¥2.6 2.5 6.9 

All hospitals ......................................... 13.4 13.0 8.7 5.9 2.7 0.3

¥1.5

¥2.4

¥1.0 1.0 5.0 10.0 15.5 

Note.—Data on PPS operating and capital costs and payments are for hospital accounting years beginning during each Federal fiscal year. Hospitals in Massachusetts 

York excluded from data in 1984 and 1985; hospitals in New Jersey excluded from data in 1984 through 1988; hospitals in Maryland excluded from data in all years.

Source: Medicare Payment Advisory Commission analysis of Medicare Cost Report data from the Health Care Financing Administration.

1116

Major teaching hospitals consistently have had the highest aggregate inpatient margin of any hospital group. Moreover, the difference in the margins for major teaching and nonteaching hospitals has grown. For major teaching hospitals, the inpatient margin fell from 19.9 percent in the second year of PPS to a low of 7.2

percent in 1990, while the drop for other teaching and nonteaching

hospitals was much sharper. By 1997, all three groups had higher

margins than in the early years of the decade, with the largest increase seen in the major teaching group. Their margin was 28.5

percent—12.3 percentage points higher than for other teaching hospitals and 16.3 percentage points higher than for the nonteaching

group. These differences had been 3.7 percentage points and 7.4

percentage points, respectively, in the first PPS year.

The trend in inpatient margins by ownership category also reflects changes in payment policy and degree of success in controlling costs. In the first year, voluntary, proprietary, and urban government hospitals all had inpatient margins around 13–14 percent,

while rural government hospitals lagged behind. In 1990, the inpatient margin for the proprietary group, which had fallen by more

than 18 percentage points since the beginning of PPS to ¥5.7 percent, was the lowest of the four groups. However, as these hospitals

held down their cost growth, their margin increased by more than

20 percentage points, to 21.2 percent in 1997.

TOTAL MARGINS

The PPS inpatient margin, however, does not represent the bottom line for the hospital industry. The total margin, which includes

expenses and revenues related to Medicare and other inpatient and

outpatient care as well as other facility activities, increased steadily from the early 1970s to the early 1980s, peaking in 1984. In

subsequent years—as Medicare tightened its control over inpatient

payment rate increases—the total margin began to fall (table D–

12). In the late 1980s, however, this decline leveled off at 3.5 percent, and by 1991 the total margin had risen to 4.4 percent. It declined slightly in 1992, then started on an upward trend in 1994,

standing at 6.3 percent in 1997, the highest level since 1986 and

above levels experienced before PPS began.

ADDITIONAL HOSPITAL DATA

Table D–13 provides historical trends in factors affecting PPS

rates and average payments per case, based on data and estimates

provided by HCFA’s Office of the Actuary. Tables D–14 through D–

16 contain wage index information for PPS hospitals for fiscal year

2000. Table D–17 contains information on changes in DRG relative

weights from fiscal year 1999 through 2000.

TABLE D–12.—TOTAL MARGINS BY HOSPITAL GROUP, 1984–97

[In percent]

Hospital group 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 

Urban ................................................................................ 7.7 6.9 4.5 3.7 3.6 3.5 3.5 4.3 4.2 4.4 4.9 5.7 5.9 Rural ................................................................................. 5.0 4.7 3.0 2.9 3.3 4.2 4.7 5.1 5.3 5.1 5.5 6.6 7.0 Large urban ...................................................................... 7.5 6.6 4.0 3.2 3.0 2.9 2.4 3.6 3.5 3.8 4.2 4.9 5.2 Other urban ...................................................................... 8.1 7.2 5.4 4.6 4.5 4.7 5.2 5.6 5.3 5.2 6.1 6.9 7.2 Rural referral .................................................................... 7.4 8.4 5.7 5.7 5.1 6.5 6.5 6.5 6.7 6.8 7.1 8.6 8.9 Sole community ................................................................ 4.8 4.1 2.7 2.3 2.7 3.3 4.3 5.4 5.6 5.6 5.9 6.3 6.Other rural ........................................................................ 4.4 3.7 2.2 2.1 3.0 3.7 4.2 4.5 4.6 4.3 4.7 5.9 5.9 Major teaching ................................................................. 5.2 5.7 2.2 2.1 2.4 1.8 0.9 3.5 3.2 3.3 3.1 4.2 3.Other teaching .................................................................. 8.4 7.3 5.6 4.4 4.3 4.5 4.4 4.7 4.4 4.7 5.3 6.2 6.9 Nonteaching ...................................................................... 7.3 6.4 4.5 3.8 3.6 3.9 4.4 4.8 4.9 4.9 5.9 6.4 7.0 Disproportionate share large urban ............................... 6.6 5.7 3.2 2.4 2.2 2.0 1.3 3.1 3.0 3.5 3.7 4.3 4.3 Disproportionate share other urban ............................... 7.9 7.1 5.4 4.7 4.6 4.7 5.3 5.9 5.8 5.4 6.2 7.0 7.2 Disproportionate share rural ........................................... 5.8 5.7 2.5 2.8 3.5 4.4 5.7 7.4 7.7 6.0 6.0 7.8 8.2 Nondisproportionate share ............................................... 7.7 7.0 4.9 4.2 4.2 4.4 4.5 4.6 4.4 4.6 5.4 8.2 6.8 Teaching and disproportionate share .............................. 6.7 6.1 3.6 3.0 2.9 3.0 2.4 4.0 3.9 4.0 4.1 4.9 4.Teaching only ................................................................... 9.0 8.5 5.9 4.7 5.0 4.6 4.5 4.7 3.9 4.4 5.1 6.5 7.3 Disproportionate share only ............................................. 7.7 6.5 4.6 3.7 3.5 3.4 4.2 5.1 5.2 5.1 6.3 6.8 7.No teaching or disproportionate share ............................ 7.0 6.2 4.4 4.0 3.7 4.3 4.5 4.5 4.7 4.7 5.5 6.1 6.6 Voluntary ........................................................................... 7.7 7.0 4.9 3.8 3.8 3.9 3.9 4.3 4.0 4.1 4.8 5.7 5.8 Proprietary ........................................................................ 8.8 7.5 5.6 4.6 3.6 2.9 3.9 5.2 6.6 7.2 9.6 9.3 10.Urban government ............................................................ 4.4 4.4 0.9 2.3 2.2 2.5 1.7 4.4 4.2 4.4 3.4 4.4 3.9 Rural government ............................................................. 4.6 2.9 2.0 1.5 2.4 3.3 4.0 4.8 5.2 4.5 4.7 5.7 6.All hospitals ..................................................................... 7.3 6.6 4.3 3.6 3.5 3.6 3.6 4.4 4.3 4.5 5.0 5.8 6.

Note.—Data are percentages. Data on total revenues and expenses are for hospital accounting years beginning during each Federal fiscal year. Hospitals in Massachu

New York excluded from data in 1984 and 1985; hospitals in New Jersey excluded from data in 1984–88; hospitals in Maryland excluded from data in all years.

Source: Medicare Payment Advisory Commission analysis of Medicare Cost Report data from the Health Care Financing Administration.

TABLE D–13.—TRENDS IN FACTORS AFFECTING PPS RATES AND AVERAGE PAYMENTS PER CASE, FISCAL YEARS 1983–2001

[Percentage change from previous year]

Rate impact factor

Fiscal year

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 200

Market basket index ......... 5.5 4.9 4.1 2.9 3.2 4.7 5.4 5.5 5.2 4.4 4.1 4.3 1 3.6 2 3.5 2.5 2.7 2.4 2

Annual update factor ....... NA NA NA NA NA 1.7 3.33 5.71 2.83 2.9 2.75 2.11 1.89 1.64 2 0 0.5 1.0Case-mix index ................. NA NA 3.1 2.5 2.1 3.2 2.5 0.85 2.5 1.5 0.8 0.7 1.5 1.4 0.3

¥0.6

¥0.5 0

Average payments per

discharge ..................... 9.7 10.4 14.2 7.0 5.0 1.6 9.5 5.6 2.6 8.8 3.6 2.5 4.4 4.1 2.4

¥2.0 0.0 2

Average payments per

beneficiary ................... 10.9 7.6 5.6 0.8 0.8 0.4 6.1 7.7 3 8.4 6 4.9 4.7 3.5 3.3

¥3.2

¥2.3 2

1 3.7 for hospitals excluded from the prospective payment system.2 3.4 for hospitals excluded from the prospective payment system.

NA—Not available.Source: Health Care Financing Administration.

1119

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000

Urban area (constituent counties) Wage

index GAF

0040 Abilene, TX: Taylor, TX ................................................................................................. 0.8179 0.8714

00602 Aguadilla,2 PR: Aguada, PR; Aguadilla, PR; Moca, PR ............................................. 0.4249 0.5565

0080 Akron, OH; Portage, OH; Summit, OH .......................................................................... 1.0163 1.0111

0120 Albany, GA: Dougherty, GA; Lee, GA ............................................................................ 1.0372 1.0253

0160 Albany-Schenectady-Troy, NY: Albany, NY; Montgomery, NY; Rensselaer, NY; Saratoga, NY; Schenectady, NY; Schoharie, NY ....................................................................... 0.8754 0.9129

0200 Albuquerque, NM: Bernalillo, NM; Sandoval, NM; Valencia, NM ................................. 0.8499 0.8946

0220 Alexandria, LA: Rapides, LA ......................................................................................... 0.7910 0.8517

0240 Allentown-Bethlehem-Easton, PA: Carbon, PA; Lehigh, PA; Northampton, PA ............ 0.9550 0.9690

0280 Altoona, PA: Blair, PA .................................................................................................. 0.9342 0.9545

0320 Amarillo, TX: Potter, TX; Randall, TX ........................................................................... 0.8435 0.8900

0380 Anchorage, AK: Anchorage, AK ..................................................................................... 1.3009 1.1974

0440 Ann Arbor, MI: Lenawee, MI; Livingston, MI; Washtenaw, MI ..................................... 1.1483 1.0993

0450 Anniston, AL: Calhoun, AL ........................................................................................... 0.8462 0.8919

0460 Appleton-Oshkosh-Neenah, WI: Calumet, WI; Outagamie, WI; Winnebago, WI ........... 0.8913 0.9242

0470 Arecibo, PR: Arecibo, PR; Camuy, PR; Hatillo, PR ....................................................... 0.4815 0.6062

0480 Asheville, NC: Buncombe, NC; Madison, NC ............................................................... 0.8884 0.9222

0500 Athens, GA: Clarke, GA; Madison, GA; Oconee, GA ..................................................... 0.9800 0.9863

0520 Atlanta,1 GA: 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 ........................................................................................................... 1.0050 1.0034

0560 Atlantic-Cape May, NJ: Atlantic, NJ; Cape May, NJ ..................................................... 1.1050 1.0708

0580 Auburn-Opelika, AL: Lee, AL ........................................................................................ 0.7748 0.8397

0600 Augusta-Aiken, GA–SC: Columbia, GA; McDuffie, GA; Richmond, GA; Aiken, SC;

Edgefield, SC ..................................................................................................................... 0.9013 0.9313

0640 Austin-San Marcos,1 TX: Bastrop, TX; Caldwell, TX; Hays, TX; Travis, TX;

Williamson, TX ................................................................................................................... 0.9081 0.9361

0680 Bakersfield,2 CA: Kern, CA ........................................................................................... 0.9951 0.9966

0720 Baltimore,1 MD: Anne Arundel, MD; Baltimore, MD; Baltimore City, MD; Carroll, MD;

Harford, MD; Howard, MD; Queen Anne’s, MD .................................................................. 0.9891 0.9925

0733 Bangor, ME: Penobscot, ME ......................................................................................... 0.9609 0.9731

0743 Barnstable-Yarmouth, MA: Barnstable, MA ................................................................. 1.3302 1.2158

0760 Baton Rouge, LA: Ascension, LA; East Baton Rouge, LA; Livingston, LA; West Baton

Rouge, LA ........................................................................................................................... 0.8707 0.9095

0840 Beaumont-Port Arthur, TX: Hardin, TX; Jefferson, TX; Orange, TX .............................. 0.8624 0.9036

0860 Bellingham, WA: Whatcom, WA .................................................................................... 1.1394 1.0935

0870 Benton Harbor,2 MI: Berrien, MI .................................................................................. 0.8831 0.9184

0875 Bergen-Passaic,1 NJ: Bergen, NJ; Passaic, NJ ............................................................. 1.1833 1.1222

0880 Billings, MT: Yellowstone, MT ...................................................................................... 1.0038 1.0026

0920 Biloxi-Gulfport-Pascagoula, MS: Hancock, MS; Harrison, MS; Jackson, MS ............... 0.7949 0.8545

0960 Binghamton, NY: Broome, NY; Tioga, NY .................................................................... 0.8750 0.9126

1000 Birmingham, AL: Blount, AL; Jefferson, AL; St. Clair, AL; Shelby, AL ......................... 0.8994 0.9300

1010 Bismarck, ND: Burleigh, ND; Morton, ND .................................................................... 0.7893 0.8504

1020 Bloomington, IN: Monroe, IN ........................................................................................ 0.8593 0.9014

1040 Bloomington-Normal, IL: McLean, IL ............................................................................ 0.8993 0.9299

1080 Boise City, ID: Ada, ID: Canyon, ID ............................................................................. 0.9086 0.9365

1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA–NH (MA Hospitals)1 2 Bristol, MA;

Essex, MA; Middlesex, MA; Norfolk, MA; Plymouth, MA; Suffolk, MA; Worcester, MA;

Hillsborough, NH; Merrimack, NH; Rockingham, NH; Strafford, NH ................................. 1.1369 1.0918

1123 Boston-Worcester-Lawrence-Lowell-Brockton, MA–NH (NH Hospitals)1 Bristol, MA;

Essex, MA; Middlesex, MA; Norfolk, MA; Plymouth, MA; Suffolk, MA; Worcester, MA;

Hillsborough, NH; Merrimack, NH; Rockingham, NH; Strafford, NH ................................. 1.1358 1.0911

1125 Boulder-Longmont, CO: Boulder, CO ............................................................................ 0.9944 0.9962

1145 Brazoria, TX: Brazoria, TX ............................................................................................ 0.8516 0.8958

1150 Bremerton, WA: Kitsap, WA .......................................................................................... 1.1011 1.0682

1240 Brownsville-Harlingen-San Benito, TX: Cameron, TX .................................................. 0.9212 0.9453

1260 Bryan-College Station, TX: Brazos, TX ......................................................................... 0.8501 0.8947

1280 Buffalo-Niagara Falls, NY: 1 Erie, NY; Niagara, NY ..................................................... 0.9604 0.9727

1303 Burlington, VT: Chittenden, VT; Franklin, VT; Grand Isle, VT ...................................... 1.0558 1.0379

1310 Caguas, PR: Caguas, PR; Cayey, PR; Cidra, PR; Gurabo, PR; San Lorenzo, PR ........ 0.4561 0.5842

1120

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000—Continued

Urban area (constituent counties) Wage

index GAF

1320 Canton-Massillon,2 OH: Carroll, OH; Stark, OH ........................................................... 0.8649 0.9054

1350 Casper, WY: Natrona, WY ............................................................................................. 0.9199 0.9444

1360 Cedar Rapids, IA: Linn, IA ........................................................................................... 0.9018 0.9317

1400 Champaign-Urbana, IL: Champaign, IL ....................................................................... 0.9163 0.9419

1440 Charleston-North Charleston, SC: Berkeley, SC; Charleston, SC; Dorchester, SC ...... 0.8988 0.9295

1480 Charleston, WV: Kanawha, WV; Putnam, WV ............................................................... 0.9095 0.9371

1520 Charlotte-Gastonia-Rock Hill, NC–SC: 1 Cabarrus, NC; Gaston, NC; Lincoln, NC;

Mecklenburg, NC; Rowan, NC; Stanly, NC; Union, NC; York, SC ...................................... 0.9433 0.9608

1540 Charlottesville, VA: Albemarle, VA; Charlottesville City, VA; Fluvanna, VA; Greene,

VA ....................................................................................................................................... 1.0573 1.0389

1560 Chattanooga, TN–GA: Catoosa, GA; Dade, GA; Walker, GA; Hamilton, TN; Marion,

TN ....................................................................................................................................... 0.9731 0.9815

1580 Cheyenne, WY: 2 Laramie, WY ...................................................................................... 0.8859 0.9204

1600 Chicago, IL: 1 Cook, IL; DeKalb, IL; DuPage, IL; Grundy, IL; Kane, IL; Kendall, IL;

Lake, IL; McHenry, IL; Will, IL ............................................................................................ 1.0872 1.0589

1620 Chico-Paradise, CA: Butte, CA ..................................................................................... 1.0390 1.0265

1640 Cincinnati, OH–KY–IN: 1 Dearborn, IN; Ohio, IN; Boone, KY; Campbell, KY; Gallatin,

KY; Grant, KY; Kenton, KY; Pendleton, KY; Brown, OH; Clermont, OH; Hamilton, OH;

Warren, OH ......................................................................................................................... 0.9434 0.9609

1660 Clarksville-Hopkinsville, TN–KY: Christian, KY; Montgomery, TN ................................ 0.8283 0.8790

1680 Cleveland-Lorain-Elyria, OH: 1 Ashtabula, OH; Cuyahoga, OH; Geauga, OH; Lake,

OH; Lorain, OH; Medina, OH .............................................................................................. 0.9688 0.9785

1720 Colorado Springs, CO: El Paso, CO ............................................................................. 0.9218 0.9458

1740 Columbia, MO: Boone, MO ........................................................................................... 0.8904 0.9236

1760 Columbia, SC: Lexington, SC; Richland, SC ................................................................ 0.9357 0.9555

1800 Columbus, GA–AL: Russell, AL; Chattahoochee, GA; Harris, GA; Muscogee, GA ........ 0.8510 0.8954

1840 Columbus, OH: 1 Delaware, OH; Fairfield, OH; Franklin, OH; Licking, OH; Madison,

OH; Pickaway, OH .............................................................................................................. 0.9907 0.9936

1880 Corpus Christi, TX: Nueces, TX; San Patricio, TX ........................................................ 0.8702 0.9092

1890 Corvallis, OR: Benton, OR ............................................................................................ 1.1087 1.0732

1900 Cumberland, MD–WV (Maryland Hospitals): Allegany, MD; Mineral, WV .................... 0.8801 0.9163

1920 Dallas, TX: 1 Collin, TX; Dallas, TX; Denton, TX; Ellis, TX; Henderson, TX; Hunt, TX;

Kaufman, TX; Rockwall, TX ............................................................................................... 0.9589 0.9717

1950 Danville, VA: Danville City, VA; Pittsylvania, VA ......................................................... 0.9061 0.9347

1960 Davenport-Moline-Rock Island, IA–IL: Scott, IA; Henry, IL; Rock Island, IL ................ 0.8706 0.9095

2000 Dayton-Springfield, OH: Clark, OH; Greene, OH; Miami, OH; Montgomery, OH ........... 0.9336 0.9540

2020 Daytona Beach, FL: 2 Flagler, FL; Volusia, FL .............................................................. 0.8986 0.9294

2030 Decatur, AL: Lawrence, AL; Morgan, AL ....................................................................... 0.8679 0.9075

2040 Decatur, IL: Macon, IL .................................................................................................. 0.8321 0.8817

2080 Denver, CO: 1 Adams, CO; Arapahoe, CO; Denver, CO; Douglas, CO; Jefferson, CO .. 1.0197 1.0134

2120 Des Moines, IA: Dallas, IA; Polk, IA; Warren, IA .......................................................... 0.8754 0.9129

2160 Detroit, MI: 1 Lapeer, MI; Macomb, MI; Monroe, MI; Oakland, MI; St. Clair, MI;

Wayne, MI .......................................................................................................................... 1.0421 1.0286

2180 Dothan, AL: Dale, AL; Houston, AL .............................................................................. 0.7836 0.8462

2190 Dover, DE: Kent, DE ..................................................................................................... 0.9335 0.9540

2200 Dubuque, IA: Dubuque, IA ............................................................................................ 0.8520 0.8961

2240 Duluth-Superior, MN–WI: St. Louis, MN; Douglas, WI ................................................. 1.0165 1.0113

2281 Dutchess County, NY: Dutchess, NY ............................................................................ 0.9872 0.9912

2290 Eau Claire, WI: Chippewa, WI; Eau Claire, WI ............................................................ 0.8957 0.9273

2320 El Paso, TX: El Paso, TX .............................................................................................. 0.8947 0.9266

2330 Elkhart-Goshen, IN: Elkhart, IN .................................................................................... 0.9379 0.9570

2335 Elmira, NY: 2 Chemung, NY .......................................................................................... 0.8636 0.9045

2340 Enid, OK: Garfield, OK .................................................................................................. 0.7953 0.8548

2360 Erie, PA: Erie, PA .......................................................................................................... 0.9023 0.9320

2400 Eugene-Springfield, OR: Lane, OR ............................................................................... 1.0765 1.0518

2440 Evansville-Henderson, IN–KY (IN Hospitals): 2 Posey, IN; Vanderburgh, IN; Warrick,

IN; Henderson, KY .............................................................................................................. 0.8396 0.8872

2440 Evansville-Henderson, IN–KY (KY Hospitals): Posey, IN; Vanderburgh, IN; Warrick,

IN; Henderson, KY .............................................................................................................. 0.8303 0.8804

2520 Fargo-Moorhead, ND–MN: Clay, MN; Cass, ND ........................................................... 0.8620 0.9033

2560 Fayetteville, NC: Cumberland, NC ................................................................................ 0.8494 0.8942

1121

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000—Continued

Urban area (constituent counties) Wage

index GAF

2580 Fayetteville-Springdale-Rogers, AR: Benton, AR; Washington, AR .............................. 0.7773 0.8415

2620 Flagstaff, AZ–UT: Coconino, AZ; Kane, UT .................................................................. 1.0348 1.0237

2640 Flint, MI: Genesee, MI .................................................................................................. 1.1020 1.0688

2650 Florence, AL: Colbert, AL; Lauderdale, AL .................................................................... 0.7927 0.8529

2655 Florence, SC: Florence, SC ........................................................................................... 0.8618 0.9032

2670 Fort Collins-Loveland, CO: Larimer, CO ....................................................................... 1.0302 1.0206

2680 Ft. Lauderdale, FL: 1 Broward, FL ................................................................................ 1.0172 1.0117

2700 Fort Myers-Cape Coral, FL: 2 Lee, FL ........................................................................... 0.8986 0.9294

2710 Fort Pierce-Port St. Lucie, FL: Martin, FL; St. Lucie, FL .............................................. 1.0109 1.0075

2720 Fort Smith, AR–OK: Crawford, AR; Sebastian, AR; Sequoyah, OK .............................. 0.7844 0.8468

2750 Fort Walton Beach, FL: 2 Okaloosa, FL ......................................................................... 0.8986 0.9294

2760 Fort Wayne, IN: Adams, IN; Allen, IN; De Kalb, IN; Huntington, IN; Wells, IN; Whitley, IN ................................................................................................................................. 0.9096 0.9372

2800 Forth Worth-Arlington, TX: 1 Hood, TX; Johnson, TX; Parker, TX; Tarrant, TX .............. 0.9835 0.9887

2840 Fresno, CA: Fresno, CA; Madera, CA ............................................................................ 1.0262 1.0179

2880 Gadsden, AL: Etowah, AL ............................................................................................. 0.8754 0.9129

2900 Gainesville, FL: Alachua, FL ......................................................................................... 1.0102 1.0070

2920 Galveston-Texas City, TX: Galveston, TX ..................................................................... 0.9732 0.9816

2960 Gary, IN: Lake, IN; Porter, IN ....................................................................................... 0.9369 0.9563

2975 Glens Falls, NY: 2 Warren, NY; Washington, NY .......................................................... 0.8636 0.9045

2980 Goldsboro, NC: Wayne, NC ........................................................................................... 0.8333 0.8826

2985 Grand Forks, ND–MN: Polk, MN; Grand Forks, ND ...................................................... 0.9097 0.9372

2995 Grand Junction, CO: Mesa, CO .................................................................................... 0.9188 0.9437

3000 Grand Rapids-Muskegon-Holland, MI: 1 Allegan, MI; Kent, MI; Muskegon, MI; Ottawa, MI ............................................................................................................................. 1.0135 1.0092

3040 Great Falls, MT: Cascade, MT ...................................................................................... 1.0459 1.0312

3060 Greeley, CO: Weld, CO .................................................................................................. 0.9722 0.9809

3080 Green Bay, WI: Brown, WI ............................................................................................ 0.9215 0.9456

3120 Greensboro-Winston-Salem-High Point, NC: 1 Alamance, NC; Davidson, NC; Davie,

NC; Forsyth, NC; Guilford, NC; Randolph, NC; Stokes, NC; Yadkin, NC ........................... 0.9037 0.9330

3150 Greenville, NC; Pitt, NC ................................................................................................ 0.9500 0.9655

3160 Greenville-Spartanburg-Anderson, SC: Anderson, SC; Cherokee, SC; Greenville, SC;

Pickens, SC; Spartanburg, SC ........................................................................................... 0.9188 0.9437

3180 Hagerstown, MD: Washington, MD ............................................................................... 0.8853 0.9200

3200 Hamilton-Middletown, OH: Butler, OH ......................................................................... 0.8989 0.9296

3240 Harrisburg-Lebanon-Carlisle, PA: Cumberland, PA; Dauphin, PA; Lebanon, PA;

Perry, PA ............................................................................................................................ 0.9917 0.9943

3283 Hartford, CT: 1 2 Hartford, CT; Litchfield, CT; Middlesex, CT; Tolland, CT .................. 1.2413 1.1595

3285 Hattiesburg, MS: 2 Forrest, MS; Lamar, MS ................................................................. 0.7306 0.8066

3290 Hickory-Morganton-Lenoir, NC: Alexander, NC; Burke, NC; Caldwell, NC; Catawba,

NC ...................................................................................................................................... 0.9148 0.9408

3320 Honolulu, HI: Honolulu, HI ............................................................................................ 1.1479 1.0991

3350 Houma, LA: Lafourche, LA; Terrebonne, LA .................................................................. 0.7837 0.8463

3360 Houston, TX: 1 Chambers, TX; Fort Bend, TX; Harris, TX; Liberty, TX; Montgomery,

TX; Waller, TX .................................................................................................................... 0.9387 0.9576

3400 Huntington-Ashland, WV–KY–OH: Boyd, KY; Carter, KY; Greenup, KY; Lawrence, OH;

Cabell, WV; Wayne, WV ...................................................................................................... 0.9757 0.9833

3440 Huntsville, AL: Limestone, AL; Madison, AL ................................................................ 0.8822 0.9178

3480 Indianapolis, IN: 1 Boone, IN; Hamilton, IN; Hancock, IN; Hendricks, IN; Johnson, IN;

Madison, IN; Marion, IN; Morgan, IN; Shelby, IN .............................................................. 0.9792 0.9857

3500 Iowa City, IA: Johnson, IA ............................................................................................ 0.9607 0.9729

3520 Jackson, MI: Jackson, MI .............................................................................................. 0.8840 0.9190

3560 Jackson, MS: Hinds, MS; Madison, MS; Rankin, MS ................................................... 0.8387 0.8865

3580 Jackson, TN: Madison, TN; Chester, TN ....................................................................... 0.8600 0.9019

3600 Jacksonville, FL: 1 2 Clay, FL; Duval, FL; Nassau, FL; St. Johns, FL ............................ 0.8986 0.9294

3605 Jacksonville, NC: 2 Onslow, NC .................................................................................... 0.8290 0.8795

3610 Jamestown, NY: 2 Chautauqua, NY .............................................................................. 0.8636 0.9045

3620 Janesville-Beloit, WI: Rock, WI ..................................................................................... 0.9656 0.9763

3640 Jersey City, NJ: Hudson, NJ .......................................................................................... 1.1674 1.1118

3660 Johnson City-Kingsport-Bristol, TN–VA: Carter, TN; Hawkins, TN; Sullivan, TN;

Unicoi, TN; Washington, TN; Bristol City, VA; Scott, VA Washington, VA ......................... 0.8894 0.9229

1122

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000—Continued

Urban area (constituent counties) Wage

index GAF

3680 Johnstown, PA: 2 Cambria, PA; Somerset, PA .............................................................. 0.8524 0.8964

3700 Jonesboro, AR: Craighead, AR ...................................................................................... 0.7251 0.8024

3710 Joplin, MO: 2 Jasper, MO; Newton, MO ......................................................................... 0.7723 0.8378

3720 Kalamazoo-Battlecreek, MI: Calhoun, MI; Kalamazoo, MI; Van Buren, MI .................. 0.9981 0.9987

3740 Kankakee, IL: Kankakee, IL .......................................................................................... 0.8598 0.9017

3760 Kansas City, KS–MO: 1 Johnson, KS; Leavenworth, KS; Miami, KS; Wyandotte, KS;

Cass, MO; Clay, MO; Clinton, MO; Jackson, MO; Lafayette, MO; Platte, MO; Ray, MO .... 0.9322 0.9531

3800 Kenosha, WI: Kenosha, WI ............................................................................................ 0.9033 0.9327

3810 Killeen-Temple, TX: Bell, TX; Coryell, TX ...................................................................... 0.9932 0.9953

3840 Knoxville, TN: Anderson, TN; Blount, TN; Knox, TN; Loudon, TN; Sevier, TN; Union,

TN ....................................................................................................................................... 0.9199 0.9444

3850 Kokomo, IN: Howard, IN; Tipton, IN ............................................................................. 0.8984 0.9293

3870 La Crosse, WI–MN: Houston, MN; La Crosse, WI ......................................................... 0.8933 0.9256

3880 Lafayette, LA: Acadia, LA; Lafayette, LA; St. Landry, LA; St. Martin, LA .................... 0.8397 0.8872

3920 Lafayette, IN: Clinton, IN; Tippecanoe, IN ................................................................... 0.8809 0.9168

3960 Lake Charles, LA: Calcasieu, LA .................................................................................. 0.7966 0.8558

3980 Lakeland-Winter Haven, FL: 2 Polk, FL ......................................................................... 0.8986 0.9294

4000 Lancaster, PA: Lancaster, PA ....................................................................................... 0.9255 0.9484

4040 Lansing-East Lansing, MI: Clinton, MI; Eaton, MI; Ingham, MI ................................. 0.9977 0.9984

4080 Laredo, TX: Webb, TX ................................................................................................... 0.8323 0.8819

4100 Las Cruces, NM: Dona Ana, NM .................................................................................. 0.8590 0.9012

4120 Las Vegas, NV–AZ: 1 Mohave, AZ; Clark, NV; Nye, NV ................................................ 1.1258 1.0845

4150 Lawrence, KS: Douglas, KS .......................................................................................... 0.8222 0.8745

4200 Lawton, OK: Comanche, OK ......................................................................................... 0.9532 0.9677

4243 Lewiston-Auburn, ME: Androscoggin, ME .................................................................... 0.8899 0.9232

4280 Lexington, KY: Bourbon, KY; Clark, KY; Fayette, KY; Jessamine, KY; Madison, KY;

Scott, KY; Woodford, KY ..................................................................................................... 0.8552 0.8984

4320 Lima, OH: Allen, OH; Auglaize, OH .............................................................................. 0.9108 0.9380

4360 Lincoln, NE: Lancaster, NE .......................................................................................... 0.9670 0.9773

4400 Little Rock-North Little Rock, AR: Faulkner, AR; Lonoke, AR; Pulaski, AR; Saline, AR 0.8614 0.9029

4420 Longview-Marshall, TX: Gregg, TX; Harrison, TX; Upshur, TX ..................................... 0.8738 0.9118

4480 Los Angeles-Long Beach, CA: 1 Los Angeles, CA ......................................................... 1.2085 1.1385

4520 Louisville, KY-IN: Clark, IN; Floyd, IN; Harrison, IN; Scott, IN; Bullitt, KY; Jefferson,

KY; Oldham, KY ................................................................................................................. 0.9381 0.9572

4600 Lubbock, TX: Lubbock, TX ............................................................................................ 0.8411 0.8883

4640 Lynchburg, VA: Amherst, VA; Bedford, VA; Bedford City, VA; Campbell, VA; Lynchburg City, VA ..................................................................................................................... 0.8814 0.9172

4680 Macon, GA: Bibb, GA; Houston, GA; Jones, GA; Peach, GA; Twiggs, GA ..................... 0.8530 0.8968

4720 Madison, WI: Dane, WI ................................................................................................. 0.9729 0.9814

4800 Mansfield, OH: 2 Crawford, OH; Richland, OH ............................................................. 0.8649 0.9054

4840 Mayaguez, PR: Anasco, PR; Cabo Rojo, PR; Hormigueros, PR; Mayaguez, PR;

Sabana Grande, PR; San German, PR .............................................................................. 0.4674 0.5940

4880 McAllen-Edinburg-Mission, TX: Hidalgo, TX ................................................................. 0.8120 0.8671

4890 Medford-Ashland, OR: Jackson, OR ............................................................................. 1.0492 1.0334

4900 Melbourne-Titusville-Palm Bay, FL: Brevard, Fl .......................................................... 0.9296 0.9512

4920 Memphis, TN–AR–MS :1 Crittenden, AR; DeSoto, MS; Fayette, TN; Shelby, TN; Tipton, TN ............................................................................................................................... 0.8244 0.8761

4940 Merced, CA: Merced, CA ............................................................................................... 1.0509 1.0346

5000 Miami, FL: 1 Dade, FL ................................................................................................... 1.0233 1.0159

5015 Middlesex-Somerset-Hunterdon, NJ: 1 Hunterdon, NJ; Middlesex, NJ; Somerset, NJ .... 1.0876 1.0592

5080 Milwaukee-Waukesha, WI: 1 Milwaukee, WI; Ozaukee, WI; Washington, WI;

Waukesha, WI .................................................................................................................... 0.9845 0.9894

5120 Minneapolis-St. Paul, MN–WI: 1 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 ................................................................................ 1.0929 1.0627

5140 Missoula, MT: Missoula, MT ......................................................................................... 0.9085 0.9364

5160 Mobile, AL: Baldwin, AL; Mobile, AL ............................................................................ 0.8267 0.8778

5170 Modesto, CA: Stanislaus, CA ....................................................................................... 1.0111 1.0076

5190 Monmouth-Ocean, NJ: 1 Monmouth, NJ; Ocean, NJ ...................................................... 1.1258 1.0845

5200 Monroe, LA: Ouachita, LA ............................................................................................. 0.8221 0.8745

5240 Montgomery, AL: Autauga, AL; Elmore, AL; Montgomery, AL ....................................... 0.7724 0.8379

1123

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000—Continued

Urban area (constituent counties) Wage

index GAF

5280 Muncie, IN: Delaware, IN ............................................................................................. 1.0834 1.0564

5330 Myrtle Beach, SC: Horry, SC ........................................................................................ 0.8529 0.8968

5345 Naples, FL: Collier, FL .................................................................................................. 0.9839 0.9889

5360 Nashville, TN: 1 Cheatham, TN; Davidson, TN; Dickson, TN; Robertson, TN; Rutherford, TN; Sumner, TN; Williamson, TN; Wilson, TN ........................................................... 0.9449 0.9619

5380 Nassau-Suffolk, NY: 1 Nassau, NY; Suffolk, NY ........................................................... 1.4074 1.2637

5483 New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT: 1 Fairfield, CT; New

Haven, CT .......................................................................................................................... 1.2417 1.1598

5523 New London-Norwich, CT: New London, CT ................................................................. 1.2428 1.1605

5560 New Orleans, LA: 1 Jefferson, LA; Orleans, LA; Plaquemines, LA; St. Bernard, LA; St.

Charles, LA; St. James, LA; St. John The Baptist, LA; St. Tammany, LA ......................... 0.9089 0.9367

5600 New York, NY: 1 Bronx, NY; Kings, NY; New York, NY; Putnam, NY; Queens, NY;

Richmond, NY; Rockland, NY; Westchester, NY ................................................................ 1.4517 1.2908

5640 Newark, NJ: 1 Essex, NJ; Morris, NJ; Sussex, NJ; Union, NJ; Warren, NJ ..................... 1.0772 1.0522

5660 Newburgh, NY–PA: Orange, NY; Pike, PA .................................................................... 1.0908 1.0613

5720 Norfolk-Virginia Beach-Newport News, VA–NC: 1 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 ........................... 0.8442 0.8905

5775 Oakland, CA: 1 Alameda, CA; Contra Costa, CA .......................................................... 1.5095 1.3258

5790 Ocala, FL: Marion, FL ................................................................................................... 0.9615 0.9735

5800 Odessa-Midland, TX: Ector, TX; Midland, TX ............................................................... 0.8873 0.9214

5880 Oklahoma City, OK: 1 Canadian, OK; Cleveland, OK; Logan, OK; McClain, OK; Oklahoma, OK; Pottawatomie, OK ............................................................................................ 0.8589 0.9011

5910 Olympia, WA: Thurston, WA .......................................................................................... 1.0932 1.0629

5920 Omaha, NE–IA: Pottawattamie, IA; Cass, NE; Douglas, NE; Sarpy, NE; Washington,

NE ...................................................................................................................................... 1.0455 1.0309

5945 Orange County, CA: 1 Orange, CA ................................................................................ 1.1592 1.1065

5960 Orlando, FL: 1 Lake, FL; Orange, FL; Osceola, FL; Seminole, FL .................................. 0.9806 0.9867

5990 Owensboro, KY: Daviess, KY ........................................................................................ 0.8104 0.8659

6015 Panama City, FL: Bay, FL ............................................................................................ 0.9169 0.9423

6020 Parkersburg-Marietta, WV–OH (WV Hospitals): Washington, OH; Wood, WV .............. 0.8414 0.8885

6020 Parkersburg-Marietta, WV–OH (OH Hospitals): 2 Washington, OH; Wood, WV ............ 0.8649 0.9054

6080 Pensacola, FL: 2 Escambia, FL; Santa Rosa, FL .......................................................... 0.8986 0.9294

6120 Peoria-Pekin, IL: Peoria, IL; Tazewell, IL; Woodford, IL ............................................... 0.8399 0.8874

6160 Philadelphia, PA–NJ: 1 Burlington, NJ; Camden, NJ; Gloucester, NJ; Salem, NJ;

Bucks, PA; Chester, PA; Delaware, PA; Montgomery, PA; Philadelphia, PA ..................... 1.1186 1.0798

6200 Phoenix-Mesa, AZ: 1 Maricopa, AZ; Pinal, AZ .............................................................. 0.9464 0.9630

6240 Pine Bluff, AR: Jefferson, AR ....................................................................................... 0.7697 0.8359

6280 Pittsburgh, PA: 1 Allegheny, PA; Beaver, PA; Butler, PA; Fayette, PA; Washington,

PA; Westmoreland, PA ....................................................................................................... 0.9634 0.9748

6323 Pittsfield, MA: 2 Berkshire, MA ..................................................................................... 1.1369 1.0918

6340 Pocatello, ID: Bannock, ID ........................................................................................... 0.8973 0.9285

6360 Ponce, PR: Guayanilla, PR; Juana Diaz, PR; Penuelas, PR; Ponce, PR; Villalba, PR;

Yauco, PR .......................................................................................................................... 0.4971 0.6196

6403 Portland, ME: Cumberland, ME; Sagadahoc, ME; York, ME ........................................ 0.9487 0.9646

6440 Portland-Vancouver, OR–WA: 1 Clackamas, OR; Columbia, OR; Multnomah, OR;

Washington, OR; Yamhill, OR; Clark, WA .......................................................................... 1.0996 1.0672

6483 Providence-Warwick-Pawtucket, RI: 1 Bristol, RI; Kent, RI; Newport, RI; Providence,

RI; Washington, RI ............................................................................................................. 1.0690 1.0468

6520 Provo-Orem, UT: Utah, UT ............................................................................................ 0.9818 0.9875

6560 Pueblo, CO: Pueblo, CO ................................................................................................ 0.8853 0.9200

6580 Punta Gorda, FL: Charlotte, FL .................................................................................... 0.9508 0.9660

6600 Racine, WI: Racine, WI ................................................................................................. 0.9216 0.9456

6640 Raleigh-Durham-Chapel Hill, NC: 1 Chatham, NC; Durham, NC; Franklin, NC; Johnston, NC; Orange, NC; Wake, NC ...................................................................................... 0.9544 0.9685

6660 Rapid City, SD: Pennington, SD ................................................................................... 0.8363 0.8848

6680 Reading, PA: Berks, PA ................................................................................................ 0.9436 0.9610

6690 Redding, CA: Shasta, CA ............................................................................................. 1.1263 1.0849

6720 Reno, NV: Washoe, NV ................................................................................................. 1.0655 1.0444

6740 Richland-Kennewick-Pasco, WA: Benton, WA; Franklin, WA ........................................ 1.1224 1.0823

1124

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000—Continued

Urban area (constituent counties) Wage

index GAF

6760 Richmond-Petersburg, VA: 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 .................................................................................................................... 0.9545 0.9686

6780 Riverside-San Bernardino, CA: 1 Riverside, CA; San Bernardino, CA .......................... 1.1061 1.0715

6800 Roanoke, VA: Botetourt, VA; Roanoke, VA; Roanoke City, VA; Salem City, VA ............ 0.8142 0.8687

6820 Rochester, MN: Olmsted, MN ....................................................................................... 1.1429 1.0958

6840 Rochester, NY: 1 Genesee, NY; Livingston, NY; Monroe, NY; Ontario, NY; Orleans,

NY; Wayne, NY ................................................................................................................... 0.9184 0.9434

6880 Rockford, IL: Boone, IL; Ogle, IL; Winnebago, IL ......................................................... 0.8783 0.9150

6895 Rocky Mount, NC: Edgecombe, NC; Nash, NC ............................................................. 0.8735 0.9115

6920 Sacramento, CA: 1 El Dorado, CA; Placer, CA; Sacramento, CA .................................. 1.2284 1.1513

6960 Saginaw-Bay City-Midland, MI: Bay, MI; Midland, MI; Saginaw, MI .......................... 0.9294 0.9511

6980 St. Cloud, MN: Benton, MN; Stearns, MN .................................................................... 0.9608 0.9730

7000 St. Joseph, MO: Andrew, MO; Buchanan, MO .............................................................. 0.8943 0.9264

7040 St. Louis, MO–IL: 1 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 ........................................................................................................ 0.9052 0.9341

7080 Salem, OR: Marion, OR; Polk, OR ................................................................................ 0.9949 0.9965

7120 Salinas, CA: Monterey, CA ........................................................................................... 1.4710 1.3025

7160 Salt Lake City-Ogden, UT: 1 Davis, UT; Salt Lake, UT; Weber, UT .............................. 0.9854 0.9900

7200 San Angelo, TX: Tom Green, TX ................................................................................... 0.7845 0.8469

7240 San Antonio, TX: 1 Bexar, TX; Comal, TX; Guadalupe, TX; Wilson, TX ........................ 0.8318 0.8815

7320 San Diego, CA: 1 San Diego, CA .................................................................................. 1.1955 1.1301

7360 San Francisco, CA: 1 Marin, CA; San Francisco, CA; San Mateo, CA ......................... 1.3784 1.2458

7400 San Jose, CA: 1 Santa Clara, CA .................................................................................. 1.3492 1.2277

7440 San Juan-Bayamon, PR: 1 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 ............................................................................. 0.4657 0.5925

7460 San Luis Obispo-Atascadero-Paso Robles, CA: San Luis Obispo, CA ......................... 1.0470 1.0320

7480 Santa Barbara-Santa Maria-Lompoc, CA: Santa Barbara, CA ................................... 1.0819 1.0554

7485 Santa Cruz-Watsonville, CA: Santa Cruz, CA .............................................................. 1.3927 1.2546

7490 Santa Fe, NM: Los Alamos, NM; Santa Fe, NM ........................................................... 1.0437 1.0297

7500 Santa Rosa, CA: Sonoma, CA ...................................................................................... 1.3000 1.1968

7510 Sarasota-Bradenton, FL: Manatee, FL; Sarasota, FL ................................................... 0.9905 0.9935

7520 Savannah, GA: Bryan, GA; Chatham, GA; Effingham, GA ........................................... 0.9953 0.9968

7560 Scranton—Wilkes-Barre—Hazleton, PA: 2 Columbia, PA; Lackawanna, PA; Luzerne,

PA; Wyoming, PA ................................................................................................................ 0.8524 0.8964

7600 Seattle-Bellevue-Everett, WA: 1 Island, WA; King, WA; Snohomish, WA ...................... 1.1289 1.0866

7610 Sharon, PA2: Mercer, PA ............................................................................................... 0.8524 0.8964

7620 Sheboygan, WI: 2 Sheboygan, WI .................................................................................. 0.8759 0.9133

7640 Sherman-Denison, TX: Grayson, TX .............................................................................. 0.9329 0.9535

7680 Shreveport-Bossier City, LA: Bossier, LA; Caddo, LA; Webster, LA ............................. 0.9049 0.9339

7720 Sioux City, IA–NE: Woodbury, IA; Dakota, NE .............................................................. 0.8549 0.8982

7760 Sioux Falls, SD: Lincoln, SD; Minnehaha, SD .............................................................. 0.8776 0.9145

7800 South Bend, IN: St. Joseph, IN .................................................................................... 0.9793 0.9858

7840 Spokane, WA: Spokane, WA; ......................................................................................... 1.0799 1.0541

7880 Springfield, IL: Menard, IL; Sangamon, IL ................................................................... 0.8684 0.9079

7920 Springfield, MO: Christian, MO; Greene, MO; Webster, MO ......................................... 0.7991 0.8576

8003 Springfield, MA: 2 Hampden, MA; Hampshire, MA ....................................................... 1.1369 1.0918

8050 State College, PA: Centre, PA ...................................................................................... 0.9138 0.9401

8080 Steubenville-Weirton, OH–WV (OH Hospitals): Jefferson, OH; Brooke, WV; Hancock,

WV ...................................................................................................................................... 0.8649 0.9054

8080 Steubenville-Weirton, OH–WV (WV Hospitals): Jefferson, OH; Brooke, WV; Hancock,

WV ...................................................................................................................................... 0.8614 0.9029

8120 Stockton-Lodi, CA: San Joaquin, CA ............................................................................ 1.0518 1.0352

8140 Sumter, SC: 2 Sumter, SC ............................................................................................ 0.8264 0.8776

8160 Syracuse, NY: Cayuga, NY; Madison, NY; Onondaga, NY; Oswego, NY ...................... 0.9441 0.9614

1125

TABLE D–14.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

URBAN AREAS, FISCAL YEAR 2000—Continued

Urban area (constituent counties) Wage

index GAF

8200 Tacoma, WA: Pierce, WA .............................................................................................. 1.1631 1.1090

8240 Tallahassee, FL: 2 Gadsden, FL; Leon, FL .................................................................... 0.8986 0.9294

8280 Tampa-St. Petersburg-Clearwater, FL: 1 Hernando, FL; Hillsborough, FL; Pasco, FL;

Pinellas, FL ........................................................................................................................ 0.9119 0.9388

8320 Terre Haute, IN: Clay, IN; Vermillion, IN; Vigo, IN ....................................................... 0.8570 0.8997

8360 Texarkana, AR-Texarkana, TX: Miller, AR; Bowie, TX ................................................... 0.8174 0.8710

8400 Toledo, OH: Fulton, OH; Lucas, OH; Wood, OH ............................................................ 0.9593 0.9719

8440 Topeka, KS: Shawnee, KS ............................................................................................. 0.9326 0.9533

8480 Trenton, NJ: Mercer, NJ ................................................................................................ 0.9955 0.9969

8520 Tucson, AZ: Pima, AZ ................................................................................................... 0.8742 0.9120

8560 Tulsa, OK: Creek, OK; Osage, OK; Rogers, OK; Tulsa, OK; Wagoner, OK .................... 0.8086 0.8646

8600 Tuscaloosa, AL: Tuscaloosa, AL ................................................................................... 0.8064 0.8630

8640 Tyler, TX: Smith, TX ...................................................................................................... 0.9369 0.9563

8680 Utica-Rome, NY: 2 Herkimer, NY; Oneida, NY .............................................................. 0.8636 0.9045

8720 Vallejo-Fairfield-Napa, CA: Napa, CA; Solano, CA ...................................................... 1.2655 1.1750

8735 Ventura, CA: Ventura, CA ............................................................................................. 1.0952 1.0643

8750 Victoria, TX: Victoria, TX .............................................................................................. 0.8378 0.8859

8760 Vineland-Millville-Bridgeton, NJ: Cumberland, NJ ....................................................... 1.0517 1.0351

8780 Visalia-Tulare-Porterville, CA: Tulare, CA .................................................................... 1.0411 1.0280

8800 Waco, TX: McLennan, TX .............................................................................................. 0.8075 0.8638

8840 Washington, DC–MD–VA–WV: 1 District of Columbia, DC; Calvert, MD; Charles, MD;

Frederick, MD; Montgomery, MD; Prince Georges, MD; Alexandria City, VA; Arlington,

VA; Clarke, VA; Culpeper, 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 ........................................................................................ 1.1053 1.0710

8920 Waterloo-Cedar Falls, IA: Black Hawk, IA .................................................................... 0.8841 0.9191

8940 Wausau, WI: Marathon, WI ........................................................................................... 0.9445 0.9617

8960 West Palm Beach-Boca Raton, FL: 1 Palm Beach, FL ................................................. 0.9909 0.9938

9000 Wheeling, WV-OH (WV Hospitals): 2 Belmont, OH; Marshall, WV; Ohio, WV ................ 0.8068 0.8633

9000 Wheeling, WV-OH (OH Hospitals): 2 Belmont, OH; Marshall, WV; Ohio, WV ................ 0.8649 0.9054

9040 Wichita, KS: Butler, KS; Harvey, KS; Sedgwick, KS ..................................................... 0.9421 0.9600

9080 Wichita Falls, TX: Archer, TX; Wichita, TX ................................................................... 0.7652 0.8325

9140 Williamsport, PA: 2 Lycoming, PA ................................................................................. 0.8524 0.8964

9160 Wilmington-Newark, DE-MD: New Castle, DE; Cecil, MD ............................................ 1.1274 1.0856

9200 Wilmington, NC: New Hanover, NC; Brunswick, NC .................................................... 0.9707 0.9798

9260 Yakima, WA: 2 Yakima, WA .......................................................................................... 1.0446 1.0303

9270 Yolo, CA: Yolo, CA ........................................................................................................ 1.0485 1.0330

9280 York, PA: York, PA ........................................................................................................ 0.9309 0.9521

9320 Youngstown-Warren, OH: Columbiana, OH; Mahoning, OH; Trumbull, OH .................. 0.9996 0.9997

9340 Yuba City, CA: Sutter, CA; Yuba, CA ........................................................................... 1.0662 1.0449

9360 Yuma, AZ: Yuma, AZ .................................................................................................... 0.9924 0.9948

1 Large urban area.

2 Hospitals geographically located in the area are assigned the statewide rural wage index for fiscal year

2000.

Source: Federal Register, (1999a).

TABLE D–15.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

RURAL AREAS

Nonurban area Wage index GAF

Alabama .............................................................................. 0.7390 0.8129

Alaska ................................................................................. 1.2057 1.1367

Arizona ................................................................................ 0.8544 0.8978

Arkansas ............................................................................. 0.7236 0.8013

California ............................................................................ 0.9951 0.9966

1126

TABLE D–15.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

RURAL AREAS—Continued

Nonurban area Wage index GAF

Colorado .............................................................................. 0.8813 0.9171

Connecticut ......................................................................... 1.2413 1.1595

Delaware ............................................................................. 0.9166 0.9421

Florida ................................................................................. 0.8986 0.9294

Georgia ................................................................................ 0.8094 0.8652

Hawaii ................................................................................. 1.0726 1.0492

Idaho ................................................................................... 0.8651 0.9055

Illinois ................................................................................. 0.8047 0.8617

Indiana ................................................................................ 0.8396 0.8872

Iowa .................................................................................... 0.7926 0.8528

Kansas ................................................................................ 0.7460 0.8182

Kentucky .............................................................................. 0.8043 0.8615

Louisiana ............................................................................ 0.7486 0.8201

Maine .................................................................................. 0.8639 0.9047

Maryland ............................................................................. 0.8631 0.9041

Massachusetts .................................................................... 1.1369 1.0918

Michigan ............................................................................. 0.8831 0.9184

Minnesota ........................................................................... 0.8669 0.9068

Mississippi .......................................................................... 0.7306 0.8066

Missouri .............................................................................. 0.7723 0.8378

Montana .............................................................................. 0.8398 0.8873

Nebraska ............................................................................. 0.8007 0.8588

Nevada ................................................................................ 0.9097 0.9372

New Hampshire ................................................................... 0.9905 0.9935

New Jersey .......................................................................... (1) (1)

New Mexico ......................................................................... 0.8378 0.8859

New York ............................................................................. 0.8636 0.9045

North Carolina .................................................................... 0.8290 0.8795

North Dakota ....................................................................... 0.7647 0.8322

Ohio ..................................................................................... 0.8649 0.9054

Oklahoma ............................................................................ 0.7255 0.8027

Oregon ................................................................................. 0.9873 0.9913

Pennsylvania ....................................................................... 0.8524 0.8964

Puerto Rico ......................................................................... 0.4249 0.5565

Rhode Island ....................................................................... (1) (1)

South Carolina .................................................................... 0.8264 0.8776

South Dakota ...................................................................... 0.7576 0.8269

Tennessee ........................................................................... 0.7650 0.8324

Texas ................................................................................... 0.7471 0.8190

Utah .................................................................................... 0.8906 0.9237

Vermont ............................................................................... 0.9427 0.9604

Virginia ............................................................................... 0.7916 0.8521

Washington ......................................................................... 1.0446 1.0303

West Virginia ...................................................................... 0.8068 0.8633

Wisconsin ............................................................................ 0.8759 0.9133

Wyoming .............................................................................. 0.8859 0.9204

1 All counties within the State are classified as urban.

Source: Federal Register (1999a).

1127

TABLE D–16.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

HOSPITALS THAT ARE RECLASSIFIED, FISCAL YEAR 2000

Area Wage index GAF

Abilene, TX .......................................................................... 0.8179 0.8714

Akron, OH ............................................................................ 0.9981 0.9987

Albany, GA .......................................................................... 0.9544 0.9685

Alexandria, LA ..................................................................... 0.7910 0.8517

Amarillo, TX ........................................................................ 0.8435 0.8900

Anchorage, AK ..................................................................... 1.3009 1.1974

Ann Arbor, MI ...................................................................... 1.1343 1.0901

Atlanta, GA ......................................................................... 1.0050 1.0034

Austin-San Marcos, TX ....................................................... 0.9081 0.9361

Baltimore, MD ..................................................................... 0.9891 0.9925

Baton Rouge, LA ................................................................. 0.8707 0.9095

Beaumont-Port Arthur, TX .................................................. 0.8624 0.9036

Benton Harbor, MI .............................................................. 0.8831 0.9184

Bergen-Passaic, NJ ............................................................. 1.1833 1.1222

Billings, MT ......................................................................... 1.0038 1.0026

Biloxi-Gulfport-Pascagoula, MS .......................................... 0.7949 0.8545

Binghamton, NY .................................................................. 0.8750 0.9126

Birmingham, AL .................................................................. 0.8994 0.9300

Bismarck, ND ...................................................................... 0.7893 0.8504

Boise City, ID ...................................................................... 0.9086 0.9365

Boston-Worcester-Lawrence-Lowell-Brockton, MA–NH ....... 1.1358 1.0911

Burlington, VT ..................................................................... 1.0122 1.0083

Caguas, PR ......................................................................... 0.4561 0.5842

Champaign-Urbana, IL ....................................................... 0.9163 0.9419

Charleston-North Charleston, SC ....................................... 0.8988 0.9295

Charleston, WV ................................................................... 0.8861 0.9205

Charlotte-Gastonia-Rock Hill, NC–SC ................................ 0.9433 0.9608

Chattanooga, TN–GA .......................................................... 0.9453 0.9622

Chicago, IL .......................................................................... 1.0872 1.0589

Cincinnati, OH–KY–IN ......................................................... 0.9434 0.9609

Clarksville-Hopkinsville, TN–KY .......................................... 0.8283 0.8790

Cleveland-Lorain-Elyria, OH ................................................ 0.9688 0.9785

Columbia, MO ..................................................................... 0.8736 0.9116

Columbia, SC ...................................................................... 0.9215 0.9456

Columbus, GA–AL ............................................................... 0.8318 0.8815

Columbus, OH ..................................................................... 0.9728 0.9813

Corpus Christi, TX .............................................................. 0.8599 0.9018

Dallas, TX ........................................................................... 0.9589 0.9717

Danville, VA ........................................................................ 0.8706 0.9095

Davenport-Moline-Rock Island, IA–IL ................................. 0.8606 0.9023

Dayton-Springfield, OH ....................................................... 0.9231 0.9467

Denver, CO .......................................................................... 1.0197 1.0134

Des Moines, IA .................................................................... 0.8754 0.9129

Dothan, AL .......................................................................... 0.7836 0.8462

Dover, DE ............................................................................ 1.0511 1.0347

Duluth-Superior, MN–WI ..................................................... 1.0165 1.0113

Elkhart-Goshen, IN .............................................................. 0.9379 0.9570

Eugene-Springfield, OR ...................................................... 1.0765 1.0518

Evansville-Henderson, IN–KY .............................................. 0.8396 0.8872

1128

TABLE D–16.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

HOSPITALS THAT ARE RECLASSIFIED, FISCAL YEAR 2000—Continued

Area Wage index GAF

Fargo-Moorhead, ND–MN (ND and SD Hospitals) .............. 0.8620 0.9033

Fargo-Moorhead, ND–MN (MN Hospital) ............................ 0.8669 0.9068

Fayetteville, NC ................................................................... 0.8494 0.8942

Flagstaff, AZ–UT ................................................................. 0.9860 0.9904

Flint, MI .............................................................................. 1.0918 1.0620

Fort Collins-Loveland, CO ................................................... 1.0197 1.0134

Fort Pierce-Port St. Lucie, FL ............................................. 1.0109 1.0075

Fort Smith, AR–OK .............................................................. 0.7696 0.8358

Fort Walton Beach, FL ........................................................ 0.8713 0.9100

Fort Worth-Arlington, TX ..................................................... 0.9835 0.9887

Fresno, CA ........................................................................... 1.0262 1.0179

Gadsden, AL ........................................................................ 0.8754 0.9129

Gainesville, FL .................................................................... 0.9963 0.9975

Goldsboro, NC ..................................................................... 0.8333 0.8826

Grand Forks, ND–MN .......................................................... 0.9097 0.9372

Grand Rapids-Muskegon-Holland, MI ................................. 1.0017 1.0012

Great Falls, MT ................................................................... 1.0459 1.0312

Greeley, CO ......................................................................... 0.9449 0.9619

Green Bay, WI ..................................................................... 0.9215 0.9456

Greensboro-Winston-Salem-High Point, NC ........................ 0.9037 0.9330

Greenville, NC ..................................................................... 0.9237 0.9471

Greenville-Spartanburg-Anderson, SC ................................ 0.9188 0.9437

Hagerstown, MD .................................................................. 0.8853 0.9200

Harrisburg-Lebanon-Carlisle, PA ........................................ 0.9793 0.9858

Hartford, CT ........................................................................ 1.1715 1.1145

Hickory-Morganton-Lenoir, NC ............................................ 0.9148 0.9408

Honolulu, HI ........................................................................ 1.1479 1.0991

Houston, TX ......................................................................... 0.9387 0.9576

Huntington-Ashland, WV–KY–OH ........................................ 0.9436 0.9610

Huntsville, AL ...................................................................... 0.8608 0.9024

Indianapolis, IN .................................................................. 0.9792 0.9857

Iowa City, IA ....................................................................... 0.9460 0.9627

Jackson, MS ........................................................................ 0.8268 0.8779

Jackson, TN ......................................................................... 0.8447 0.8909

Jacksonville, FL ................................................................... 0.8957 0.9273

Johnson City-Kingsport-Bristol, TN–VA ............................... 0.8894 0.9229

Jonesboro, AR ...................................................................... 0.7251 0.8024

Joplin, MO ........................................................................... 0.7678 0.8345

Kalamazoo-Battlecreek, MI ................................................. 0.9981 0.9987

Kansas City, KS–MO ........................................................... 0.9322 0.9531

Knoxville, TN ....................................................................... 0.9199 0.9444

Kokomo, IN .......................................................................... 0.8984 0.9293

Lafayette, LA ....................................................................... 0.8397 0.8872

Lansing-East Lansing, MI .................................................. 0.9834 0.9886

Las Vegas, NV–AZ .............................................................. 1.1258 1.0845

Lexington, KY ...................................................................... 0.8552 0.8984

Lima, OH ............................................................................. 0.9108 0.9380

Lincoln, NE .......................................................................... 0.9451 0.9621

Little Rock-North Little Rock, AR ....................................... 0.8432 0.8898

1129

TABLE D–16.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

HOSPITALS THAT ARE RECLASSIFIED, FISCAL YEAR 2000—Continued

Area Wage index GAF

Longview-Marshall, TX ........................................................ 0.8541 0.8976

Los Angeles-Long Beach, CA .............................................. 1.2085 1.1385

Louisville, KY–IN ................................................................. 0.9381 0.9572

Macon, GA ........................................................................... 0.8530 0.8968

Madison, WI ........................................................................ 0.9729 0.9814

Mansfield, OH ..................................................................... 0.8649 0.9054

Memphis, TN–AR–MS ......................................................... 0.8244 0.8761

Merced, CA .......................................................................... 1.0509 1.0346

Milwaukee-Waukesha, WI ................................................... 0.9845 0.9894

Minneapolis-St. Paul, MN–WI ............................................. 1.0929 1.0627

Missoula, MT ....................................................................... 0.9085 0.9364

Monmouth-Ocean, NJ .......................................................... 1.1258 1.0845

Monroe, LA .......................................................................... 0.8062 0.8628

Montgomery, AL .................................................................. 0.7724 0.8379

Myrtle Beach, SC ................................................................ 0.8357 0.8843

Nashville, TN ....................................................................... 0.9254 0.9483

New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT 1.2417 1.1598

New London-Norwich, CT .................................................... 1.2328 1.1541

New Orleans, LA ................................................................. 0.9089 0.9367

New York, NY ...................................................................... 1.4399 1.2836

Newark, NJ .......................................................................... 1.0772 1.0522

Newburgh, NY–PA ............................................................... 1.0837 1.0566

Norfolk-Virginia Beach-Newport News, VA–NC .................. 0.8442 0.8905

Oakland, CA ........................................................................ 1.5095 1.3258

Oklahoma City, OK .............................................................. 0.8589 0.9011

Omaha, NE–IA .................................................................... 1.0455 1.0309

Orange County, CA ............................................................. 1.1592 1.1065

Orlando, FL ......................................................................... 0.9806 0.9867

Peoria-Pekin, IL ................................................................... 0.8399 0.8874

Philadelphia, PA–NJ ............................................................ 1.1186 1.0798

Phoenix-Mesa, AZ ............................................................... 0.9464 0.9630

Pittsburgh, PA ..................................................................... 0.9496 0.9652

Pocatello, ID ........................................................................ 0.8651 0.9055

Portland, ME ....................................................................... 0.9487 0.9646

Portland-Vancouver, OR–WA ............................................... 1.0996 1.0672

Provo-Orem, UT ................................................................... 0.9818 0.9875

Raleigh-Durham-Chapel Hill, NC ....................................... 0.9544 0.9685

Roanoke, VA ........................................................................ 0.8142 0.8687

Rockford, IL ......................................................................... 0.8783 0.9150

Sacramento, CA .................................................................. 1.2284 1.1513

Saginaw-Bay City-Midland, MI ........................................... 0.9294 0.9511

St. Cloud, MN ..................................................................... 0.9608 0.9730

St. Louis, MO–IL ................................................................. 0.9052 0.9341

Salt Lake City-Ogden, UT ................................................... 0.9854 0.9900

San Diego, CA ..................................................................... 1.1955 1.1301

Santa Fe, NM ...................................................................... 0.9911 0.9939

Santa Rosa, CA .................................................................. 1.3000 1.1968

Seattle-Bellevue-Everett, WA .............................................. 1.1289 1.0866

Sharon, PA .......................................................................... 0.8524 0.8964

1130

TABLE D–16.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR

HOSPITALS THAT ARE RECLASSIFIED, FISCAL YEAR 2000—Continued

Area Wage index GAF

Sherman-Denison, TX ......................................................... 0.8833 0.9185

Sioux City, IA–NE ................................................................ 0.8549 0.8982

South Bend, IN ................................................................... 0.9692 0.9788

Springfield, IL ..................................................................... 0.8684 0.9079

Springfield, MO ................................................................... 0.7991 0.8576

Syracuse, NY ....................................................................... 0.9441 0.9614

Tallahassee, FL ................................................................... 0.8274 0.8783

Tampa-St. Petersburg-Clearwater, FL ................................ 0.9119 0.9388

Texarkana, AR-Texarkana, TX ............................................. 0.8174 0.8710

Toledo, OH ........................................................................... 0.9593 0.9719

Topeka, KS .......................................................................... 0.9326 0.9533

Tulsa, OK ............................................................................ 0.7931 0.8532

Tuscaloosa, AL .................................................................... 0.8064 0.8630

Tyler, TX .............................................................................. 0.9199 0.9444

Vallejo-Fairfield-Napa, CA .................................................. 1.2167 1.1438

Victoria, TX ......................................................................... 0.8378 0.8859

Waco, TX ............................................................................. 0.8075 0.8638

Washington, DC–MD–VA–WV .............................................. 1.1053 1.0710

Waterloo-Cedar Falls, IA ..................................................... 0.8841 0.9191

Wausau, WI ......................................................................... 0.9445 0.9617

Wichita, KS ......................................................................... 0.9082 0.9362

Rural Colorado .................................................................... 0.8813 0.9171

Rural Florida ....................................................................... 0.8986 0.9294

Rural Illinois ....................................................................... 0.8047 0.8617

Rural Louisiana .................................................................. 0.7486 0.8201

Rural Michigan ................................................................... 0.8831 0.9184

Rural Minnesota ................................................................. 0.8669 0.9068

Rural Missouri .................................................................... 0.7723 0.8378

Rural Montana .................................................................... 0.8398 0.8873

Rural Oregon ....................................................................... 0.9873 0.9913

Rural Tennessee ................................................................. 0.7650 0.8324

Rural Texas ......................................................................... 0.7471 0.8190

Rural Virginia (KY Hospital) ............................................... 0.8043 0.8615

Rural Washington ............................................................... 1.0333 1.0227

Rural Wyoming .................................................................... 0.8859 0.9204

Source: Federal Register (1999a).

1131

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

1 1 Surg Craniotomy age >17 except for trauma ................ 3.0694 3.0957 0.9

2 1 Surg Craniotomy for trauma age >17 ............................ 3.1113 3.1047 ¥0.2

3 1 Surg 1 Craniotomy age 0–17 ............................................. 1.9493 1.9619 0.6

4 1 Surg Spinal procedures ................................................... 2.3278 2.3205 ¥0.3

5 1 Surg Extracranial vascular procedures ........................... 1.4851 1.4466 ¥2.6

6 1 Surg Carpal tunnel release ............................................. 0.7712 0.8119 5.3

7 1 Surg Peripheral and cranial nerve and other nervous

system proc with CC.

2.3938 2.4986 4.4

8 1 Surg Peripheral and cranial nerve and other nervous

system proc without CC.

1.2901 1.3426 4.1

9 1 Med Spinal disorders and injuries ................................. 1.2873 1.1917 ¥7.4

10 1 Med Nervous system neoplasms with CC ...................... 1.2107 1.2036 ¥0.6

11 1 Med Nervous system neoplasms without CC ................. 0.8245 0.8283 0.5

12 1 Med Degenerative nervous system disorders ................. 0.9030 0.8904 ¥1.4

13 1 Med Multiple sclerosis and cerebellar ataxia ................ 0.7810 0.7599 ¥2.7

14 1 Med Specific cerebrovascular disorders except TIA ....... 1.1955 1.1914 ¥0.3

15 1 Med Transient ischemic attack and precerebral occlusions.0.7314 0.7397 1.1

16 1 Med Nonspecific cerebrovascular disorders with CC ..... 1.0693 1.0985 2.7

17 1 Med Nonspecific cerebrovascular disorders without CC 0.6178 0.6399 3.6

18 1 Med Cranial and peripheral nerve disorders with CC ... 0.9269 0.9353 0.9

19 1 Med Cranial and peripheral nerve disorders without CC 0.6455 0.6503 0.7

20 1 Med Nervous system infection except viral meningitis 2.6102 2.6125 0.1

21 1 Med Viral meningitis ...................................................... 1.4753 1.5032 1.9

22 1 Med Hypertensive encephalopathy .................................. 0.8985 0.9621 7.1

23 1 Med Nontraumatic stupor and coma ............................. 0.7764 0.7746 ¥0.2

24 1 Med Seizure and headache age >17 with CC ............... 0.9577 0.9770 2.0

25 1 Med Seizure and headache age >17 without CC .......... 0.5893 0.5911 0.3

26 1 Med Seizure and headache age 0–17 ........................... 0.7277 0.6337 ¥12.9

27 1 Med Traumatic stupor and coma, coma >1 hr ............. 1.3130 1.3581 3.4

28 1 Med Traumatic stupor and coma, coma <1 hr age

>17 with CC.

1.1700 1.2690 8.5

29 1 Med Traumatic stupor and coma, coma <1 hr age

>17 without CC.

0.6377 0.6859 7.6

30 1 Med 1 Traumatic stupor and coma, coma <1 hr age 0–

17.

0.3297 0.3318 0.6

31 1 Med Concussion age >17 with CC ................................ 0.8105 0.8497 4.8

32 1 Med Concussion age >17 without CC ........................... 0.5158 0.5295 2.7

33 1 Med 1 Concussion age 0–17 ............................................. 0.2072 0.2085 0.6

34 1 Med Other disorders of nervous system with CC .......... 1.0091 1.0275 1.8

35 1 Med Other disorders of nervous system without CC ..... 0.5907 0.5937 0.5

36 2 Surg Retinal procedures .................................................. 0.6891 0.6834 ¥0.8

37 2 Surg Orbital procedures .................................................. 0.9637 1.0318 7.1

38 2 Surg Primary iris procedures ........................................... 0.4841 0.4875 0.7

39 2 Surg Lens procedures with or without vitrectomy .......... 0.5697 0.5704 0.1

40 2 Surg Extraocular procedures except orbit age >17 ........ 0.7895 0.8170 3.5

41 2 Surg 1 Extraocular procedures except orbit age 0–17 ...... 0.3356 0.3378 0.7

42 2 Surg Intraocular procedures except retina, iris and lens 0.6030 0.6236 3.4

43 2 Med Hyphema ................................................................. 0.4371 0.4515 3.3

44 2 Med Acute major eye infections ..................................... 0.6090 0.6496 6.7

45 2 Med Neurological eye disorders ...................................... 0.6814 0.6941 1.9

46 2 Med Other disorders of the eye age >17 with CC ........ 0.7521 0.7525 0.1

47 2 Med Other disorders of the eye age >17 without CC ... 0.4617 0.4784 3.6

48 2 Med 1 Other disorders of the eye age 0–17 ..................... 0.2956 0.2975 0.6

49 3 Surg Major head and neck procedures ........................... 1.7567 1.8557 5.6

50 3 Surg Sialoadenectomy ..................................................... 0.8283 0.8401 1.4

51 3 Surg Salivary gland procedures except sialoadenectomy 0.8601 0.8504 ¥1.1

52 3 Surg Cleft lip and palate repair ..................................... 0.8614 0.7696 ¥10.7

1132

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

53 3 Surg Sinus and mastoid procedures age >17 ............... 1.1432 1.1784 3.1

54 3 Surg 1 Sinus and mastoid procedures age 0–17 .............. 0.4792 0.4823 0.6

55 3 Surg Miscellaneous ear, nose, mouth and throat procedures.0.8952 0.8686 ¥3.0

56 3 Surg Rhinoplasty ............................................................. 0.9008 0.8893 ¥1.3

57 3 Surg T&A proc, except tonsillectomy and/or

adenoidectomy only, age >17.

0.8876 1.1589 30.6

58 3 Surg 1 T&A proc, except tonsillectomy and/or

adenoidectomy only, age 0–17.

0.2721 0.2739 0.7

59 3 Surg Tonsillectomy and/or adenoidectomy only, age

>17.

0.6700 0.6720 0.3

60 3 Surg 1 Tonsillectomy and/or adenoidectomy only, age 0–

17.

0.2073 0.2086 0.6

61 3 Surg Myringotomy with tube insertion age >17 ............. 1.1586 1.2597 8.7

62 3 Surg 1 Myringotomy with tube insertion age 0–17 ........... 0.2934 0.2953 0.6

63 3 Surg Other ear, nose, mouth and throat O.R. procedures.1.3283 1.3136 ¥1.1

64 3 Med Ear, nose, mouth and throat malignancy .............. 1.2177 1.2464 2.4

65 3 Med Dysequilibrium ........................................................ 0.5162 0.5261 1.9

66 3 Med Epistaxis .................................................................. 0.5402 0.5548 2.7

67 3 Med Epiglottitis ............................................................... 0.8230 0.8031 ¥2.4

68 3 Med Otitis media and uri age >17 with CC ................. 0.6699 0.6758 0.9

69 3 Med Otitis media and uri age >17 without CC ............ 0.5053 0.5191 2.7

70 3 Med Otitis media and uri age 0–17 .............................. 0.3841 0.3985 3.7

71 3 Med Laryngotracheitis ..................................................... 0.7630 0.6136 ¥19.6

72 3 Med Nasal trauma and deformity .................................. 0.6524 0.6462 ¥1.0

73 3 Med Other ear, nose, mouth and throat diagnoses age

>17.

0.7504 0.7667 2.2

74 3 Med 1 Other ear, nose, mouth and throat diagnoses age

0–17.

0.3334 0.3356 0.7

75 4 Surg Major chest procedures .......................................... 3.1811 3.1107 ¥2.2

76 4 Surg Other respiratory system O.R. procedures with CC 2.6876 2.7208 1.2

77 4 Surg Other respiratory system O.R. procedures without

CC.

1.1565 1.2113 4.7

78 4 Med Pulmonary embolism ............................................... 1.4047 1.3861 ¥1.3

79 4 Med Respiratory infections and inflammations age

>17 with CC.

1.6309 1.6439 0.8

80 4 Med Respiratory infections and inflammations age

>17 without CC.

0.9147 0.8980 ¥1.8

81 4 Med 1 Respiratory infections and inflammations age 0–

17.

1.5098 1.5196 0.6

82 4 Med Respiratory neoplasms ............................................ 1.3606 1.3656 0.4

83 4 Med Major chest trauma with CC .................................. 0.9544 0.9796 2.6

84 4 Med Major chest trauma without CC ............................. 0.5068 0.5278 4.1

85 4 Med Pleural effusion with CC ........................................ 1.2351 1.2421 0.6

86 4 Med Pleural effusion without CC ................................... 0.6835 0.6724 ¥1.6

87 4 Med Pulmonary edema and respiratory failure .............. 1.3650 1.3694 0.3

88 4 Med Chronic obstructive pulmonary disease ................. 0.9530 0.9406 ¥1.3

89 4 Med Simple pneumonia and pleurisy age >17 with CC 1.0838 1.0855 0.2

90 4 Med Simple pneumonia and pleurisy age >17 without

CC.

0.6644 0.6734 1.4

91 4 Med Simple pneumonia and pleurisy age 0–17 ............ 0.7209 0.6334 ¥12.1

92 4 Med Interstitial lung disease with CC ........................... 1.2042 1.1786 ¥2.1

93 4 Med Interstitial lung disease without CC ...................... 0.7711 0.7644 ¥0.9

94 4 Med Pneumothorax with CC ........................................... 1.1879 1.1910 0.3

95 4 Med Pneumothorax without CC ...................................... 0.6042 0.5944 ¥1.6

96 4 Med Bronchitis and asthma age >17 with CC ............. 0.7891 0.7943 0.7

97 4 Med Bronchitis and asthma age >17 without CC ........ 0.5919 0.5954 0.6

1133

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

98 4 Med Bronchitis and asthma age 0–17 .......................... 0.6953 0.6859 ¥1.4

99 4 Med Respiratory signs and symptoms with CC ............. 0.6738 0.6817 1.2

100 4 Med Respiratory signs and symptoms without CC ........ 0.5150 0.5268 2.3

101 4 Med Other respiratory system diagnoses with CC ......... 0.8292 0.8490 2.4

102 4 Med Other respiratory system diagnoses without CC .... 0.5395 0.5349 ¥0.9

103 5 Surg Heart transplant ..................................................... 17.7902 19.5100 9.7

104 5 Surg Cardiac valve and other major cardiothoracic proc

with cardiac cath.

7.2824 7.2361 ¥0.6

105 5 Surg Cardiac valve and other major cardiothoracic proc

without cardiac cath.

5.7099 5.6607 ¥0.9

106 5 Surg Coronary bypass with PTCA .................................... 7.3690 7.3334 ¥0.5

107 5 Surg Coronary bypass with cardiac cath ........................ 5.5030 5.4639 ¥0.7

108 5 Surg Other cardiothoracic procedures ............................. 5.9764 5.7715 ¥3.4

109 5 Surg Coronary bypass without PTCA or cardiac cath ..... 4.0718 4.0403 ¥0.8

110 5 Surg Major cardiovascular procedures with CC ............. 4.1500 4.1600 0.2

111 5 Surg Major cardiovascular procedures without CC ........ 2.2199 2.2267 0.3

112 5 Surg Percutaneous cardiovascular procedures ............... 1.9893 1.9222 ¥3.4

113 5 Surg Amputation for circulatory system disorders except upper limb and toe.2.7389 2.7283 ¥0.4

114 5 Surg Upper limb and toe amputation for circulatory

system disorders.

1.5077 1.5555 3.2

115 5 Surg Permanent cardiac pacemaker implant with ami,

heart failure or shock, or AICD lead or generator proc.

3.5558 3.4727 ¥2.3

116 5 Surg Other permanent cardiac pacemaker implant or

PTCA with coronary artery stent implant.

2.4833 2.4651 ¥0.7

117 5 Surg Cardiac pacemaker revision except device replacement.1.2372 1.2931 4.5

118 5 Surg Cardiac pacemaker device replacement ................ 1.5716 1.5480 ¥1.5

119 5 Surg Vein ligation and stripping .................................... 1.3076 1.2297 ¥6.0

120 5 Surg Other circulatory system O.R. procedures .............. 1.9630 2.0136 2.6

121 5 Med Circulatory disorders with AMI and major comp,

discharged alive.

1.6334 1.6295 ¥0.2

122 5 Med Circulatory disorders with AMI without major

comp, discharged alive.

1.1286 1.1063 ¥2.0

123 5 Med Circulatory disorders with AMI, expired .................. 1.4848 1.5108 1.8

124 5 Med Circulatory disorders except AMI, with cardiac

cath and complex diag.

1.3793 1.4020 1.6

125 5 Med Circulatory disorders except AMI, with cardiac

cath without complex diag.

1.0134 1.0436 3.0

126 5 Med Acute and subacute endocarditis ........................... 2.5837 2.5170 ¥2.6

127 5 Med Heart failure and shock .......................................... 1.0131 1.0144 0.1

128 5 Med Deep vein thrombophlebitis .................................... 0.7641 0.7645 0.1

129 5 Med Cardiac arrest, unexplained ................................... 1.0898 1.0770 ¥1.2

130 5 Med Peripheral vascular disorders with CC ................... 0.9427 0.9469 0.4

131 5 Med Peripheral vascular disorders without CC .............. 0.6067 0.6050 ¥0.3

132 5 Med Atherosclerosis with CC .......................................... 0.6698 0.6713 0.2

133 5 Med Atherosclerosis without CC ..................................... 0.5556 0.5675 2.1

134 5 Med Hypertension ............................................................ 0.5823 0.5846 0.4

135 5 Med Cardiac congenital and valvular disorders age

>17 with CC.

0.8543 0.8704 1.9

136 5 Med Cardiac congenital and valvular disorders age

>17 without CC.

0.5735 0.6004 4.7

137 5 Med 1 Cardiac congenital and valvular disorders age 0–

17.

0.8135 0.8188 0.7

138 5 Med Cardiac arrhythmia and conduction disorders with

CC.

0.7999 0.8154 1.9

1134

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

139 5 Med Cardiac arrhythmia and conduction disorders

without CC.

0.4977 0.5079 2.0

140 5 Med Angina pectoris ....................................................... 0.5957 0.5829 ¥2.1

141 5 Med Syncope and collapse with CC ............................... 0.7022 0.7091 1.0

142 5 Med Syncope and collapse without CC .......................... 0.5312 0.5419 2.0

143 5 Med Chest pain .............................................................. 0.5263 0.5342 1.5

144 5 Med Other circulatory system diagnoses with CC ......... 1.1122 1.1526 3.6

145 5 Med Other circulatory system diagnoses without CC .... 0.6316 0.6497 2.9

146 6 Surg Rectal resection with CC ........................................ 2.2175 2.7862 25.6

147 6 Surg Rectal resection without CC ................................... 1.5890 1.6382 3.1

148 6 Surg Major small and large bowel procedures with CC 3.4231 3.4289 0.2

149 6 Surg Major small and large bowel procedures without

CC.

1.5692 1.5723 0.2

150 6 Surg Peritoneal adhesiolysis with CC ............................. 2.7419 2.8098 2.5

151 6 Surg Peritoneal adhesiolysis without CC ........................ 1.2808 1.3437 4.9

152 6 Surg Minor small and large bowel procedures with CC 1.9406 1.9606 1.0

153 6 Surg Minor small and large bowel procedures without

CC.

1.1925 1.2170 2.1

154 6 Surg Stomach, esophageal and duodenal procedures

age >17 with CC.

4.1847 4.1335 ¥1.2

155 6 Surg Stomach, esophageal and duodenal procedures

age >17 without CC.

1.3541 1.3781 1.8

156 6 Surg 1 Stomach, esophageal and duodenal procedures

age 0–17.

0.8378 0.8432 0.6

157 6 Surg Anal and stomal procedures with CC .................... 1.2082 1.2392 2.6

158 6 Surg Anal and stomal procedures without CC ............... 0.6416 0.6561 2.3

159 6 Surg Hernia procedures except inguinal and femoral

age >17 with CC.

1.2878 1.3097 1.7

160 6 Surg Hernia procedures except inguinal and femoral

age >17 without CC.

0.7411 0.7801 5.3

161 6 Surg Inguinal and femoral hernia procedures age >17

with CC.

1.0710 1.0976 2.5

162 6 Surg Inguinal and femoral hernia procedures age >17

without CC.

0.6108 0.6283 2.9

163 6 Surg 1 Hernia procedures age 0–17 .................................. 0.8664 0.8720 0.6

164 6 Surg Appendectomy with complicated principal diag

with CC.

2.3212 2.3463 1.1

165 6 Surg Appendectomy with complicated principal diag

without CC.

1.2269 1.2655 3.1

166 6 Surg Appendectomy without complicated principal diag

with CC.

1.4446 1.4788 2.4

167 6 Surg Appendectomy without complicated principal diag

without CC.

0.8522 0.8995 5.6

168 3 Surg Mouth procedures with CC ..................................... 1.1642 1.2039 3.4

169 3 Surg Mouth procedures without CC ................................ 0.7219 0.7492 3.8

170 6 Surg Other digestive system O.R. procedures with CC .. 2.8030 2.8435 1.4

171 6 Surg Other digestive system O.R. procedures without

CC.

1.1658 1.2556 7.7

172 6 Med Digestive malignancy with CC ............................... 1.3143 1.3144 0.0

173 6 Med Digestive malignancy without CC .......................... 0.7320 0.7123 ¥2.7

174 6 Med Gastrointestinal hemorrhage with CC .................... 0.9933 0.9981 0.5

175 6 Med Gastrointestinal hemorrhage without CC ............... 0.5298 0.5456 3.0

176 6 Med Complicated peptic ulcer ........................................ 1.1053 1.0968 ¥0.8

177 6 Med Uncomplicated peptic ulcer with CC ...................... 0.8614 0.8802 2.2

178 6 Med Uncomplicated peptic ulcer without CC ................. 0.6317 0.6502 2.9

179 6 Med Inflammatory bowel disease ................................... 1.1054 1.0869 ¥1.7

180 6 Med Gastrointestinal obstruction with CC ..................... 0.9174 0.9206 0.3

181 6 Med Gastrointestinal obstruction without CC ................ 0.5259 0.5277 0.3

1135

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

182 6 Med Esophagitis, gastroent and misc digestive disorders age >17 with CC.0.7690 0.7821 1.7

183 6 Med Esophagitis, gastroent and misc digestive disorders age >17 without CC.0.5577 0.5710 2.4

184 6 Med Esophagitis, gastroent and misc digestive disorders age 0–17.0.5457 0.5286 ¥3.1

185 3 Med Dental and oral dis except extractions and restorations, age >17.0.8292 0.8593 3.6

186 3 Med 1 Dental and oral dis except extractions and restorations, age 0–17.0.3193 0.3214 0.7

187 3 Med Dental extractions and restorations ....................... 0.7385 0.7790 5.5

188 6 Med Other digestive system diagnoses age >17 with

CC.

1.0758 1.0942 1.7

189 6 Med Other digestive system diagnoses age >17 without CC.0.5593 0.5831 4.3

190 6 Med Other digestive system diagnoses age 0–17 ......... 0.7519 1.0011 33.1

191 7 Surg Pancreas, liver and shunt procedures with CC ..... 4.4345 4.3837 ¥1.1

192 7 Surg Pancreas, liver and shunt procedures without CC 1.7253 1.8454 7.0

193 7 Surg Biliary tract proc except only cholecystectomy with

or without C.D.E. with CC.

3.3276 3.4161 2.7

194 7 Surg Biliary tract proc except only cholecystectomy with

or without C.D.E. without CC.

1.6646 1.6401 ¥1.5

195 7 Surg Cholecystectomy with C.D.E. with CC .................... 2.7888 2.9359 5.3

196 7 Surg Cholecystectomy with C.D.E. without CC ............... 1.6357 1.6554 1.2

197 7 Surg Cholecystectomy except by laparoscope without

C.D.E. with CC.

2.3845 2.4183 1.4

198 7 Surg Cholecystectomy except by laparoscope without

C.D.E. without CC.

1.1996 1.2324 2.7

199 7 Surg Hepatobiliary diagnostic procedure for malignancy 2.3865 2.3317 ¥2.3

200 7 Surg Hepatobiliary diagnostic procedure for nonmalignancy.3.2800 3.0708 ¥6.4

201 7 Surg Other hepatobiliary or pancreas O.R. procedures .. 3.6053 3.5838 ¥0.6

202 7 Med Cirrhosis and alcoholic hepatitis ........................... 1.3158 1.3188 0.2

203 7 Med Malignancy of hepatobiliary system or pancreas .. 1.3000 1.3046 0.4

204 7 Med Disorders of pancreas except malignancy ............. 1.2122 1.2161 0.3

205 7 Med Disorders of liver except malig, cirr, alc hepa

with CC.

1.2127 1.1816 ¥2.6

206 7 Med Disorders of liver except malig, cirr, alc hepa

without CC.

0.6947 0.7163 3.1

207 7 Med Disorders of the biliary tract with CC .................... 1.0695 1.1013 3.0

208 7 Med Disorders of the biliary tract without CC ............... 0.6169 0.6455 4.6

209 8 Surg Major joint and limb reattachment procedures of

lower extremity.

2.1803 2.1175 ¥2.9

210 8 Surg Hip and femur procedures except major joint age

>17 with CC.

1.8128 1.8028 ¥0.6

211 8 Surg Hip and femur procedures except major joint age

>17 without CC.

1.2505 1.2609 0.8

212 8 Surg 1 Hip and femur procedures except major joint age

0–17.

0.8413 0.8468 0.7

213 8 Surg Amputation for musculoskeletal system and connective tissue disorders.1.6383 1.7130 4.6

214 8 Surg No longer valid.

215 8 Surg No longer valid.

216 8 Surg Biopsies of musculoskeletal system and connective tissue.2.1275 2.1400 0.6

217 8 Surg Wound debrid and skin graft except hand, for

musculoskeletal and connective tissue disorders.

2.7944 2.8006 0.2

1136

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

218 8 Surg Lower extrem and humer proc except hip, foot,

femur age >17 with CC.

1.4641 1.4900 1.8

219 8 Surg Lower extrem and humer proc except hip, foot,

femur age >17 without CC.

0.9924 1.0117 1.9

220 8 Surg 1 Lower extrem and humer proc except hip, foot,

femur age 0–17.

0.5803 0.5841 0.7

221 8 Surg No longer valid.

222 8 Surg No longer valid.

223 8 Surg Major shoulder/elbow proc, or other upper extremity proc with CC.0.9255 0.9378 1.3

224 8 Surg Shoulder, elbow or forearm proc, except major

joint proc, without CC.

0.7871 0.8042 2.2

225 8 Surg Foot procedures ....................................................... 1.0122 1.0518 3.9

226 8 Surg Soft tissue procedures with CC .............................. 1.4081 1.4383 2.1

227 8 Surg Soft tissue procedures without CC ......................... 0.7922 0.8181 3.3

228 8 Surg Major thumb or joint proc, or other hand or wrist

proc with CC.

1.0038 1.0516 4.8

229 8 Surg Hand or wrist proc, except major joint proc, without CC.0.7058 0.7348 4.1

230 8 Surg Local excision and removal of int fix devices of

hip and femur.

1.1072 1.1722 5.9

231 8 Surg Local excision and removal of int fix devices except hip and femur.1.2923 1.3623 5.4

232 8 Surg Arthroscopy .............................................................. 1.0892 1.1567 6.2

233 8 Surg Other musculoskeletal system and connective tissue O.R. proc with CC.2.0628 2.0424 ¥1.0

234 8 Surg Other musculoskeletal system and connective tissue O.R. proc without CC.1.1731 1.2450 6.1

235 8 Med Fractures of femur .................................................. 0.7524 0.7479 ¥0.6

236 8 Med Fractures of hip and pelvis .................................... 0.7243 0.7157 ¥1.2

237 8 Med Sprains, strains, and dislocations of hip, pelvis

and thigh.

0.5384 0.5451 1.2

238 8 Med Osteomyelitis ........................................................... 1.3409 1.2831 ¥4.3

239 8 Med Pathological fractures and musculoskeletal and

connective tissue malignancy.

0.9653 0.9660 0.1

240 8 Med Connective tissue disorders with CC ..................... 1.2252 1.2328 0.6

241 8 Med Connective tissue disorders without CC ................ 0.5903 0.6089 3.2

242 8 Med Septic arthritis ........................................................ 1.0371 1.0168 ¥2.0

243 8 Med Medical back problems ........................................... 0.7142 0.7164 0.3

244 8 Med Bone diseases and specific arthropathies with CC 0.7048 0.7024 ¥0.3

245 8 Med Bone diseases and specific arthropathies without

CC.

0.4939 0.4801 ¥2.8

246 8 Med Nonspecific arthropathies ....................................... 0.5647 0.5545 ¥1.8

247 8 Med Signs and symptoms of musculoskeletal system

and connective tissue.

0.5534 0.5563 0.5

248 8 Med Tendonitis, myositis and bursitis ........................... 0.7445 0.7554 1.5

249 8 Med Aftercare, musculoskeletal system and connective

tissue.

0.6520 0.6504 ¥0.2

250 8 Med FX, sprn, strn and disl of forearm, hand, foot age

>17 with CC.

0.6752 0.6700 ¥0.8

251 8 Med FX, sprn, strn and disl of forearm, hand, foot age

>17 without CC.

0.4621 0.4608 ¥0.3

252 8 Med 1 FX, sprn, strn and disl of forearm, hand, foot age

0–17.

0.2521 0.2537 0.6

253 8 Med FX, sprn, strn and disl of uparm, lowleg ex foot

age >17 with CC.

0.7181 0.7261 1.1

254 8 Med FX, sprn, strn and disl of uparm, lowleg ex foot

age >17 without CC.

0.4309 0.4339 0.7

1137

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

255 8 Med 1 FX, sprn, strn and disl of uparm, lowleg ex foot

age 0–17.

0.2935 0.2954 0.6

256 8 Med Other musculoskeletal system and connective tissue diagnoses.0.7583 0.7687 1.4

257 9 Surg Total mastectomy for malignancy with CC ............ 0.9198 0.9134 ¥0.7

258 9 Surg Total mastectomy for malignancy without CC ....... 0.7228 0.7227 0.0

259 9 Surg Subtotal mastectomy for malignancy with CC ...... 0.8837 0.8673 ¥1.9

260 9 Surg Subtotal mastectomy for malignancy without CC 0.6241 0.6444 3.3

261 9 Surg Breast proc for nonmalignancy except biopsy and

local excision.

0.9131 0.9188 0.6

262 9 Surg Breast biopsy and local excision for nonmalignancy.0.8729 0.8392 ¥3.9

263 9 Surg Skin graft and/or debrid for skin ulcer or cellulitis

with CC.

2.0064 2.0609 2.7

264 9 Surg Skin graft and/or debrid for skin ulcer or cellulitis

without CC.

1.1090 1.1216 1.1

265 9 Surg Skin graft and/or debrid except for skin ulcer or

cellulitis with CC.

1.4796 1.5650 5.8

266 9 Surg Skin graft and/or debrid except for skin ulcer or

cellulitis without CC.

0.8262 0.8495 2.8

267 9 Surg Perianal and pilonidal procedures ......................... 0.9293 0.9815 5.6

268 9 Surg Skin, subcutaneous tissue and breast plastic procedures.1.0669 1.1979 12.3

269 9 Surg Other skin, subcut tissue and breast proc with

CC.

1.5798 1.6147 2.2

270 9 Surg Other skin, subcut tissue and breast proc without

CC.

0.7206 0.7447 3.3

271 9 Med Skin ulcers .............................................................. 1.0007 0.9905 ¥1.0

272 9 Med Major skin disorders with CC ................................. 1.0421 1.0003 ¥4.0

273 9 Med Major skin disorders without CC ............................ 0.6260 0.6275 0.2

274 9 Med Malignant breast disorders with CC ...................... 1.1119 1.1335 1.9

275 9 Med Malignant breast disorders without CC ................. 0.5305 0.6322 19.2

276 9 Med Nonmalignant breast disorders .............................. 0.6407 0.6529 1.9

277 9 Med Cellulitis age >17 with CC .................................... 0.8342 0.8312 ¥0.4

278 9 Med Cellulitis age >17 without CC ............................... 0.5548 0.5621 1.3

279 9 Med Cellulitis age 0–17 ................................................. 0.6657 0.6641 ¥0.2

280 9 Med Trauma to the skin, subcut tissue and breast age

>17 with CC.

0.6628 0.6736 1.6

281 9 Med Trauma to the skin, subcut tissue and breast age

>17 without CC.

0.4535 0.4596 1.3

282 9 Med 1 Trauma to the skin, subcut tissue and breast age

0–17.

0.2552 0.2569 0.7

283 9 Med Minor skin disorders with CC ................................. 0.6938 0.7129 2.8

284 9 Med Minor skin disorders without CC ............................ 0.4399 0.4373 ¥0.6

285 10 Surg Amputation of lower limb for endocrine, nutrit,

and metabolic disorders.

2.0425 2.0217 ¥1.0

286 10 Surg Adrenal and pituitary procedures ........................... 2.2199 2.2287 0.4

287 10 Surg Skin grafts and wound debrid for endocrine,

nutrit and metabolic disorders.

1.8591 1.8045 ¥2.9

288 10 Surg O.R. procedures for obesity .................................... 2.0227 2.0665 2.2

289 10 Surg Parathyroid procedures ........................................... 1.0117 0.9756 ¥3.6

290 10 Surg Thyroid procedures .................................................. 0.9166 0.9174 0.1

291 10 Surg Thyroglossal procedures .......................................... 0.5772 0.6732 16.6

292 10 Surg Other endocrine, nutrit and metabolic O.R. proc

with CC.

2.5980 2.4719 ¥4.9

293 10 Surg Other endocrine, nutrit and metabolic O.R. proc

without CC.

1.2794 1.1942 ¥6.7

294 10 Med Diabetes age >35 ................................................... 0.7478 0.7518 0.5

1138

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

295 10 Med Diabetes age 0–35 ................................................. 0.7242 0.7464 3.1

296 10 Med Nutritional and misc metabolic disorders age >17

with CC.

0.8497 0.8556 0.7

297 10 Med Nutritional and misc metabolic disorders age >17

without CC.

0.5202 0.5204 0.0

298 10 Med Nutritional and misc metabolic disorders age 0–

17.

0.5262 0.4954 ¥5.9

299 10 Med Inborn errors of metabolism ................................... 0.8800 0.9475 7.7

300 10 Med Endocrine disorders with CC .................................. 1.0801 1.0779 ¥0.2

301 10 Med Endocrine disorders without CC ............................. 0.6020 0.5889 ¥2.2

302 11 Surg Kidney transplant .................................................... 3.6406 3.5669 ¥2.0

303 11 Surg Kidney, ureter and major bladder procedures for

neoplasm.

2.6597 2.5401 ¥4.5

304 11 Surg Kidney, ureter and major bladder proc for nonneoplasm with CC.2.3361 2.3458 0.4

305 11 Surg Kidney, ureter and major bladder proc for nonneoplasm without CC.1.1341 1.1857 4.5

306 11 Surg Prostatectomy with CC ........................................... 1.2401 1.2448 0.4

307 11 Surg Prostatectomy without CC ...................................... 0.6410 0.6588 2.8

308 11 Surg Minor bladder procedures with CC ......................... 1.5166 1.5907 4.9

309 11 Surg Minor bladder procedures without CC .................... 0.9076 0.9442 4.0

310 11 Surg Transurethral procedures with CC .......................... 1.0629 1.0869 2.3

311 11 Surg Transurethral procedures without CC ..................... 0.6073 0.6126 0.9

312 11 Surg Urethral procedures, age >17 with CC .................. 0.9877 1.0270 4.0

313 11 Surg Urethral procedures, age >17 without CC ............. 0.6286 0.6640 5.6

314 11 Surg 1 Urethral procedures, age 0–17 .............................. 0.4918 0.4950 0.7

315 11 Surg Other kidney and urinary tract O.R. procedures .... 2.0703 2.0660 ¥0.2

316 11 Med Renal failure ........................................................... 1.3315 1.3380 0.5

317 11 Med Admit for renal dialysis .......................................... 0.6140 0.6965 13.4

318 11 Med Kidney and urinary tract neoplasms with CC ........ 1.0921 1.1413 4.5

319 11 Med Kidney and urinary tract neoplasms without CC ... 0.6150 0.6187 0.6

320 11 Med Kidney and urinary tract infections age >17 with

CC.

0.8665 0.8647 ¥0.2

321 11 Med Kidney and urinary tract infections age >17 without CC.

0.5808 0.5785 ¥0.4

322 11 Med Kidney and urinary tract infections age 0–17 ....... 0.5406 0.5606 3.7

323 11 Med Urinary stones with CC, and/or ESW lithotripsy .... 0.7658 0.7816 2.1

324 11 Med Urinary stones without CC ...................................... 0.4346 0.4475 3.0

325 11 Med Kidney and urinary tract signs and symptoms age

>17 with CC.

0.6236 0.6287 0.8

326 11 Med Kidney and urinary tract signs and symptoms age

>17 without CC.

0.4200 0.4203 0.1

327 11 Med 1 Kidney and urinary tract signs and symptoms age

0–17.

0.3518 0.3541 0.7

328 11 Med Urethral stricture age >17 with CC ....................... 0.7176 0.7024 ¥2.1

329 11 Med Urethral stricture age >17 without CC .................. 0.4918 0.5172 5.2

330 11 Med 1 Urethral stricture age 0–17 ................................... 0.3168 0.3189 0.7

331 11 Med Other kidney and urinary tract diagnoses age >17

with CC.

0.9952 1.0157 2.1

332 11 Med Other kidney and urinary tract diagnoses age >17

without CC.

0.6235 0.6104 ¥2.1

333 11 Med Other kidney and urinary tract diagnoses age 0–

17.

0.7757 0.7642 ¥1.5

334 12 Surg Major male pelvic procedures with CC .................. 1.5975 1.5864 ¥0.7

335 12 Surg Major male pelvic procedures without CC ............. 1.2056 1.1911 ¥1.2

336 12 Surg Transurethral prostatectomy with CC ..................... 0.8856 0.8965 1.2

337 12 Surg Transurethral prostatectomy without CC ................ 0.6176 0.6229 0.9

338 12 Surg Testes procedures, for malignancy ......................... 1.0867 1.1552 6.3

1139

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

339 12 Surg Testes procedures, nonmalignancy age >17 ......... 0.9822 1.0600 7.9

340 12 Surg 1 Testes procedures, nonmalignancy age 0–17 ........ 0.2816 0.2834 0.6

341 12 Surg Penis procedures ..................................................... 1.1194 1.1141 ¥0.5

342 12 Surg Circumcision age >17 ............................................ 0.8555 0.8601 0.5

343 12 Surg 1 Circumcision age 0–17 .......................................... 0.1530 0.1540 0.7

344 12 Surg Other male reproductive system O.R. procedures

for malignancy.

1.0414 1.1025 5.9

345 12 Surg Other male reproductive system O.R. proc except

for malignancy.

0.8646 0.8816 2.0

346 12 Med Malignancy, male reproductive system, with CC ... 0.9494 0.9645 1.6

347 12 Med Malignancy, male reproductive system, without

CC.

0.5620 0.5828 3.7

348 12 Med Benign prostatic hypertrophy with CC ................... 0.6892 0.6983 1.3

349 12 Med Benign prostatic hypertrophy without CC .............. 0.4090 0.4345 6.2

350 12 Med Inflammation of the male reproductive system ..... 0.6918 0.6957 0.6

351 12 Med 1 Sterilization, male ................................................... 0.2348 0.2363 0.6

352 12 Med Other male reproductive system diagnoses ........... 0.6251 0.6769 8.3

353 13 Surg Pelvic evisceration, radical hysterectomy and radical vulvectomy.1.9235 1.9721 2.5

354 13 Surg Uterine, adnexa proc for nonovarian/adnexal

malig with CC.

1.4953 1.5134 1.2

355 13 Surg Uterine, adnexa proc for nonovarian/adnexal

malig without CC.

0.9322 0.9477 1.7

356 13 Surg Female reproductive system reconstructive procedures.0.7863 0.7916 0.7

357 13 Surg Uterine and adnexa proc for ovarian or adnexal

malignancy.

2.4429 2.3699 ¥3.0

358 13 Surg Uterine and adnexa proc for nonmalignancy with

CC.

1.2111 1.2357 2.0

359 13 Surg Uterine and adnexa proc for nonmalignancy without CC.0.8663 0.8699 0.4

360 13 Surg Vagina, cervix and vulva procedures ..................... 0.8902 0.8823 ¥0.9

361 13 Surg Laparoscopy and incisional tubal interruption ...... 1.2051 1.1894 ¥1.3

362 13 Surg 1 Endoscopic tubal interruption ................................ 0.3001 0.3020 0.6

363 13 Surg D&C, conization and radio-implant, for malignancy.0.7498 0.7807 4.1

364 13 Surg D&C, conization except for malignancy ................. 0.7280 0.7601 4.4

365 13 Surg Other female reproductive system O.R. procedures 1.7421 1.8299 5.0

366 13 Med Malignancy, female reproductive system with CC 1.1912 1.2474 4.7

367 13 Med Malignancy, female reproductive system without

CC.

0.5640 0.5509 ¥2.3

368 13 Med Infections, female reproductive system .................. 1.0544 1.0499 ¥0.4

369 13 Med Menstrual and other female reproductive system

disorders.

0.5257 0.5526 5.1

370 14 Surg Cesarean section with CC ...................................... 1.0501 1.0974 4.5

371 14 Surg Cesarean section without CC ................................. 0.7161 0.7212 0.7

372 14 Med Vaginal delivery with complicating diagnoses ....... 0.5716 0.5920 3.6

373 14 Med Vaginal delivery without complicating diagnoses .. 0.4000 0.4020 0.5

374 14 Surg Vaginal delivery with sterilization and/or D&C ...... 0.7120 0.7081 ¥0.5

375 14 Surg 1 Vaginal delivery with O.R. proc except sterilization

and/or D&C.

0.6812 0.6856 0.6

376 14 Med Postpartum and postabortion diagnoses without

O.R. procedure.

0.4877 0.5342 9.5

377 14 Surg Postpartum and postabortion diagnoses with O.R.

procedure.

1.4263 1.3506 ¥5.3

378 14 Med Ectopic pregnancy ................................................... 0.8441 0.9394 11.3

379 14 Med Threatened abortion ................................................ 0.4390 0.4424 0.8

380 14 Med Abortion without D&C ............................................. 0.4168 0.3404 ¥18.3

1140

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

381 14 Surg Abortion with D&C, aspiration curettage or

hysterotomy.

0.5540 0.6002 8.3

382 14 Med False labor .............................................................. 0.1965 0.2045 4.1

383 14 Med Other antepartum diagnoses with medical complications.0.4718 0.5334 13.1

384 14 Med Other antepartum diagnoses without medical

complications.

0.3578 0.3437 ¥3.9

385 15 (1) Neonates, died or transferred to another acute

care facility.

1.3671 1.3760 0.7

386 15 (1) Extreme immaturity or respiratory distress syndrome, neonate.4.5084 4.5376 0.6

387 15 (1) Prematurity with major problems ........................... 3.0791 3.0991 0.6

388 15 (1) Prematurity without major problems ...................... 1.8578 1.8699 0.7

389 15 (1) Full term neonate with major problems ................. 1.8279 1.8398 0.7

390 15 (1) Neonate with other significant problems ............... 1.5908 1.6011 0.6

391 15 (1) Normal newborn ...................................................... 0.1516 0.1526 0.7

392 16 Surg Splenectomy age >17 ............................................. 3.2927 3.1411 ¥4.6

393 16 Surg 1 Splenectomy age 0–17 ........................................... 1.3392 1.3479 0.6

394 16 Surg Other O.R. procedures of the blood and blood

forming organs.

1.6195 1.6806 3.8

395 16 Med Red blood cell disorders age >17 ......................... 0.8196 0.8168 ¥0.3

396 16 Med Red blood cell disorders age 0–17 ........................ 2.1978 1.0917 ¥50.3

397 16 Med Coagulation disorders ............................................. 1.2536 1.2154 ¥3.0

398 16 Med Reticuloendothelial and immunity disorders with

CC.

1.2463 1.2507 0.4

399 16 Med Reticuloendothelial and immunity disorders without CC.

0.6908 0.7085 2.6

400 17 Surg Lymphoma and leukemia with major O.R. procedure.2.6546 2.6610 0.2

401 17 Surg Lymphoma and nonacute leukemia with other

O.R. proc with CC.

2.5749 2.6191 1.7

402 17 Surg Lymphoma and nonacute leukemia with other

O.R. proc without CC.

1.0114 1.0641 5.2

403 17 Med Lymphoma and nonacute leukemia with CC ......... 1.6843 1.7181 2.0

404 17 Med Lymphoma and nonacute leukemia without CC .... 0.8302 0.8549 3.0

405 17 (1) Acute leukemia without major O.R. procedure age

0–17.

1.8987 1.9110 0.6

406 17 Surg Myeloprolif disorders or poorly diff neopl with

major O.R. proc with CC.

2.5688 2.7833 8.4

407 17 Surg Myeloprolif disorders or poorly diff neopl with

major O.R. proc without CC.

1.1788 1.2463 5.7

408 17 Surg Myeloprolif disorders or poorly diff neopl with

other O.R. proc.

1.8204 1.9990 9.8

409 17 Med Radiotherapy ........................................................... 1.0117 1.0631 5.1

410 17 Med Chemotherapy without acute leukemia as secondary diagnosis.0.8402 0.9015 7.3

411 17 Med History of malignancy without endoscopy .............. 0.3897 0.4335 11.2

412 17 Med History of malignancy with endoscopy ................... 0.5042 0.4070 ¥19.3

413 17 Med Other myeloprolif dis or poorly diff neopl diag

with CC.

1.3473 1.3925 3.4

414 17 Med Other myeloprolif dis or poorly diff neopl diag

without CC.

0.7146 0.7824 9.5

415 18 Surg O.R. procedure for infectious and parasitic diseases.3.5747 3.5541 ¥0.6

416 18 Med Septicemia age >17 ............................................... 1.4883 1.4988 0.7

417 18 Med Septicemia age 0–17 ............................................. 1.3276 0.8695 ¥34.5

418 18 Med Postoperative and post-traumatic infections ......... 0.9894 0.9931 0.4

419 18 Med Fever of unknown origin age >17 with CC ........... 0.8764 0.8885 1.4

1141

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

420 18 Med Fever of unknown origin age >17 without CC ...... 0.6331 0.6136 ¥3.1

421 18 Med Viral illness age >17 ............................................. 0.6748 0.6663 ¥1.3

422 18 Med Viral illness and fever of unknown origin age 0–

17.

0.5668 0.4792 ¥15.5

423 18 Med Other infectious and parasitic diseases diagnoses 1.6028 1.6019 ¥0.1

424 19 Surg O.R. procedure with principal diagnoses of mental

illness.

2.3483 2.3706 0.9

425 19 Med Acute adjustment reaction and psychological dysfunction.0.6782 0.6805 0.3

426 19 Med Depressive neuroses ............................................... 0.5525 0.5363 ¥2.9

427 19 Med Neuroses except depressive .................................... 0.5588 0.5714 2.3

428 19 Med Disorders of personality and impulse control ........ 0.7114 0.6982 ¥1.9

429 19 Med Organic disturbances and mental retardation ....... 0.8710 0.8448 ¥3.0

430 19 Med Psychoses ................................................................ 0.8079 0.7881 ¥2.5

431 19 Med Childhood mental disorders .................................... 0.7468 0.7532 0.9

432 19 Med Other mental disorder diagnoses ........................... 0.7085 0.7083 0.0

433 20 NA Alcohol/drug abuse or dependence, left AMA ........ 0.3025 0.2961 ¥2.1

434 20 NA Alcohol/drug abuse or dependence, detox or other

symptoms, treatment with CC.

0.7007 0.7296 4.1

435 20 NA Alcohol/drug abuse or dependence, detox or other

symptoms, treatment without CC.

0.4151 0.4275 3.0

436 20 NA Alcohol/drug dependence with rehabilitation therapy.0.8145 0.7850 ¥3.6

437 20 NA Alcohol/drug dependence, combined rehabilitation

and detox therapy.

0.7023 0.6864 ¥2.3

438 NA NA No longer valid.

439 21 Surg Skin grafts for injuries ........................................... 1.5800 1.6571 4.9

440 21 Surg Wound debridements for injuries ........................... 1.7993 1.9354 7.6

441 21 Surg Hand procedures for injuries .................................. 1.0106 0.9179 ¥9.2

442 21 Surg Other O.R. procedures for injuries with CC ........... 2.2652 2.2454 ¥0.9

443 21 Surg Other O.R. procedures for injuries without CC ...... 0.9292 0.9614 3.5

444 21 Med Traumatic injury age >17 with CC ........................ 0.7115 0.7087 ¥0.4

445 21 Med Traumatic injury age >17 without CC ................... 0.4812 0.4800 ¥0.2

446 21 Med 1 Traumatic injury age 0–17 ..................................... 0.2943 0.2962 0.6

447 21 Med Allergic reactions age >17 ..................................... 0.4938 0.5220 5.7

448 21 Med 1 Allergic reactions age 0–17 ................................... 0.0968 0.0974 0.6

449 21 Med Poisoning and toxic effects of drugs age >17

with CC.

0.7850 0.8149 3.8

450 21 Med Poisoning and toxic effects of drugs age >17

without CC.

0.4321 0.4352 0.7

451 21 Med 1 Poisoning and toxic effects of drugs age 0–17 .... 0.2614 0.2631 0.7

452 21 Med Complications of treatment with CC ...................... 0.9799 0.9920 1.2

453 21 Med Complications of treatment without CC ................. 0.4859 0.5060 4.1

454 21 Med Other injury, poisoning and toxic effect diag with

CC.

0.8448 0.8152 ¥3.5

455 21 Med Other injury, poisoning and toxic effect diag without CC.0.4675 0.4663 ¥0.3

456 NA NA No longer valid.

457 NA NA No longer valid.

458 NA NA No longer valid.

459 NA NA No longer valid.

460 NA NA No longer valid.

461 23 Surg O.R. proc with diagnoses of other contact with

health services.

1.0684 1.1309 5.8

462 23 Med Rehabilitation .......................................................... 1.4071 1.3599 ¥3.4

463 23 Med Signs and symptoms with CC ................................ 0.6738 0.6811 1.1

464 23 Med Signs and symptoms without CC ........................... 0.4996 0.4942 ¥1.1

1142

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

465 23 Med Aftercare with history of malignancy as secondary

diagnosis.

0.5247 0.6720 28.1

466 23 Med Aftercare without history of malignancy as secondary diagnosis.0.6121 0.7129 16.5

467 23 Med Other factors influencing health status ................. 0.4941 0.4986 0.9

468 NA NA Extensive O.R. procedure unrelated to principal

diagnosis.

3.6582 3.6400 ¥0.5

469 NA (2) Principal diagnosis invalid as discharge diagnosis 0.0000 0.0000 0.0

470 NA (2) Ungroupable ............................................................ 0.0000 0.0000 0.0

471 8 Surg Bilateral or multiple major joint proc of lower extremity.3.3246 3.2205 ¥3.1

472 NA NA No longer valid ....................................................... 0.0000 0.0000 0.0

473 17 NA Acute leukemia without major O.R. procedure age

>17.

3.4741 3.7200 7.1

474 NA NA No longer valid ....................................................... 0.0000 0.0000 0.0

475 4 Med Respiratory system diagnosis with ventilator support.3.7429 3.7065 ¥1.0

476 NA Surg Prostatic O.R. procedure unrelated to principal diagnosis.2.2182 2.2633 2.0

477 NA Surg Nonextensive O.R. procedure unrelated to principal diagnosis.1.7545 1.7696 0.9

478 5 Surg Other vascular procedures with CC ....................... 2.3355 2.3515 0.7

479 5 Surg Other vascular procedures without CC .................. 1.4230 1.4618 2.7

480 NA Surg Liver transplant ...................................................... 10.6455 10.7834 1.3

481 NA Surg Bone marrow transplant ......................................... 10.2138 8.7285 ¥14.5

482 NA Surg Tracheostomy for face, mouth and neck diagnoses 3.6031 3.6454 1.2

483 NA Surg Tracheostomy except for face, mouth and neck diagnoses.16.3395 16.1211 ¥1.3

484 24 Surg Craniotomy for multiple significant trauma .......... 5.3380 5.5421 3.8

485 24 Surg Limb reattachment, hip and femur proc for multiple significant trauma.3.0788 3.0757 ¥0.1

486 24 Surg Other O.R. procedures for multiple significant

trauma.

4.9966 4.8962 ¥2.0

487 24 Med Other multiple significant trauma ......................... 1.9183 1.9536 1.8

488 25 Surg HIV with extensive O.R. procedure ......................... 4.5766 4.7891 4.6

489 25 Med HIV with major related condition ........................... 1.7690 1.7913 1.3

490 25 Med HIV with or without other related condition ........... 0.9705 0.9651 ¥0.6

491 8 Surg Major joint and limb reattachment procedures of

upper extremity.

1.6655 1.6673 0.1

492 17 Med Chemotherapy with acute leukemia as secondary

diagnosis.

4.5427 4.4470 ¥2.1

493 7 Surg Laparoscopic cholecystectomy without C.D.E. with

CC.

1.7914 1.8290 2.1

494 7 Surg Laparoscopic cholecystectomy without C.D.E. without CC.0.9973 1.0246 2.7

495 NA Surg Lung transplant ...................................................... 8.9500 8.8332 ¥1.3

496 8 Surg Combined anterior/posterior spinal fusion ............. 5.4275 5.6871 4.8

497 8 Surg Spinal fusion with CC ............................................ 2.7594 2.8441 3.1

498 8 Surg Spinal fusion without CC ....................................... 1.6863 1.7952 6.5

499 8 Surg Back and neck procedures except spinal fusion

with CC.

1.4677 1.4487 ¥1.3

500 8 Surg Back and neck procedures except spinal fusion

without CC.

0.9714 0.9836 1.3

501 8 Surg Knee procedures with pdx of infection with CC .... 2.5544 2.5305 ¥0.9

502 8 Surg Knee procedures with pdx of infection without CC 1.5539 1.5559 0.1

503 8 Surg Knee procedures without pdx of infection .............. 1.2297 1.2029 ¥2.2

504 22 Surg Extensive third degree burns with skin graft ........ 14.1153 13.2930 ¥5.8

505 22 NA Extensive third degree burns without skin graft ... 1.7875 2.2593 26.4

1143

TABLE D–17.—LIST OF DIAGNOSIS-RELATED GROUPS (DRGS), RELATIVE WEIGHTS, AND

PERCENT CHANGE, FISCAL YEARS 1999 AND 2000—Continued

DRG

numberMDC Type Title

Fiscal

year

1999

relative

weights

Fiscal

year

2000

relative

weights

Percent

change

506 22 NA Full thickness burn with skin graft or inhalation

injury with CC or sig trauma.

4.2478 4.2007 ¥1.1

507 22 NA Full thickness burn with skin graft or inhalation

injury without CC or sig trauma.

1.7078 1.8942 10.9

508 22 NA Full thickness burn without skin graft or inhalation injury with CC or sig trauma.1.4178 1.5971 12.6

509 22 NA Full thickness burn without skin graft or inhalation injury without CC or sig trauma.0.7824 0.8554 9.3

510 22 NA Nonextensive burns with CC or significant trauma 1.1630 1.3335 14.7

511 22 NA Nonextensive burns without CC or significant

trauma.

0.6042 0.8312 37.6

1Medicare data have been supplemented by data from 19 States for low-volume diagnosis-related groups

(DRGs). 2 DRGs 469 and 470 contain cases that could not be assigned to valid DRGs.

NA—Not available.

Note.—Relative weights are based on Medicare patient data and may not be appropriate for other patients. Abbreviations are as follows:

AICD = automatic

implantable

cardioverter

defibrillator

alc hepa = alcoholic

hepatitis

AMA = against medical

advice

AMI = acute myocardial

infarction

cath = catheterization

CC = complication or

comorbidity

C.D.E. = common duct

exploration

cirr = cirrhosis

D&C = dilation &

curettage

debrid = debridement

detox = detoxification

diag = diagnosis

diff = differentiated

dis = diseases

disl = dislocation

ESW = extracorporeal

shock wave

ex = except

extrem = extremity

fix = fixation

FX = fracture

gastroent =

gastroenteritis

HIV = human immunodeficiency virus

hr = hour

humer = humerus

int = internal

lowleg = lower leg

malig = malignancy

MDC = major diagnostic

category

med = medical

myeloprolif =

myeloproliferative

misc = miscellaneous

neopl = neoplasm

nutrit = nutritional

O.R. = operating room

pdx = principal diagnosis

proc = procedures

PTCA = percutaneous

transluminal coronary

angioplasty

sig = significant

sprn = sprain

strn = strain

subcut = subcutaneous

surg = surgical

T&A = tonsillectomy

and/or adenoidectomy

TIA = transient ischemic

attack

uparm = upper arm

uri = upper respiratory

infection

Source: Health Care Financing Administration.

1144

PART II: PHYSICIANS

PHYSICIAN PAYMENT REFORM

The Omnibus Budget Reconciliation Act of 1989 (OBRA 1989)

provided for the implementation, beginning January 1, 1992, of a

new payment system for physicians’ services paid for by Medicare.

This fee schedule payment system replaced the previous reasonable

charge payment system. The new system was enacted in response

to two principal concerns. The first was the rapid escalation in program payments. The second was that the use of the reasonable

charge payment method had led, in many cases, to payments which

were not directly related to the resources used. The Balanced

Budget Act of 1997 (BBA 1997) made several modifications to the

fee schedule payment system. The Balanced Budget Refinement

Act (BBRA) of 1999 made technical modifications to the BBA 1997

provisions.

Medicare payments for physicians’ services are made under a fee

schedule which is based on a resource-based relative value scale.

Annual updates to the payment amounts are based, in part, on a

comparison of actual physician spending in a base period compared

to an expenditure goal. The expenditure goal in place prior to fiscal

year 1998 was known as the Medicare volume performance standard (MVPS). Beginning in fiscal year 1998 the MVPS was replaced

by the sustainable growth rate (SGR). Use of an expenditure goal

was intended to moderate the rate of growth in physician expenditures. The law also places limits on amounts that physicians can

bill in excess of Medicare’s approved payment amount.

MEDICARE FEE SCHEDULE

The Secretary of the U.S. Department of Health and Human

Services (DHHS) is required to establish a fee schedule before January 1 of each year that sets payment amounts for all physicians’

services furnished in all fee schedule areas for the year. The fee

schedule amount for a service is equal to the product of:

—The relative value for the service;

—The geographic adjustment factor (GAF) for the service for the

fee schedule area; and

—The national dollar conversion factor for the year.

RELATIVE VALUE UNIT

The relative value unit (RVU) for each service, the first factor

used to calculate the fee schedule, has three components:

—The physician work component reflects physician time and intensity, including activities before and after patient contact;

—The practice expense or overhead component includes all categories of practice expenses (exclusive of malpractice liability

insurance costs). Included are office rents, employee wages,

physician compensation, and physician fringe benefits; and

—The malpractice expense component reflects costs of obtaining

malpractice insurance.

The proportion that each component represents of the total RVU

varies by service.

1145

The work RVUs incorporated in the initial fee schedule were

based on resource costs. They were developed after extensive input

from the physician community. Refinements in existing values and

establishment of values for new services have been included in the

annual fee schedule update. In addition, HCFA is required to conduct a review of all values at least every 5 years. The results of

the first review were incorporated in the values used in 1997.

The practice expense and malpractice expense RVUs included in

the initial fee schedule were based on historical charges. An analysis by the Physician Payment Review Commission suggested that

practice expense RVUs for a service were most likely to be overvalued when they exceeded the work RVUs by a substantial

amount. OBRA 1993 provided for reductions in 1994, 1995, and

1996 in cases where the number of practice expense RVUs was

substantially more than the number of work RVUs for the service.

The Social Security Act Amendments of 1994 required the Secretary to develop a methodology for a resource-based system to be

implemented in 1998.

BBA 1997 provided for a phase-in of the resource-based methodology for practice expenses. In 1998, there was a reallocation of

no more than $390 million in practice expense RVUs from services

whose number of practice expense RVUs exceed 110 percent of the

number of work RVUs. Not included were services provided 75 percent of the time in an office setting or services which were slated

to receive an increase under HCFA’s proposed regulations issued

June 18, 1997. The amount reduced was added to the practice expense RVUs of physician office procedure codes. A new practice expense methodology is being phased in over the 1999–2002 period.

In 1999, 25 percent of the practice payment was based on the new

methodology. This percentage increased to 50 percent in 2000. It

will increase to 75 percent in 2001 and 100 percent in 2002. The

Secretary was also required to develop new resource-based methodology for practice expenses. In developing the units, the Secretary was required, to the maximum extent practicable, to utilize

generally accepted accounting principles. The Secretary was also

required to use actual data on equipment and other key factors.

BBRA 1999 requires the Secretary to establish by regulation a

process for determining practice expense relative values. Under

this process, the Secretary will accept for use, and will use to the

maximum extent practicable, data collected or developed outside

DHHS.

BBA 1997 also directed HCFA to develop and implement a resource-based methodology for malpractice expenses. It was implemented beginning January 2000.

GEOGRAPHIC ADJUSTMENT FACTOR

The second factor used in calculation of the fee schedule is the

GAF for the fee schedule area. There are currently 99 fee schedule

areas nationwide.

The GAF is designed to account for geographic variations in the

costs of practicing medicine and obtaining malpractice insurance as

well as a portion of the difference in physicians’ incomes that is not

attributable to these factors.

1146

The GAF is the sum of three indices. Separate geographic practice cost indices (GPCIs) have been developed for each of the three

components of the RVU, namely a work GPCI, a practice expense

or overhead GPCI, and a malpractice GPCI. In effect, a separate

geographic adjustment is made for each component. However, as

required by law, only one-quarter of the geographic variation in

physician work resource costs is taken into account in the formula.

(Table D–37 at the end of this chapter shows the GAF values for

each of the 99 fee schedule areas nationwide.)

The three GPCI-adjusted RVU values are summed to produce an

indexed RVU for each locality.

CONVERSION FACTOR

The conversion factor, which is the third fee schedule factor, is

a dollar multiplier which converts the geographically adjusted relative value for a service to an actual payment amount for the service. The law initially required the establishment of a single conversion factor. Beginning in 1993, two conversion factors applied—one

for surgical services and one for nonsurgical services. Beginning in

1994, there were three conversion factors—one for surgical, one for

primary care, and one for nonsurgical services. BBA 1997 established a single conversion factor beginning in 1998. The 2000 conversion factor is $36.6137. Thus, payment for a service with an adjusted relative value of 2.0 is $73.23. Anesthesiologists are paid

under a separate fee schedule which uses base and time units. A

separate conversion factor ($17.77 in 2000) applies.

PAYMENT FORMULA

The payment for each service is calculated as follows:

Payment = CF × [(RVUwork × GPCIwork)

+ (RVUpractice expense × GPCIpractice expense)

+ (RVUmalpractice × GPCImalpractice)]

Where:

CF = conversion factor;

RVUwork = physician work relative value units for the service;

GPCIwork = geographic practice cost index value for physician

work in the locality (the value reflects only one-quarter of the variation in physician work as required by law);

RVUpractice expense = practice expense or overhead relative value

units for the service;

GPCIpractice expense = geographic practice cost index value for practice expense or overhead applicable in the locality;

RVUmalpractice = malpractice relative value units for the service;

and

GPCImalpractice = geographic practice cost index value for malpractice applicable in the locality.

SUSTAINABLE GROWTH RATE AND CONVERSION

FACTOR UPDATES

A key element of the fee schedule is the conversion factor. One

consideration in establishing the annual update in the conversion

factor is whether efforts to stem the annual rate of growth in phyVerDate 20-JUL-2000 13:14 Sep 29, 2000 Jkt 061710 PO 00000 Frm 01146 Fmt 6601 Sfmt 6601 J:\SKAYNE\GB96\61710.019 WAYS3 PsN: WAYS3
1147

sician payments have succeeded. Initially, this growth was measured by the MVPS. Beginning in fiscal year 1998, the MVPS was

replaced by the sustainable growth rate (SGR). The SGR for a year

is based on estimates of four factors: (1) changes in spending due

to fee increases; (2) fee-for-service enrollment; (3) gross domestic

product growth per capita; and (4) laws and regulations.

Beginning in 1999, the annual percentage update to the conversion factor equals the Medicare economic index (MEI) subject to an

adjustment (‘‘update adjustment factor’’) to match spending for

physicians services under the SGR system. This adjustment sets

the conversion factor at a level so that projected spending for a

year will meet allowed spending by the end of the year. Allowed

spending for a year is calculated using the SGR. However, in no

case can the conversion factor update be more than 3 percentage

points above the MEI nor more than 7 percentage points below the

MEI.

Currently the update adjustment factor is calculated as follows.

The adjustment is determined by estimating the difference between: (1) cumulative allowed spending for April 1, 1997 through

March 31 of the year involved; and (2) the cumulative sum of actual spending for April 1, 1997 through March 31 of the previous

year. This amount is divided by actual expenditures for the 12-

month period ending March 31 of the preceding year, increased by

the SGR for the fiscal year which begins during such 12-month period. For the 12-month period ending March 31, 1997, allowed expenditures are defined as actual expenditures for the period. For

subsequent 12-month periods, allowed expenditures equal the previous year’s amount, increased by the SGR for the fiscal year beginning during such 12-month period.

BBRA 1999 specifies that the calculation of the update adjustment factor is to be made on a calendar year basis, beginning in

2001. The formula for determining the update is modified to add

a new component to measure variances from the allowed growth

rate in the past year. Further, the impact of year-to-year changes

is mitigated by the addition of dampening multipliers. Specifically,

beginning for 2001, the update adjustment factor is the sum of a

prior year adjustment component and a cumulative adjustment

component. The prior year adjustment component is determined by:

(1) computing the difference between allowed expenditures for the

prior year and actual expenditures for that year; (2) dividing that

amount by allowed expenditures for the year; and (3) multiplying

the quotient by 0.75. The cumulative adjustment component is determined by: (1) computing the difference between allowed expenditures over the period April 1, 1996 through the end of the prior

year and the amount of actual expenditures for such period; (2) dividing that amount by actual expenditures for the prior year increased by the SGR for the year for which the adjustment factor

is to be determined; and (3) multiplying the quotient by 0.33. In

addition, a transitional adjustment to the update is provided over

the 2001–5 period to provide for budget neutrality.

By March 1 of each year (beginning in 2000), the Secretary is required to make available to the Medicare Payment Advisory Commission (MedPAC) and the public an estimate of the SGR and the

conversion factor that will apply in the following year and the data

1148

used in making such estimate. MedPAC is required to include a review of the estimate in its June report. The Secretary is required

to publish the conversion factor by November 1 (beginning in 2000)

for the following year. The Secretary is required to publish, by November 1, 2000, the SGR for 2000 and 2001. Beginning in 2001, the

Secretary is required to publish the SGR for the following year and

each of the 2 preceding years.

Calculation of the SGR is to be made on a calendar year basis.

The 2001 update to the conversion factor is to be based on the fiscal year 2000 SGR as well as the 2000 and 2001 SGRs (using the

best data available to the Secretary as of September 1, 2000). The

2002 update to the conversion factor will use the fiscal year 2000

SGR as well as the 2000, 2001, and 2002 SGRs (using the best data

available to the Secretary as of September 1, 2001). For 2003 and

succeeding years, the SGR for that year and the 2 preceding years

would be determined on the basis of the best data available to the

Secretary as of September 1 of the preceding year.

The revisions made by BBRA 1999 apply to calculations made to

determine the conversion factor for years beginning with 2001. The

changes do not apply to or affect any update (or any update adjustment factor) for any year before 2001.

Table D–18 shows the conversion factors that have applied since

implementation of the fee schedule in 1992. In 1992, there was one

conversion factor. In 1993, there were two conversion factors—one

for surgical services and one for nonsurgical services. In 1994–97,

there were three conversion factors—one for surgical services, one

for primary care services, and one for nonsurgical (nonprimary

care) services. BBA 1997 provided for the use of a single conversion

factor beginning in 1998.

The SGR system was used for the calculation of the conversion

factor update beginning in 1999. This 1999 conversion factor

amount was lower than the dollar figure for 1998. However, HCFA

explained that this number actually reflected an overall increase

because of adjustments made in other parts of the fee schedule calculation. The increase in the MEI for 1999 was 2.3 percent and the

adjustment to assure that projected spending would match the

SGR was 0.0 percent; this translated into a 1999 update of 2.3 percent. However, the law requires that any changes in the RVUs be

budget neutral; HCFA implemented this budget neutrality adjustment through the conversion factor. This and other factors yielded

a 1999 adjustment of ¥7.45944 percent. Thus, the 1999 conversion

factor was a 5.3 percent reduction from the 1998 factor.

The 2000 conversion factor is $36.6137. The increase in the MEI

for 2000 is 2.4 percent and the adjustment to assure that projected

spending would match the SGR was 3.0 percent. Other adjustments including a budget neutrality adjustment translated into a

2000 update of 5.5 percent.

1149

TABLE D–18.—CONVERSION FACTORS: CALENDAR YEARS 1992–2000

Calendar year Conversion

factor

1992:

All services ............................................................................................. $31.00

1993:

Surgical .................................................................................................. 31.96

Nonsurgical ............................................................................................. 31.25

1994:

Surgical .................................................................................................. 35.16

Primary care ........................................................................................... 33.72

Other nonsurgical ................................................................................... 32.90

1995:

Surgical .................................................................................................. 39.45

Primary care ........................................................................................... 36.38

Other nonsurgical ................................................................................... 34.62

1996:

Surgical .................................................................................................. 40.80

Primary care ........................................................................................... 35.42

Other nonsurgical ................................................................................... 34.63

1997:

Surgical .................................................................................................. 40.96

Primary care ........................................................................................... 35.77

Other nonsurgical ................................................................................... 33.85

1998:

All services ............................................................................................. 36.69

1999:

All services ............................................................................................. 34.73

2000:

All services ............................................................................................. 36.61

Source: Federal Register, 1999b.

LIMITS ON BENEFICIARY LIABILITY

Medicare pays 80 percent of the fee schedule amount after the

beneficiary has met the $100 deductible for the year. The beneficiary is responsible for the remaining 20 percent, known as coinsurance. If a physician does not accept assignment on a claim, the

beneficiary may be liable for additional charges known as balance

billing charges. However, the law places certain limits on these balance billing charges.

Assignment/participation

A physician is able to choose whether to accept assignment on a

claim paid under the fee schedule. In the case of an assigned claim,

the physician bills the program directly and is paid an amount

equal to 80 percent of the fee schedule amount (less any unmet deductible). The physician may not charge the beneficiary more than

the applicable deductible and coinsurance amounts. In the case of

nonassigned claims, the physician still bills the program directly;

however, Medicare payment is made to the beneficiary. In addition

to the deductible and coinsurance amounts, the beneficiary is liable

1150

for the difference between the fee schedule amount and the physician’s actual charge, subject to certain limits. This is known as the

balance billed amount.

A physician may become a ‘‘participating physician’’ by voluntarily entering into an agreement with the Secretary of DHHS to

accept assignment on all claims for the forthcoming year. Medicare

patients of these physicians never face balance billing charges.

The law includes a number of incentives for physicians to become

participating physicians, chief of which is higher recognized fee

schedule amounts. The fee schedule amount for a nonparticipating

physician is only 95 percent of the recognized amount for a participating physician.

The law specifies that physicians are required to accept assignment on all claims for persons who are dually eligible for Medicare

and Medicaid. This includes ‘‘qualified Medicare beneficiaries’’;

these are persons with incomes below poverty for whom Medicaid

is required to pay Medicare premiums and cost-sharing charges.

Balance billing limits

Nonparticipating physicians may charge beneficiaries more than

the fee schedule amount on nonassigned claims; these balance billing charges are subject to certain limits. The limit is 115 percent

of the fee schedule amount for nonparticipating physicians. The

nonparticipating physicians fee schedule payment level is 95 percent of the participating physicians level. Thus, the balance billing

limit is only 9.25 percent higher than the level recognized for participating physicians (95 percent × 115 percent).

Private contracting

Private contracting is the term used to describe situations where

a physician and a patient agree not to submit a claim for a service

which would otherwise be covered and paid for by Medicare. Under

private contracting, physicians can bill patients at their discretion

without being subject to upper limits specified by Medicare. HCFA

had interpreted Medicare law to preclude such private contracts.

BBA 1997 included language permitting a limited opportunity for

private contracting, effective January 1, 1998. However, if and

when a physician decides to enter a private contract with a Medicare patient, that physician must agree to forgo any reimbursement

by Medicare (including services provided by Medicare+Choice organizations) for all Medicare beneficiaries for 2 years. The patient is

not subject to the 2-year limit; the patient would continue to be

able to see other physicians who were not private contracting physicians and have Medicare pay for the services.

Private contracts apply only to covered services. A private contract is unnecessary and private contracting rules do not apply for

noncovered services. Examples of noncovered services include cosmetic surgery and routine physical exams.

A physician or practitioner may furnish a service that Medicare

may cover under some circumstances but which the physician or

practitioner anticipates would not be considered ‘‘reasonable and

necessary’’ in the particular case (for example, multiple nursing

home visits). If the beneficiary receives an ‘‘advance beneficiary notice’’ that the service may not be covered, a private contract is not

1151

necessary to bill the patient if the claim is subsequently denied by

Medicare. There are no limits on what may be charged for the noncovered service.

INITIAL IMPACT OF THE BALANCED BUDGET ACT ON MEDICARE

PAYMENTS TO PHYSICIANS

Several important changes to Medicare’s payments to physicians

occurred almost immediately after enactment of BBA 1997. A single conversion factor for the physician fee schedule, replacing separate conversion factors for surgical services, primary care, and

other nonsurgical services, was implemented on January 1, 1998.

On that same date, adjustments in practice expense RVUs for some

services were implemented. Both of these policy changes were required by the BBA. Simultaneous with these changes, the Health

Care Financing Administration (HCFA) increased the physician

work RVUs for many surgical services to make them consistent

with previous changes in the RVUs for evaluation and management services. These changes were made on a budget-neutral basis.

MedPAC analyzed the effects of these payment policy changes on

payment rates for selected, high volume services. The analysis

showed that the net effects of the policy changes were generally

greatest for surgical services, with payment rates for some of those

services decreasing by 13 percent or more (table D–19). Payment

rates for office visits and other nonsurgical services generally increased by 7 percent or more, however.

The shift to a single conversion factor affected payment rates for

all services in 1998. In 1997, three separate conversion factors were

used: $40.96 for surgical services, $35.77 for primary care, and

$33.85 for other nonsurgical services. HCFA calculated the single

conversion factor, required by the BBA, to be $36.69.

In 1998, changes in payment rates for different types of services

varied depending on the conversion factor used in 1997 (table D–

19). The conversion factor for primary care services, such as office

visits, increased by 2.6 percent (table D–18). The conversion factor

for other nonsurgical services, such as consultations, grew by 8.4

percent. The decrease in the conversion factor for surgical services

was 10.4 percent.

The second policy change affecting payments in 1998 was the adjustment of practice expense RVUs called for by the BBA. The law

limited practice expense values to 110 percent of each service’s

work value. Two groups of services were excluded from this limit:

(1) those provided in an office setting at least 75 percent of the

time; and (2) those slated to receive an increase in practice expense

values under a HCFA proposed rule released on June 18, 1997.

To implement the 110 percent limit in a budget-neutral manner,

the savings generated were reallocated to increase the practice expense values of office visits. This reallocation was intended to be

a ‘‘downpayment’’ toward changes in office visit values expected as

resource-based practice expense values are phased in through 2002.

The BBA specified that up to $390 million could be reallocated to

office visits in 1998.

These adjustments led to decreases in practice expense RVUs for

both surgical services and nonsurgical services other than primary

care (table D–19). The surgical service affected the most by the

1152

practice expense adjustments was cataract lens replacement. The

effect of the adjustments on that service was a decrease of 5.8 percent. Upper gastrointestinal endoscopy was affected the most by

the practice expense adjustments—a decrease of 6.5 percent. The

increase for office visits was 4.3 percent.

TABLE D–19.—CHANGES IN PHYSICIAN PAYMENT RATES FOR SELECTED SERVICES,

1997–98

[In percent]

Type of service

Policy change

Total

change

Percentage

of 1996

physician

services

outlays

Single

conversion

factor

Practice

expense

adjustments

Work increases

Primary care:

Office and other outpatient visit .............. 2.6 4.3 0.0 6.9 16.8

Emergency department

visits ......................... 2.6 0.0 0.0 2.6 2.7

Surgical:

Cataract lens replacement .......................... ¥10.4 ¥5.8 1.3 ¥14.9 4.8

Joint prosthesis ............. ¥10.4 ¥2.9 3.2 ¥10.1 1.5

Coronary artery bypass

graft .......................... ¥10.4 ¥3.8 2.7 ¥11.5 1.6

Transurethral prostate

surgery ...................... ¥10.4 ¥0.1 3.2 ¥7.3 0.3

Arthroscopy .................... ¥10.4 ¥5.0 1.7 ¥13.7 0.3

Open prostate surgery ... ¥10.4 0.0 3.4 ¥7.0 0.1

Other nonsurgical:

Consultations ................. 8.4 0.0 0.0 8.4 5.7

Routine diagnostic radiology .......................... 8.4 0.0 0.0 8.4 3.2

Electrocardiograms ........ 8.4 ¥0.9 0.0 7.5 2.1

Echocardiograms ........... 8.4 ¥2.4 0.0 6.0 1.9

CAT scans ...................... 8.4 0.0 0.0 8.4 1.7

Colorectal endoscopy ..... 8.1 ¥3.9 0.0 4.2 1.6

Magnetic resonance imaging ......................... 8.4 0.0 0.0 8.4 1.3

Upper gastrointestinal

endoscopy .................. 8.3 ¥6.5 0.0 1.8 1.2

Angioplasty .................... 8.4 ¥4.7 0.0 3.7 0.6

Note.—Within MedPAC’s type of service classification scheme, some ‘‘other nonsurgical services’’ show

an increase of slightly less than 8.4 percent. The difference is due to inclusion of surgical services in

some categories that are otherwise made up mainly of other nonsurgical services.

Source: Medicare Payment Advisory Commission analysis of 1996 Medicare claims, 100 percent of

beneficiaries; 1997 and 1998 physician fee schedule relative value units.

The third policy change for 1998 was increases in work RVUs for

global surgical services. This change addressed an issue that arose

in the 5-year review of work RVUs. Global surgical services include

a surgical service as well as pre- and postoperative evaluation and

1153

management (EM) services. EM work values increased as a result

of the 5-year review, but the EM component of global surgical services did not. The increases in work RVUs for 1998 corrected that

inconsistency. Among those surgical services responsible for the

largest shares of Medicare physician payments, increases due to

the change in work RVUs ranged from 1.3 to 3.4 percent (table D–

19).

The total change in payment rates for 1998 reflected the combined effects of the single conversion factor, the adjustments in

practice expense RVUs for some services, and the increase in work

RVUs for global surgical services. By type of service, total changes

ranged from an increase of 8.4 percent for some nonsurgical services, other than primary care, to a decrease of 14.9 percent for cataract lens replacements. In general, surgical services saw decreases

in payment rates primarily because of the move to a single conversion factor. Payment rates for other services increased.

In addition to the payment policy changes implemented in 1998,

the BBA required a phase in of new resource-based practice expense RVUs, starting in 1999. These new RVUs replace values

based on historical charges. From 1999 through 2001, payments

will be a blend of resource-based and charge-based RVUs. The

resource-based values will be fully implemented in 2002. The BBA

also required implementation of resource-based professional liability insurance, or malpractice expense, RVUs in 2000.

HISTORICAL DATA

ASSIGNMENT RATE EXPERIENCE

The total number of assigned claims as a percentage of total

claims received by Medicare carriers for physicians and other medical services is known as the assignment rate. (Initially, this calculation omitted hospital-based physicians and group-practice prepayment plans which were considered assigned by definition. This

distinction is no longer made). The assignment rate declined until

the mid-1970s when the rate leveled off at about 50 percent (table

D–20). Since 1985, the rate has increased significantly, rising to

97.5 percent in 1999. This increase reflects both the impact of the

participating physician program as well as the requirement that

laboratory services must be paid on an assigned basis.

The statistics included in table D–20 are programwide data. Assignment rates vary geographically. For example, the assignment

rate (taken as a percent of dollars) for physician services in fiscal

year 1999 ranged from a low of 86.9 percent in Idaho to a high of

99.9 percent in Massachusetts, Ohio, and Rhode Island. The national average assignment rate for physicians services in 1949 was

99.0 percent (table D–21).

1154

TABLE D–20.—ASSIGNMENT RATES, 1969–99

[In percent]

Fiscal year Claims Covered

charges

1969 ............................................................................................ 61.0 NA

1970 ............................................................................................ 61.2 NA

1971 ............................................................................................ 60.1 NA

1972 ............................................................................................ 56.4 NA

1973 ............................................................................................ 53.4 49.0

1974 ............................................................................................ 52.2 47.8

1975 ............................................................................................ 51.9 47.7

1976 ............................................................................................ 51.0 47.8

1977 ............................................................................................ 50.5 47.9

1978 ............................................................................................ 50.6 49.3

1979 ............................................................................................ 51.1 50.4

1980 ............................................................................................ 51.4 51.3

1981 ............................................................................................ 52.2 52.9

1982 ............................................................................................ 52.8 53.8

1983 ............................................................................................ 53.5 55.3

1984 ............................................................................................ 56.4 57.7

1985 ............................................................................................ 67.7 67.4

1986 ............................................................................................ 68.0 69.5

1987 ............................................................................................ 71.7 73.7

1988 ............................................................................................ 76.3 79.4

1989 ............................................................................................ 79.3 82.6

1990 ............................................................................................ 80.9 84.8

1991 ............................................................................................ 82.5 87.6

1992 ............................................................................................ 85.5 90.8

1993 ............................................................................................ 89.2 94.0

1994 ............................................................................................ 92.1 96.0

1995 ............................................................................................ 94.2 97.1

1996 ............................................................................................ 95.6 97.9

1997 ............................................................................................ 96.5 98.3

1998 ............................................................................................ 97.2 98.6

1999 ............................................................................................ 97.5 98.8

NA—Not available.

Source: Health Care Financing Administration, Office of Financial Management.

1155

TABLE D–21.—PHYSICIAN ASSIGNMENT RATES AS PERCENT OF ALLOWED CHARGES BY

STATE, SELECTED YEARS 1985–99 1

[In percent]

Census division/State

Fiscal year

1985 1990 1995 1996 1997 1998 1999

National ....................................... 65.5 83.0 96.8 97.8 98.4 98.7 99.0

New England:

Maine ................................. 81.5 92.4 99.1 99.4 99.5 99.6 99.7

New Hampshire .................. 56.5 69.9 96.9 97.9 98.6 98.9 99.2

Vermont .............................. 64.3 94.7 99.1 99.3 99.4 99.5 99.5

Massachusetts 2 ................. 93.7 99.5 99.8 99.8 99.9 99.9 99.9

Rhode Island ...................... 94.0 98.7 99.9 99.9 99.9 99.9 99.9

Connecticut ........................ 57.6 84.7 97.6 98.1 98.5 98.7 98.8

Middle Atlantic:

New York ............................ 70.3 81.9 95.6 97.0 97.7 98.1 98.3

New Jersey .......................... 62.3 73.0 92.6 94.9 96.2 97.0 97.6

Pennsylvania ...................... 88.1 95.7 99.6 99.7 99.7 99.8 99.8

East North Central:

Ohio .................................... 50.8 82.6 99.7 99.8 99.8 99.8 99.9

Indiana ............................... 49.6 77.2 96.5 97.6 98.4 98.9 99.1

Illinois ................................ 51.7 75.9 98.6 96.9 97.6 98.1 98.5

Michigan ............................ 88.2 94.5 99.0 99.2 99.4 99.5 99.6

Wisconsin ........................... 51.7 68.2 94.2 96.3 97.2 98.7 99.4

West North Central:

Minnesota ........................... 30.6 47.6 86.2 91.7 93.5 95.3 95.8

Iowa .................................... 46.9 69.8 99.2 96.3 98.0 98.6 98.8

Missouri 3 ........................... 50.1 74.9 96.7 97.7 98.3 98.7 99.1

North Dakota ...................... 30.5 55.0 92.9 96.7 98.5 99.0 99.4

South Dakota ..................... 18.7 39.2 67.0 73.5 80.0 84.4 90.6

Nebraska ............................ 47.3 64.9 89.6 91.6 93.9 95.7 96.3

Kansas 4 ............................. 72.7 88.8 97.1 98.5 99.4 99.5 99.6

South Atlantic:

Delaware ............................ 81.8 90.5 97.8 98.6 98.7 98.9 99.2

Maryland 5 .......................... 81.6 91.4 98.1 98.6 98.9 99.1 99.2

District of Columbia 6 ........ 78.1 87.5 96.6 97.3 97.9 98.2 98.5

Virginia 7 ............................ 66.4 87.3 98.4 98.9 99.2 99.4 99.5

West Virginia ...................... 66.7 93.2 99.1 99.4 99.5 99.6 99.6

North Carolina .................... 60.3 80.8 96.7 97.6 98.2 98.5 98.9

South Carolina ................... 64.9 87.1 97.0 98.0 98.8 99.1 99.3

Georgia ............................... 63.9 83.5 97.4 98.3 98.7 99.0 99.2

Florida ................................ 62.2 84.1 98.4 98.8 99.0 99.3 99.4

East South Central:

Kentucky ............................. 50.3 84.8 97.9 98.6 99.0 99.2 99.4

Tennessee ........................... 55.6 84.0 98.3 98.8 99.2 99.4 99.5

Alabama ............................. 74.6 92.3 98.9 99.2 99.4 99.6 99.6

Mississippi ......................... 63.5 88.1 97.8 98.5 98.8 99.1 99.4

West South Central:

Arkansas ............................ 72.6 92.0 98.7 99.0 99.2 99.4 99.5

Louisiana ............................ 51.0 88.0 98.1 98.8 99.1 99.2 99.4

Oklahoma ........................... 39.0 68.2 94.2 96.7 97.7 98.1 98.6

Texas .................................. 63.0 79.9 96.6 97.7 98.3 98.7 99.0

1156

TABLE D–21.—PHYSICIAN ASSIGNMENT RATES AS PERCENT OF ALLOWED CHARGES BY

STATE, SELECTED YEARS 1985–99 1—Continued

[In percent]

Census division/State

Fiscal year

1985 1990 1995 1996 1997 1998 1999

Mountain:

Montana ............................. 42.6 53.0 86.3 95.2 96.2 97.1 97.8

Idaho .................................. 25.2 36.1 71.7 77.9 82.8 85.6 86.9

Wyoming ............................. 33.8 43.9 81.8 86.0 88.7 90.7 92.9

Colorado ............................. 56.0 70.4 93.5 95.5 96.7 97.3 97.8

New Mexico ........................ 58.3 76.1 95.2 96.0 97.1 98.2 98.5

Arizona ............................... 52.8 76.2 92.8 93.4 94.1 94.4 95.0

Utah ................................... 63.1 80.4 96.6 98.0 98.5 99.0 99.3

Nevada ............................... 81.6 96.0 99.4 99.5 99.6 99.7 99.8

Pacific:

Washington ........................ 45.5 54.8 93.4 95.7 97.1 98.1 98.6

Oregon ................................ 38.7 59.9 92.3 94.7 96.7 97.4 97.6

California ........................... 71.3 84.4 97.3 98.0 98.9 98.8 99.0

Alaska ................................ 54.4 79.6 96.2 97.0 97.6 98.2 98.5

Hawaii ................................ 61.2 82.9 98.7 99.0 99.2 99.4 99.4

1 Rates reflect covered charges for physician claims processed during the period.

2Massachusetts enacted a Medicare mandatory assignment provision, effective April 1986. The fact

that the assignment rates shown here are not 100 percent may be explained by the inclusion in the

data base of billings by practitioners other than allopathic and osteopathic physicians, which are included in the Medicare statutory definition of ‘‘physician.’’ 3 Starting with fiscal year 1993, includes data for all counties in Missouri plus two counties on the

State border located in Kansas. 4 Starting with fiscal year 1993, includes data for all counties in Kansas excluding two counties on

the State border. 5 Starting with fiscal year 1993, includes data for all counties in Maryland excluding two counties on

the State border. 6 Starting with fiscal year 1993, includes data for the District of Columbia plus two counties in Maryland located on the State border plus a few counties and cities located in Virginia, near the State border.7 Starting with fiscal year 1993, includes data for all counties in Virginia excluding a few counties

and cities near the State border.

Source: Health Care Financing Administration, Office of Financial Management.

PARTICIPATING PHYSICIAN PROGRAM DATA

Physician participation rates have increased significantly since

the inception of the program (tables D–22 and D–23). For the calendar year 1999 participation period, the physician participation

rate (including limited licensed practitioners) had risen to 84.6 percent accounting for 95.9 percent of allowed charges for physician

services during the period. Table D–23 shows the participation

rates by specialty. Table D–24 shows the percentage of participating physicians and limited licensed practitioners as a percentage of

total physicians and limited licensed practitioners for each State.

1157

TABLE D–22.—MEDICARE PHYSICIAN PARTICIPATION RATES: PERCENT OF PHYSICIANS

AND LIMITED LICENSED PRACTITIONERS WITH AGREEMENTS AND THEIR SHARE OF

ALLOWED CHARGES, 1984–99

Participation period

Percent of physicians signing

agreements

Participating physicians’ covered

charges as a percent of total 1

October 1984–September 1985 .................................. 30.4 36.0

October 1985–April 1986 ........................................... 28.4 36.3

April 1986–December 1986 2 ..................................... 28.3 38.7

January 1987–March 1988 ......................................... 30.6 48.1

April 1988–December 1988 ........................................ 37.3 57.9

January 1989–March 1990 ......................................... 40.2 62.0

April 1990–December 1990 ........................................ 45.5 67.2

January 1991–December 1991 ................................... 47.6 72.3

January 1992–December 1992 ................................... 52.2 78.8

January 1993–December 1993 ................................... 59.8 85.5

January 1994–December 1994 ................................... 64.8 89.4

January 1995–December 1995 ................................... 72.3 92.6

January 1996–December 1996 ................................... 77.5 94.3

January 1997–December 1997 ................................... 80.2 95.1

January 1998–December 1998 ................................... 82.8 95.7

January 1999–December 1999 ................................... 84.6 95.9

1 Rates reflect covered charges for physician services processed during period.

2 The actual participation period was May through December of 1986, and participation agreements

were in effect for that time. However, charge data are generally collected by quarter; thus, the data for

the last three quarters of 1986 are used as a proxy for the participation period.

Source: Health Care Financing Administration, Office of Financial Management.

Table D–25 shows the allowed charges of participating physicans

as a percent of total allowed charges, by State, for several participation periods. Overall, this percentage increased substantially, rising from 36 percent in the October 1984–September 1985 period to

95.9 percent in the calendar 1999 participation period.

As the participation rate has increased, total allowed charges

billed by nonparticipating physicians have declined. In addition,

the number of unassigned claims submitted by nonparticipating

physicians has declined (table D–26). Total covered charges represented by unassigned claims declined from 34.5 to 1.0 percent

over the 1984–99 period. The proportion of charges billed by participation and assignment status varies by State; these data are

shown in table D–27.

TABLE D–23.—PARTICIPATION RATES AS PERCENTAGE OF PHYSICIANS BY SPECIALTY, FOR SELECTED PARTICIPATION PERIODS, 1985–9

Specialty Oct. 1985– Apr. 1986 Jan. 1991– Dec. 1991 Jan. 1992– Dec. 1992 Jan. 1993– Dec. 1993 Jan. 1994– Dec. 1994 Jan. 1995– Dec. 1995 Jan. 1996– Dec. 1996 Jan. 1997– Dec. 1997 Jan. 1998– Dec. 1998 Ja

D

Physicians (M.D.s and D.O.s):

General practice ................................. 27.3 44.0 48.0 55.1 59.1 59.9 66.3 69.2 71.1 General surgery .................................. 33.9 60.5 66.3 73.8 77.6 80.2 85.8 87.8 89.3 Otology, laryngology, rhinology .......... 24.6 49.6 57.0 66.2 72.2 77.1 82.6 85.8 87.7 Anesthesiology .................................... 21.1 36.5 49.3 64.6 71.5 73.9 81.0 83.5 85.9 Cardiovascular disease ...................... 35.6 65.4 72.0 78.7 82.5 81.9 88.3 90.2 91.5 Dermatology ....................................... 34.0 57.0 61.6 69.8 75.8 79.3 83.6 85.4 87.2 Family practice .................................. 25.5 50.8 57.7 66.1 71.3 74.5 81.4 84.0 85.9 Internal medicine ............................... 32.5 52.6 57.8 66.2 71.0 73.8 79.8 82.2 84.8 Neurology ............................................ 34.8 56.1 63.8 71.8 76.4 78.9 84.1 85.8 87.1 Obstetrics-gynecology ........................ 29.1 52.6 58.0 65.7 69.9 72.5 77.3 79.5 81.3 Ophthalmology ................................... 27.3 60.0 66.1 73.2 78.3 81.2 86.2 87.9 89.8 Orthopedic surgery ............................. 29.0 58.4 65.5 74.9 79.2 82.6 86.8 88.7 90.4 Pathology ............................................ 39.6 59.2 65.8 73.3 76.8 78.9 83.1 85.0 86.6 Psychiatry ........................................... 30.0 44.1 48.8 53.5 57.8 58.7 64.6 67.6 70.4 Radiology ............................................ 41.3 62.0 68.2 74.7 78.6 82.8 84.9 87.0 88.3 Urology ............................................... 27.8 53.6 61.7 71.8 78.6 83.0 87.3 89.3 90.6 Nephrology .......................................... 50.8 71.7 76.3 82.4 84.3 87.0 90.0 90.6 91.3 Clinic or other group practice—not

group practice prepayment plan ... 33.8 73.9 77.0 75.5 80.5 79.4 84.5 87.8 90.1 

Limited licensed practitioners:

Chiropractor ....................................... 25.4 28.6 31.4 35.6 39.8 42.6 47.3 51.0 54.3 Podiatry-surgical chiropody ............... 38.2 59.6 64.2 70.9 75.3 79.2 83.3 86.0 87.9 Optometrist ........................................ 44.0 56.9 59.0 62.7 65.6 66.9 70.3 72.2 74.7 

Source: Health Care Financing Administration.

1159

DISTRIBUTION OF PHYSICIAN SERVICES

Tables D–28 to D–36 show the distribution of physician services

for calendar year 1998. These tables provide data from the seventh

year of the implementation of the Medicare fee schedule. The 1998

data are a summary of all claims filed with the Medicare carriers.

The totals shown will differ from total supplementary medical insurance (part B) outlay figures for 1998 shown in the budget for

several reasons. First, the amounts shown in these tables are allowed amounts, rather than reimbursements—that is, they include

both Medicare’s and the enrollee’s share of approved charges. Second, the amounts shown are for services rendered during calendar

year 1998; budget figures are for payments made during the fiscal

year regardless of when the services were rendered. Third, the

amounts shown are only for services reimbursed by carriers under

the fee schedule; hence, they do not include part B payments to

hospital outpatient departments or to risk-based prepaid medical

plans. Finally, the amounts shown underestimate what they are

supposed to represent by a small amount because some claims for

services rendered in 1998 had not been processed by carriers at the

time the 1998 files were submitted to HCFA, and because some

claims recorded had to be eliminated due to recording errors.

Table D–28 illustrates that in 1998, 77.6 percent of allowed

amounts under the fee schedule were for physicians’ services, and

another 1.3 percent were for the services of limited licensed practitioners—psychologists, podiatrists, optometrists, audiologists, chiropractors, dentists, and physical therapists. About 3.7 percent went

to independent laboratories in 1998, while 17.3 percent went to

suppliers of medical equipment, prosthetics, and ambulance services.

Table D–29 shows the distribution of spending for physicians’

services by specialty. (It excludes limited licensed practitioners,

labs, and suppliers.) In 1998, generalists accounted for 25.1 percent

of spending, nonsurgical specialists for 28.8 percent, and surgical

specialists for 26.1 percent. Radiologists, anesthesiologists, and pathologists together accounted for 10.5 percent of allowed amounts.

Other physician specialties accounted for the remaining 9.5 percent

of total allowed amounts for physicians’ services.

The major physician specialties treating the Medicare population,

in descending order of importance as measured by total allowed

amounts, were general internists (13.4 percent of allowed

amounts), cardiologists (9.0 percent), ophthalmologists (7.3 percent), radiologists (6.5 percent), and family practitioners (6.1 percent).

The share of services provided on an inpatient basis varies by

specialty. About 30.4 percent of the services of generalists were inpatient in 1998. The inpatient share for nonsurgical specialists was

35.7 percent and 32.9 percent for surgical specialists.

TABLE D–24.—PHYSICIAN AND LIMITED LICENSED PRACTITIONER PARTICIPATION RATES AS PERCENTAGE OF PHYSICIANS AND LIMITED LICE

PRACTITIONERS, BY STATE, FOR SELECTED PARTICIPATION PERIODS, 1985–99

State

Oct.

1985–Apr.

1986

Jan.

1991–Dec.

1991

Jan.

1992–Dec.

1992

Jan.

1993–Dec.

1993

Jan.

1994–Oct.

1994

Jan.

1995–Dec.

1995

Jan.

1996–Dec.

1996

Jan.

1997–Dec.

1997

Jan.

1998–Dec.

1998

1

Alabama ........................................ 58.2 82.7 83.4 85.1 87.2 90.5 91.8 93.5 74.0 Alaska ........................................... 10.4 53.8 55.1 60.4 66.3 77.1 73.5 79.0 79.6 Arizona .......................................... 15.4 61.3 64.5 76.2 82.6 87.1 85.2 86.6 89.2 Arkansas ....................................... 45.2 59.9 57.8 62.1 64.4 74.8 77.2 78.9 80.4 California ...................................... 30.0 60.8 62.6 65.9 69.0 74.5 80.5 80.9 81.9 Colorado ........................................ 28.1 35.3 48.0 55.7 58.5 65.2 79.5 81.4 83.1 Connecticut ................................... 22.2 29.3 40.8 48.1 55.4 57.8 61.8 86.4 87.8 Delaware ....................................... 23.9 43.9 51.9 57.4 60.0 68.0 72.2 68.6 83.1 District of Columbia ..................... 30.5 39.8 45.9 50.6 52.8 63.0 65.3 68.6 79.5 Florida ........................................... 25.7 36.5 41.5 55.6 62.2 68.0 70.9 73.9 76.2 Georgia .......................................... 33.1 53.6 57.2 74.9 82.7 86.3 87.2 88.6 88.6 Hawaii ........................................... 20.6 57.3 64.1 75.9 80.4 82.8 83.6 84.0 84.6 Idaho ............................................. 11.0 19.5 22.9 37.1 49.7 54.7 60.1 67.6 72.2 Illinois ........................................... 23.1 46.9 50.8 57.6 61.8 73.3 75.6 83.3 85.4 Indiana .......................................... 18.2 45.1 49.3 55.8 61.3 72.8 75.7 76.8 77.9 Iowa .............................................. 29.7 51.9 58.8 61.8 63.2 81.1 83.6 88.5 90.0 Kansas .......................................... 45.4 62.6 70.3 73.2 78.7 84.4 91.1 91.8 93.3 Kentucky ........................................ 24.3 59.5 64.0 73.6 69.1 83.4 85.8 88.7 89.7 Louisiana ...................................... 18.8 42.9 44.6 44.0 46.7 57.4 61.0 64.6 67.6 Maine ............................................ 35.4 50.3 51.6 52.0 53.6 68.9 72.2 79.9 92.4 Maryland ....................................... 30.4 45.3 58.7 72.5 77.3 88.1 89.9 89.6 90.6 Massachusetts .............................. 48.1 50.8 50.0 50.2 48.9 64.7 74.9 77.2 93.7 Michigan ....................................... 44.0 53.7 51.7 58.1 62.1 75.3 80.2 82.6 88.2 Minnesota ..................................... 18.5 29.3 34.4 44.4 51.3 58.6 70.6 77.3 77.9 Mississippi .................................... 19.1 42.7 47.9 53.6 53.8 59.4 77.3 79.3 81.4 

Missouri ........................................ 35.2 49.0 51.8 67.5 81.8 87.6 86.8 88.1 89.3 Montana ........................................ 24.3 24.8 23.7 54.7 58.7 70.1 77.4 78.7 82.7 Nebraska ....................................... 20.0 56.5 61.1 70.6 75.9 82.5 86.3 87.2 89.7 Nevada .......................................... 21.7 72.9 75.4 84.9 87.9 91.2 90.8 92.2 92.6 New Hampshire ............................. 26.9 32.7 38.5 43.0 48.0 60.4 77.0 79.7 91.9 New Jersey .................................... 18.0 29.6 36.5 42.6 45.9 54.9 60.6 62.8 66.0 New Mexico ................................... 17.7 49.7 53.6 66.8 74.2 78.1 80.7 81.7 87.8 New York ....................................... 20.8 34.6 36.9 40.7 46.2 59.2 64.2 70.0 72.8 North Carolina .............................. 39.1 58.1 68.2 72.8 76.5 77.6 81.0 84.6 86.0 North Dakota ................................. 10.9 43.9 45.8 55.0 77.4 81.8 92.2 93.2 93.5 Ohio ............................................... 21.7 52.5 57.3 76.6 83.3 90.5 91.8 92.7 73.2 Oklahoma ...................................... 13.8 39.0 44.4 53.9 64.9 72.3 76.1 84.0 88.4 Oregon ........................................... 18.5 46.7 51.7 59.2 66.5 79.7 82.1 87.6 89.3 Pennsylvania ................................. 50.8 45.9 53.0 59.7 61.1 67.3 69.3 72.0 73.6 Rhode Island ................................. 46.7 67.8 70.3 80.9 82.2 80.9 66.8 68.4 70.1 South Carolina .............................. 17.9 57.9 63.0 67.3 70.2 76.1 82.7 85.5 87.1 South Dakota ................................ 8.0 20.6 23.7 31.6 41.2 51.7 71.4 79.3 83.5 Tennessee ..................................... 21.1 63.7 67.6 70.5 76.9 80.6 83.1 87.5 88.7 Texas ............................................. 19.7 38.9 52.9 61.3 68.6 76.9 80.3 82.1 84.2 Utah .............................................. 29.3 65.6 69.5 80.3 82.0 85.9 86.8 90.2 92.1 Vermont ......................................... 41.5 45.4 54.2 56.5 58.8 68.8 76.1 78.6 91.1 Virginia ......................................... 29.6 48.1 49.7 52.2 52.9 55.6 84.3 85.7 86.8 Washington ................................... 23.6 46.1 53.1 64.7 73.9 76.2 86.4 89.9 91.2 West Virginia ................................ 22.9 66.3 68.4 75.9 81.9 87.2 89.3 90.8 90.1 Wisconsin ...................................... 31.0 46.8 55.5 66.8 73.7 81.2 83.9 85.2 89.0 Wyoming ........................................ 18.3 39.1 50.2 53.3 63.0 66.4 81.2 83.3 84.9 

National ........................... 28.4 47.6 52.2 59.8 64.8 72.3 77.5 80.2 82.8 

Source: Health Care Financing Administration, Office of Financial Management.

TABLE D–25.—ALLOWED CHARGES OF PARTICIPATING PHYSICIANS AS A PERCENT OF TOTAL ALLOWED CHARGES BY STATE, FOR SELECTE

PARTICIPATION PERIODS, 1984–99 1

[In percent]

Census division/State

Oct.

1984–

Sept. 1985

Jan.

1989–Mar.

1990

Apr.

1990–Dec.

1990

Jan.

1995–Dec.

1995

Jan.

1996–Dec.

1996

Jan.

1997–Dec.

1997

Jan.

1998–Dec.

1998

1

National .............................................................................. 36.0 62.0 67.2 92.6 94.3 95.1 95.7 New England:

Maine ......................................................................... 50.9 79.4 80.5 96.2 97.4 98.2 98.3 New Hampshire ........................................................ 40.1 42.8 46.2 93.2 94.8 96.7 97.4 Vermont .................................................................... 37.3 81.4 85.9 96.9 97.9 98.4 98.9 Massachusetts ......................................................... 70.7 95.4 95.0 97.4 97.9 98.6 98.8 Rhode Island ............................................................ 68.7 88.8 95.2 99.4 99.5 99.5 99.6 Connecticut .............................................................. 30.7 65.9 67.9 94.1 95.1 96.2 96.2 

Middle Atlantic:

New York .................................................................. 31.5 51.7 58.0 87.5 89.9 91.7 92.6 New Jersey ............................................................... 21.5 42.3 49.6 84.6 89.8 90.7 92.0 Pennsylvania ............................................................ 71.4 81.6 87.9 98.7 99.0 98.8 98.8 

East North Central:

Ohio ........................................................................... 41.5 61.9 70.9 97.8 97.8 97.1 96.5 Indiana ..................................................................... 18.9 60.6 65.2 94.0 95.5 96.4 97.3 Illinois ...................................................................... 29.4 58.1 61.8 90.7 93.0 94.8 95.5 Michigan .................................................................. 55.4 85.6 86.0 97.6 97.9 98.2 98.1 Wisconsin ................................................................. 31.3 42.7 48.9 91.1 93.4 94.4 97.5 

West North Central:

Minnesota ................................................................ 9.9 20.2 25.4 80.5 81.9 83.5 83.5 Iowa ......................................................................... 28.5 54.2 57.8 90.4 95.0 97.1 97.8 Missouri 2 ................................................................. 26.7 41.8 40.1 93.4 94.5 95.4 95.8 North Dakota ............................................................ 6.9 32.3 45.5 89.3 96.3 97.4 98.4 South Dakota ........................................................... 3.2 19.5 21.2 59.2 66.4 75.1 81.2 

Nebraska .................................................................. 30.5 51.7 54.8 86.2 88.8 91.6 93.7 Kansas 3 ................................................................... 48.0 82.5 82.3 95.3 98.0 98.4 98.9 

South Atlantic:

Delaware .................................................................. 57.0 70.8 76.6 95.3 96.7 97.0 97.2 Maryland 4 ................................................................ 57.8 80.4 83.3 92.9 94.3 95.5 96.0 District of Columbia 5 .............................................. 60.3 73.9 76.8 93.8 94.9 95.7 96.0 

Virginia 6 .................................................................. 31.0 69.5 71.2 96.3 97.4 97.8 98.0 

West Virginia ........................................................... 34.5 77.5 80.6 96.3 96.0 96.2 94.9 North Carolina ......................................................... 34.4 55.2 63.9 92.7 94.7 95.5 95.7 South Carolina ......................................................... 29.9 68.5 67.6 62.7 95.5 96.8 97.1 Georgia ..................................................................... 29.3 50.7 65.9 94.8 95.8 95.9 96.3 Florida ...................................................................... 30.0 61.6 68.8 94.7 95.8 96.5 97.3 

East South Central:

Kentucky ................................................................... 22.3 64.3 72.6 94.6 95.5 95.7 96.1 Tennessee ................................................................ 25.1 57.4 68.5 95.6 96.6 97.3 97.7 Alabama ................................................................... 42.5 81.3 84.9 97.0 97.7 98.1 98.4 Mississippi ............................................................... 14.3 65.3 68.3 92.8 94.3 94.9 95.3 

West South Central:

Arkansas .................................................................. 47.9 81.0 84.5 96.4 97.4 97.6 97.6 Louisiana ................................................................. 16.2 71.0 76.7 92.2 93.6 94.5 95.3 Oklahoma ................................................................. 16.6 39.1 50.0 91.4 93.8 95.2 96.1 Texas ........................................................................ 26.2 52.5 56.9 90.6 92.5 92.8 93.2 

Mountain:

Montana ................................................................... 25.6 29.9 29.7 83.1 91.8 93.6 94.5 Idaho ........................................................................ 8.6 13.2 17.5 61.6 69.7 76.4 79.0 Wyoming ................................................................... 15.7 19.7 25.8 75.6 81.0 84.7 87.2 Colorado ................................................................... 23.5 47.7 50.5 86.1 90.3 92.7 93.8 New Mexico .............................................................. 34.1 39.5 51.1 89.6 90.8 93.4 96.1 Arizona ..................................................................... 32.7 49.8 60.2 90.6 91.5 92.7 92.9 Utah ......................................................................... 43.8 68.9 65.1 94.7 96.2 96.9 97.7 Nevada ..................................................................... 41.5 69.9 82.1 98.4 98.8 98.9 98.7 

TABLE D–25.—ALLOWED CHARGES OF PARTICIPATING PHYSICIANS AS A PERCENT OF TOTAL ALLOWED CHARGES BY STATE, FOR SELECTE

PARTICIPATION PERIODS, 1984–99 1—Continued

[In percent]

Census division/State

Oct.

1984–

Sept. 1985

Jan.

1989–Mar.

1990

Apr.

1990–Dec.

1990

Jan.

1995–Dec.

1995

Jan.

1996–Dec.

1996

Jan.

1997–Dec.

1997

Jan.

1998–Dec.

1998

1

Pacific:

Washington .............................................................. 17.5 26.9 31.8 90.5 92.9 95.1 96.5 Oregon ...................................................................... 17.3 34.8 43.3 87.5 91.7 94.3 95.3 California ................................................................. 42.2 67.2 71.2 91.7 93.3 95.5 94.4 Alaska ...................................................................... 17.2 50.0 49.3 85.4 89.8 91.1 91.5 Hawaii ...................................................................... 39.7 58.6 70.1 97.2 97.3 97.5 96.8 

1 Rates reflect covered charges for physician claims processed during the period.2 Starting with fiscal year 1993, includes data for all counties in Missouri plus two counties on the State border located in Kansas. 3 Starting with fiscal year 1993, includes data for all counties in Kansas excluding two countries on the State border.4 Starting with fiscal year 1993, includes data for all counties in Maryland excluding two countries on the State border.5 Starting with fiscal year 1993, includes data for the District of Columbia plus two counties in Maryland located on the State border plus several counties and cities 

Virginia near the State border. 6 Starting with fiscal year 1993, includes data for all counties in Virginia excluding several counties and cities near the State border.

Source: Health Care Financing Administration, Office of Financial Management.

1165

TABLE D–26.—DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED BY

PARTICIPATION STATUS OF PHYSICIAN AND ASSIGNMENT STATUS OF CLAIM, 1984–99 1

[In percent]

Time period Participants

Nonparticipants

Assigned Unassigned

Oct. 1984–Sept. 1985 ..................................... 36.0 29.5 34.5

Oct. 1985–Mar. 1986 ...................................... 36.3 29.4 34.3

Apr. 1986–Dec. 1986 2 .................................... 38.7 28.0 32.9

Jan. 1987–Mar. 1988 3 .................................... 48.1 25.2 26.7

Apr. 1988–Dec. 1988 ....................................... 57.9 21.0 21.1

Jan. 1989–Mar. 1990 ...................................... 62.0 19.0 18.5

Apr. 1990–Dec. 1990 ....................................... 67.2 16.7 16.1

Jan. 1991–Dec. 1991 ....................................... 72.3 14.6 13.1

Jan. 1992–Dec. 1992 ....................................... 78.8 11.6 9.7

Jan. 1993–Dec. 1993 ....................................... 85.5 8.5 6.0

Jan. 1994–Dec. 1994 ....................................... 89.4 6.6 4.0

Jan. 1995–Dec. 1995 ....................................... 92.6 4.6 2.8

Jan. 1996–Dec. 1996 ....................................... 94.3 3.7 2.0

Jan. 1997–Dec. 1997 ....................................... 95.1 3.3 1.5

Jan. 1998–Dec. 1998 ....................................... 95.7 3.1 1.2

Jan. 1999–Dec. 1999 ....................................... 95.9 3.0 1.0

1 Rates reflect covered charges for physician claims processed during the period.

2 The actual participation period was May through December 1986, and the participation agreements

were in effect for that time. 3 The actual participation period is January 1987 through March 1988, and the participation agreements are in effect for that time.

Source: Health Care Financing Administration, Office of Financial Management.

TABLE D–27.—DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED BY STATE,

PARTICIPATION STATUS OF PHYSICIAN, AND ASSIGNMENT STATUS OF CLAIM, JANUARY–DECEMBER 1999 1

[In percent]

Census division/State Participating

physician

Nonparticipating physician

Assigned Unassigned

National ...................................................... 95.9 3.0 1.0

New England:

Maine ................................................ 98.4 1.3 0.3

New Hampshire ................................. 98.2 1.0 0.8

Vermont ............................................. 98.9 0.6 0.5

Massachusetts .................................. 98.6 1.3 0.1

Rhode Island ..................................... 99.6 0.3 0.1

Connecticut ....................................... 95.9 2.9 1.2

Middle Atlantic:

New York ........................................... 93.3 5.1 1.6

New Jersey ......................................... 92.9 4.8 2.3

Pennsylvania ..................................... 98.8 1.0 0.2

East North Central:

Ohio ................................................... 96.7 3.1 0.1

1166

TABLE D–27.—DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED BY STATE,

PARTICIPATION STATUS OF PHYSICIAN, AND ASSIGNMENT STATUS OF CLAIM, JANUARY–DECEMBER 1999 1—Continued

[In percent]

Census division/State Participating

physician

Nonparticipating physician

Assigned Unassigned

Indiana .............................................. 97.2 2.0 0.8

Illinois ............................................... 95.6 3.1 1.4

Michigan ........................................... 97.8 1.8 0.4

Wisconsin .......................................... 98.4 1.0 0.6

West North Central:

Minnesota .......................................... 83.6 12.0 4.4

Iowa ................................................... 98.1 0.9 1.0

Missouri 2 .......................................... 95.9 3.2 1.0

North Dakota ..................................... 98.8 0.6 0.6

South Dakota .................................... 88.2 3.7 8.1

Nebraska ........................................... 94.3 2.1 3.6

Kansas 3 ............................................ 98.9 0.6 0.4

South Atlantic:

Delaware ........................................... 97.3 1.9 0.8

Maryland 4 ......................................... 96.5 2.8 0.8

District of Columbia 5 ....................... 96.1 2.4 1.5

Virginia 6 ........................................... 98.0 1.6 0.4

West Virginia ..................................... 94.9 4.7 0.4

North Carolina ................................... 96.1 2.8 1.1

South Carolina .................................. 97.6 1.7 0.7

Georgia .............................................. 96.6 2.6 0.8

Florida ............................................... 97.7 1.7 0.6

East South Central:

Kentucky ............................................ 96.7 2.7 0.6

Tennessee .......................................... 97.5 2.0 0.5

Alabama ............................................ 98.5 1.1 0.4

Mississippi ........................................ 96.4 3.0 0.6

West South Central:

Arkansas ........................................... 98.0 1.5 0.5

Louisiana ........................................... 95.7 3.7 0.6

Oklahoma .......................................... 96.9 1.8 1.3

Texas ................................................. 93.5 5.9 1.0

Mountain:

Montana ............................................ 95.8 2.2 2.1

Wyoming ............................................ 79.2 8.0 12.8

Idaho ................................................. 89.7 3.6 6.7

Colorado ............................................ 95.9 1.8 2.3

New Mexico ....................................... 96.6 1.9 1.5

Arizona .............................................. 92.2 2.2 5.6

Utah .................................................. 98.4 1.0 0.6

Nevada .............................................. 98.9 0.8 0.2

Pacific:

Washington ....................................... 96.8 1.8 1.3

Oregon ............................................... 95.5 2.2 2.3

California .......................................... 94.5 4.5 1.0

1167

TABLE D–27.—DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED BY STATE,

PARTICIPATION STATUS OF PHYSICIAN, AND ASSIGNMENT STATUS OF CLAIM, JANUARY–DECEMBER 1999 1—Continued

[In percent]

Census division/State Participating

physician

Nonparticipating physician

Assigned Unassigned

Alaska ............................................... 93.7 5.0 1.4

Hawaii ............................................... 97.2 2.1 0.6

1 Rates reflect charges for physician claims processed during the period.

2 Includes data for all counties in Missouri plus two counties on the State border located in Kansas.

3 Includes data for all counties in Kansas excluding two counties on the State border.

4 Includes data for all counties in Maryland excluding two counties on the State border.

5 Includes data for the District of Columbia plus two counties in Maryland located on the State border

plus several counties and cities located in Virginia, near the State border. 6 Includes data for all counties in Virginia excluding several counties and cities near the State border.

Source: Health Care Financing Administration, Office of Financial Management.

TABLE D–28.—ALLOWED AMOUNTS FOR CLAIMS BY TYPE OF PROVIDER, 1998

Type of provider

Allowed

amounts

(millions)

Percent of

total

Physicians ............................................................................... $44,929.6 77.6

Limited licensed practitioners 1 ............................................. 772.3 1.3

Laboratories ............................................................................ 2,154.2 3.7

Medical suppliers 2 ................................................................. 10,044.7 17.3

All providers 3 ............................................................ 57,903.7 100.0

1 Includes psychology, podiatry, optometry, audiology, chiropractic, dentistry, and physical therapy.

2 Includes suppliers of medical equipment, prosthetics, and ambulance services.

3 Total does not include charges for hospital outpatient department facility fees or for risk-based prepaid medical plans since these are not reimbursed under the customary, prevailing, and reasonable system.

Source: Health Care Financing Administration, Center for Health Plans and Providers.

TABLE D–29.—ALLOWED AMOUNTS FOR PHYSICIANS’ SERVICES BY SPECIALTY, 1998

Specialty Allowed charges

(millions)

Percent

of total

Percent

inpatient

Generalists:

General practice .................................... $931 2.07 17.86

Family practice ..................................... 2,811 6.1 22.7

Internal medicine .................................. 6,166 13.4 35.3

Pediatrics .............................................. 48 0.1 20.2

Clinics ................................................... 1,578 3.4 33.1

All generalists .................................. 11,533 25.1 30.4

Nonsurgical specialists:

Allergy/immunology ............................... 113 0.2 2.7

Cardiology ............................................. 4,151 9.0 44.8

1168

TABLE D–29.—ALLOWED AMOUNTS FOR PHYSICIANS’ SERVICES BY SPECIALTY, 1998—

Continued

Specialty Allowed charges

(millions)

Percent

of total

Percent

inpatient

Dermatology .......................................... 988 2.2 0.7

Gastroenterology .................................... 1,267 2.8 40.1

Neurology ............................................... 767 1.7 41.1

Physical medicine ................................. 419 0.9 45.1

Psychiatry .............................................. 803 1.7 36.4

Pulmonary disease ................................ 991 2.2 65.5

Nuclear medicine .................................. 64 0.1 16.4

Geriatrics ............................................... 74 0.2 28.6

Nephrology ............................................. 869 1.9 43.0

Infectious disease ................................. 238 0.5 74.7

Endocrinology ........................................ 196 0.4 30.7

Rheumatology ........................................ 285 0.6 10.1

Peripheral vascular disease ................. 19 0.0 51.9

Hematology/oncology ............................. 1,444 3.1 11.1

Medical oncology ................................... 529 1.2 9.9

All nonsurgical specialists ............... 13,218 28.8 35.7

Surgical specialists:

General surgery ..................................... 1,893 4.1 56.7

Otology, laryngology, rhinology ............. 521 1.1 10.4

Neurosurgery ......................................... 346 0.8 77.8

Obstetrics-gynecology ........................... 365 0.8 29.7

Ophthalmology ...................................... 3,344 7.3 1.1

Orthopedic surgery ................................ 2,059 4.5 50.1

Plastic surgery ...................................... 193 0.4 27.5

Proctology .............................................. 78 0.2 34.5

Thoracic surgery .................................... 544 1.2 88.2

Urology .................................................. 1,954 4.3 15.9

Hand surgery ......................................... 28 0.1 13.4

Vascular surgery ................................... 305 0.7 65.5

Cardiac surgery ..................................... 278 0.6 95.2

Surgical oncology .................................. 25 0.1 49.4

Other ..................................................... 36 0.1 33.8

All surgical specialists ..................... 11,968 26.1 32.9

Other:

Anesthesiology ....................................... 1,301 2.8 59.4

Manipulative therapy ............................ 22 0.0 17.4

Pathology ............................................... 552 1.2 33.8

Radiology ............................................... 2,982 6.5 24.0

Critical care (intensivists) .................... 68 0.1 77.3

Radiation oncology ................................ 629 1.4 3.8

Intervention medicine ........................... 147 0.3 40.9

Other physician specialties .................. 3,497 7.6 7.5

All other ............................................ 9,198 20.0 22.6

Total—all physicians .................. 45,917 100.0 31.0

Source: Health Care Financing Administration.

1169

Table D–30 shows the distribution of spending for physicians’

services by type of service. About 43.5 percent of spending was for

medical care (nonsurgical) in 1998. About 27.8 percent of spending

was for surgical procedures in total, adding together the amounts

for surgeons, assistant surgeons, and anesthesiologists. About 8.3

percent was for diagnostic laboratory tests, which would include

not only blood chemistry analysis and urinalysis, but also tests

such as electrocardiograms. About 8.5 percent of spending was for

radiology, and 5.6 percent was for consultations.

TABLE D–30.—ALLOWED AMOUNTS FOR PHYSICIANS’ SERVICES BY TYPE OF SERVICE,

1998

Type of service

Allowed

charges

(millions)

Percent

of total

Percent

inpatient

Pneumococcal, flu, and hepatitis B vaccine .................. $97 0.2 0.0

Medical care .................................................................... 19,994 43.5 28.2

Surgery ............................................................................. 11,187 24.4 43.5

Consultation ..................................................................... 2,557 5.6 54.0

Diagnostic radiology ........................................................ 3,888 8.5 17.7

Diagnostic laboratory ....................................................... 3,792 8.3 16.5

Therapeutic radiology ....................................................... 816 1.8 4.5

Anesthesia ........................................................................ 1,377 3.0 61.0

Assistant at surgery ........................................................ 177 0.4 91.6

Other ................................................................................ 2,032 4.4 0.2

All services ......................................................... 45,917 100.0 31.0

Source: Health Care Financing Administration, Center for Health Plans and Providers.

Table D–31 lists the top 20 individual services, ranked by total

allowed amounts on claims submitted by selected physicians for

1998. The most important exclusion is amounts for the services of

anesthesiologists, since there would typically be a charge for anesthesiology for the surgical procedures. The amounts for surgical

procedures include claims by both the primary surgeon and any assistant surgeons, but not the amounts for anesthesiologists.

The top 20 services (out of more than 7,000) accounted for 37.6

percent of all spending for all physicians’ services in 1998. Cataract

extraction with implantation of an intraocular lens was the highest

ranked surgical procedure, accounting by itself for 2.6 percent of

total allowed amounts for physicians’ services. Most of the services

in the top 20 were evaluation and management services (that is,

visits and consultations).

1170

Table D–32 presents total allowed amounts for selected groups of

generic services, and shows the percent of total allowed amounts

for all physicians’ services accounted for by each group. As in table

D–31, certain physicians’ services—most notably for anesthesiologists—are not included in the allowed amounts for each service

group. No attempt was made to define and rank all possible service

groups, so that there may be other important service groups that

do not appear in the table. For example, diagnostic radiology accounts for 8.5 percent of allowed amounts for physicians’ services

(from table D–14), but radiological services do not appear in table

D–16.

TABLE D–31.—TOP 20 SERVICES BILLED BY PHYSICIANS UNDER MEDICARE, 1998

Rank

order

Service

code Description

Allowed

charges 1

(millions)

Percent of

total

1 99213 Office/outpatient visit, EST .......................... $3,356 7.4

2 99214 Office/outpatient visit, EST .......................... 2,030 4.5

3 99232 Subsequent hospital care ............................ 1,880 4.1

4 66984 Remove cataract, insert lens ....................... 1,194 2.6

5 99233 Subsequent hospital care ............................ 933 2.1

6 99231 Subsequent hospital care ............................ 854 1.9

7 99212 Office/outpatient visit, EST .......................... 804 1.8

8 99223 Initial hospital care ..................................... 656 1.5

9 99215 Office/outpatient visit, EST .......................... 582 1.3

10 88305 Tissue exam by pathologist ......................... 532 1.2

11 99254 Initial inpatient consultation ....................... 525 1.2

12 93307 Echo exam of heart ...................................... 487 1.1

13 99244 Office consultation ....................................... 419 0.9

14 99285 Emergency department visit ........................ 417 0.9

15 99284 Emergency department visit ........................ 401 0.9

16 99255 Initial inpatient consultation ....................... 396 0.9

17 90921 ESRD-related services, month ..................... 389 0.9

18 99238 Hospital discharge day ................................ 375 0.8

19 99312 Nursing fac care, subsequent ..................... 372 0.8

20 92014 Eye exam and treatment .............................. 368 0.8

Total .................................................... 16,849 37.6

1 Amounts for surgical procedures include fees for primary and assistant surgeons, but not for anesthesiologists.

Note.—EST = established patient.

Source: Health Care Financing Administration, Center for Health Plans and Providers.

The 20 service groups shown in table D–32 accounted for 42.8

percent of all allowed amounts for all physicians’ services in 1998.

The single most costly group was office visits (accounting for 16.7

percent of total allowed amounts for physicians’ services), followed

by hospital visits (11.1 percent). Cataract surgery of all types accounted for 2.6 percent of total allowed amounts for physicians’

services. It should also be noted that the amount for hemodialysis

includes only physician services and does not include the much

1171

larger amounts for the facility charges for hemodialysis that were

not billed under the fee-for-service reimbursement system.

In recent years, there have been many changes in the delivery

of health care services. Some of the more significant changes affecting Medicare services have been in the delivery of surgical services.

First, there has been significant growth in the amount of surgical

care provided by some specialties. Second, there has been a dramatic shift in the place of surgical care; that is, surgical care is

now frequently provided in outpatient settings, whereas previously

most surgical care was provided in inpatient settings.

TABLE D–32.—ALLOWED AMOUNTS FOR SELECTED GROUPS OF PHYSICIANS’ SERVICES,

1998

Rank Service group

Allowed

charges

(millions) 1

Percent of

total

1 Office visits (99201–99215) ........................................... $7,712 16.7

2 Hospital visits (99221–99238) ....................................... 5,145 11.1

3 Cataract surgery (66830–66985) .................................... 1,209 2.6

4 Emergency room visits (99281–99285) .......................... 1,148 2.5

5 Skilled nursing facility visits (99301–99313) ................ 933 2.0

6 Electrocardiograms (93000–93018, 93015–26) ............. 736 1.6

7 Colonoscopy (45378–45385, 44388–44393, 45355) ...... 563 1.2

8 Coronary artery bypass (33510–33516) .......................... 475 1.0

9 Cardiac catheterization (93501–93553) ......................... 425 1.0

10 Knee arthroplasty, arthroscopy (27446, 27447, 29881) 358 0.8

11 Hip arthroplasty, arthroscopy (27130–27132) ................ 174 0.4

12 Thromboendarterectomy (35301–35381) ........................ 141 0.3

13 Hemodialysis/continuous ambulatory peritoneal dialysis

(90935–90947).

141 0.3

14 Pacemaker implant/removal (33200–33214, 33233–

33237).

102 0.2

15 Home visits (99341–99353) ............................................ 100 0.2

16 Transurethral surgery (52602) ........................................ 94 0.2

17 Pacemaker tests (93731–93736) .................................... 86 0.2

18 Vein bypass (35501–35587) ........................................... 69 0.2

19 Electroencephalograms (95816–95827, 95950, 95955) 43 0.1

20 Prostatectomy (55801–55845) ........................................ 41 0.1

Total ........................................................................ 19,744 42.8

1 Amounts for surgical procedures do not include fees for anesthesiologists.

Source: Health Care Financing Administration, Center for Health Plans and Providers.

As shown in table D–33, the most significant shift in site of surgical care between 1980 and 1998 was out of inpatient settings and

into other settings. Outpatient hospital settings benefited most

from this shift, growing from only 3.3 percent of all surgical

charges in 1980 to 26.2 percent in 1998. The proportions of surgery

taking place in a physician’s office and in other nonhospital settings also grew. In 1998 the proportion of all surgical care provided

in inpatient settings had dropped to 43.5 percent.

1172

TABLE D–33.—CHARGES SUBMITTED TO MEDICARE FOR ALL PHYSICIAN SURGICAL

SERVICES BY PLACE OF SERVICE, SELECTED YEARS 1980–98

Year and place of service

Surgical charges 1

Amount in

millions

Percent of

surgical

charges

As percent of

total settings

charges

1980:

Office ....................................................... $445 11.6 12.2

Outpatient hospital 1 .............................. 129 3.3 29.5

Inpatient hospital ................................... 3,231 84.4 44.1

Other 2 ..................................................... 23 0.6 3.7

Total ............................................... 3,828 100.0 31.8

1990:

Office ....................................................... 2,004 18.1 16.2

Outpatient hospital 1 .............................. 2,867 26.0 54.3

Inpatient hospital ................................... 5,563 50.4 40.6

Ambulatory surgical center ..................... 488 4.4 51.2

Other 2 ..................................................... 127 1.1 14.5

Total ............................................... 11,048 100.0 33.3

1995:

Office ....................................................... 2,656 20.7 14.3

Outpatient hospital 1 .............................. 3,273 25.5 47.3

Inpatient hospital ................................... 5,817 45.3 38.8

Ambulatory surgical center ..................... 887 6.9 91.0

Other 2 ..................................................... 195 1.5 8.9

Total ............................................... 12,828 100.0 29.3

1997:

Office ....................................................... 2,603 21.7 12.9

Outpatient hospital 1 .............................. 3,064 25.6 45.2

Inpatient hospital ................................... 5,263 44.0 36.8

Ambulatory surgical center ..................... 839 7.0 88.7

Other 2 ..................................................... 200 1.7 7.6

Total ............................................... 11,969 100.0 26.7

1998:

Office ....................................................... 2,427 21.7 11.3

Outpatient hospital 1 .............................. 2,935 26.2 42.6

Inpatient hospital ................................... 4,861 43.5 34.1

Ambulatory surgical center ..................... 781 7.0 87.4

Other 2 ..................................................... 183 1.6 7.3

Total ............................................... 11,187 100.0 24.4

1May include some services rendered in an ambulatory surgical center. Medicare began covering services in ambulatory surgical centers in 1982. 2 Includes homes, nursing homes, and other places of service.

Source: Health Care Financing Administration, Center for Health Plans and Providers.

1173

Table D–34 shows the percent of total surgical charges by specialty in 1980 and 1998. In 1980, three specialties (ophthalmology,

general surgery, and orthopedic surgery) accounted for nearly half

of all Medicare surgical care. These same three specialties accounted for 40.3 percent of total surgical care in 1998. The shares

among these specialties changed. Ophthalmologists accounted for

only 13.6 percent in 1980, by 1995 their share had increased to

20.4 percent due primarily to the substantial growth in cataract

surgery during the 1980s. The percentage declined to 16.8 by 1998.

For gastroenterologists, surgical care represented much larger proportions of their total Medicare practice in 1998 than in 1980. On

the other hand, surgical charges for urologists represented much

smaller proportions of their total Medicare practice in 1998 than in

1980.

TABLE D–34.—SUBMITTED SURGICAL CHARGES AS A SHARE OF TOTAL SURGICAL

CHARGES AND AS A PERCENT OF TOTAL PRACTICE CHARGES BY MEDICAL SPECIALTY,

1980 AND 1998

Specialty

Percent distribution of

surgical charges

Surgical charges as a

percent of total practice charges

1980 1998 1980 1998

General surgery ......................................... 22.1 11.6 71.6 68.6

Otology, laryngology, rhinology .................. 1.9 1.8 49.7 38.7

Cardiology .................................................. 2.7 7.1 22.4 19.2

Dermatology ............................................... 2.4 5.9 60.9 66.3

Family practice .......................................... NA 1.0 NA 3.9

Gastroenterology ........................................ 1.7 6.4 45.9 56.9

Internal medicine ...................................... 4.2 2.6 6.9 4.8

Neurosurgery .............................................. 2.9 2.3 70.2 73.9

Obstetrics-gynecology ................................ NA 1.3 NA 39.2

Ophthalmology ........................................... 13.6 16.8 62.1 56.3

Orthopedic surgery .................................... 13.0 11.9 73.6 64.7

Plastic surgery .......................................... 1.3 1.4 88.1 80.3

Thoracic surgery ........................................ 8.0 4.0 82.2 81.8

Urology ....................................................... 10.7 5.2 75.6 29.6

Podiatry ..................................................... 3.0 5.6 53.5 66.4

Clinic or other group ................................. 4.7 2.5 25.8 18.1

All other physician specialties .................. 8.4 12.6 NA 8.4

All physicians .............................. 100.0 100.0 26.7 24.4

NA—Not available.

Source: Health Care Financing Administration, Center for Health Plans and Providers.

As shown in table D–35, many different medical specialties participated in the shift to outpatient surgery. In 1980, only two specialties (dermatology and podiatry) performed the majority of their

surgical services in outpatient settings; in these cases, the care was

generally provided in the physician’s office. In 1998, nine specialties provided a majority of their surgical care in outpatient settings: ophthalmology, podiatry, gastroenterology, dermatology, ENT

TABLE D–35.—SUBMITTED SURGICAL CHARGES UNDER MEDICARE BY MEDICAL SPECIALTY AND PLACE OF SERVICE, 1980 AND 1998

[In percent]

Medical specialty

1980 1998

Office Inpatient hos- pital Outpatient hospital Other 1 Office Inpatient hos- pital Outpatient hospital ASC 

General surgery .................................. 4.4 92.6 2.9 0.1 5.1 64.5 28.4 1.7 Otology, laryngology, rhinology ........... 12.6 83.7 3.7 (2) 40.2 19.4 35.2 4.6 

Cardiology ........................................... 1.7 97.9 0.4 (2) 2.5 78.1 18.2 0.1 

Dermatology ........................................ 94.6 4.0 0.9 0.6 97.0 0.1 2.1 0.6 Family practice ................................... NA NA NA NA 75.1 6.9 16.3 0.7 Gastroenterology ................................. 12.0 75.6 12.3 0.1 5.9 31.3 50.2 12.4 Internal medicine ............................... 17.5 76.6 5.7 0.2 24.8 38.3 32.5 3.5 Neurosurgery ....................................... 1.1 98.5 0.5 (2) 1.0 92.5 6.3 0.1 Obstetrics-gynecology ......................... NA NA NA NA 17.6 66.1 14.8 1.2 Ophthalmology .................................... 7.9 87.1 5.0 0.1 21.7 1.6 47.9 28.5 Orthopedic surgery ............................. 6.3 90.2 3.4 0.1 9.7 70.9 17.1 2.1 Plastic surgery .................................... 13.0 67.2 19.7 0.1 23.6 29.4 38.1 8.6 Thoracic surgery ................................. 0.8 98.7 0.5 (2) 0.5 95.7 3.6 0.1 Urology ................................................ 8.0 90.6 1.4 0.1 30.4 40.9 25.9 2.6 Podiatry ............................................... 71.3 13.5 0.9 14.3 68.8 1.4 5.0 1.7 Clinic or other group .......................... 10.1 85.3 4.5 0.1 11.6 55.6 27.7 4.2 All other physician specialties ........... NA NA NA NA 12.7 59.4 25.6 1.9 

All physicians ........................ 21.7 44.4 25.6 1.7 21.7 43.5 26.2 7.0 

1 Includes homes, nursing homes, and other places of service.2 Less than 0.05.

NA—Not available.Source: Health Care Financing Administration, Center for Health Plans and Providers.

1175

(otology, laryngology, and rhinology), internal medicine, plastic surgery, family practice, and urology. Podiatrists and dermatologists

continued primarily to work in their offices; internists split their

noninpatient work between office and outpatient settings, while

many of the other specialties provided their surgical services in

outpatient hospital and ambulatory surgical facilities. Most surgical specialties, such as general, orthopedic, cardiology, neurology,

and thoracic surgeons, remained closely tied to inpatient hospital

settings.

In 1998, ophthalmologists provided most (30.8 percent) of the

surgery done in outpatient hospital settings (table D–36). The predominance of ophthalmologists in this setting is due to cataract

surgery. Dermatologists accounted for the largest proportion of office surgical charges at 26.2 percent. However, ophthalmologists

and podiatrists also represented significant percentages of office

surgical charges, 16.8 and 17.9 percent respectively. In inpatient

settings, the traditional surgical specialties—general surgery, orthopedic surgery, cardiovascular surgery, thoracic surgery, and

urology accounted for 63.1 percent of all surgical charges.

Table D–37 shows the GPCIs, by Medicare carrier and locality,

for 1999 and 2000.

TABLE D–36.—DISTRIBUTION OF ALLOWED SURGICAL CHARGES BY SELECTED

SPECIALTIES AND SELECTED PLACE OF SERVICE, 1998

[In percent]

Specialty Office Inpatient

hospital

Outpatient

hospital

General surgery ............................................................ 2.7 17.2 12.6

Otology, laryngology, rhinology .................................... 3.3 0.8 2.4

Cardiology .................................................................... 0.8 12.8 4.9

Dermatology ................................................................. 26.2 0.0 0.5

Family practice ............................................................ 3.3 0.2 0.6

Gastroenterology ........................................................... 1.8 4.6 12.3

Internal medicine ......................................................... 3.0 2.3 3.3

Neurosurgery ................................................................ 0.1 4.9 0.5

Obstetrics-gynecology .................................................. 1.0 1.9 0.7

Ophthalmology ............................................................. 16.8 0.6 30.8

Orthopedic surgery ....................................................... 5.3 19.4 7.7

Plastic surgery ............................................................. 1.5 0.9 2.0

Thoracic surgery ........................................................... 0.1 8.8 0.5

Urology ......................................................................... 7.2 4.9 5.1

Podiatry ........................................................................ 17.9 0.2 1.1

Clinic or other group ................................................... 1.4 3.3 2.7

Other physician specialties ......................................... 7.3 17.2 12.3

Total ................................................................ 100.0 100.0 100.0

Source: Health Care Financing Administration, Center for Health Plans and Providers.

1176

TABLE D–37.—GEOGRAPHIC PRACTICE COST INDICES BY MEDICARE STATE AND

LOCALITY, 1999–2000

Locality name

Cost indices

Work Practice expense Malpractice

Alabama ....................................................... 0.978 0.872 0.876

Alaska .......................................................... 1.063 1.173 1.533

Arizona ......................................................... 0.995 0.971 1.189

Arkansas ...................................................... 0.953 0.855 0.403

Anaheim/Santa Ana, CA .............................. 1.036 1.191 0.846

Los Angeles, CA ........................................... 1.055 1.199 0.846

Marin/Napa/Solano, CA ................................ 1.014 1.161 0.667

Oakland/Berkeley, CA ................................... 1.040 1.196 0.667

San Francisco, CA ........................................ 1.067 1.299 0.667

San Mateo, CA ............................................. 1.047 1.274 0.667

Santa Clara, CA ........................................... 1.062 1.262 0.667

Ventura ......................................................... 1.027 1.131 0.717

Rest of California 1 ...................................... 1.008 1.043 0.698

Rest of California 1 ...................................... 1.008 1.043 0.698

Colorado ....................................................... 0.987 0.970 0.795

Connecticut .................................................. 1.049 1.172 1.052

Delaware ...................................................... 1.019 1.028 0.860

DC & MD/VA suburbs .................................. 1.050 1.161 1.032

Ft. Lauderdale, FL ........................................ 0.996 1.026 1.783

Miami, FL ..................................................... 1.015 1.077 2.350

Rest of Florida ............................................. 0.975 0.948 1.327

Atlanta, GA ................................................... 1.006 1.034 0.951

Rest of Georgia ............................................ 0.970 0.900 0.951

Hawaii/Guam ................................................ 0.998 1.183 0.954

Idaho ............................................................ 0.960 0.892 0.566

Chicago, IL ................................................... 1.027 1.088 1.693

East St. Louis, IL ......................................... 0.988 0.931 1.487

Suburban Chicago, IL .................................. 1.006 1.067 1.365

Rest of Illinois ............................................. 0.963 0.886 0.990

Indiana ......................................................... 0.981 0.917 0.408

Iowa .............................................................. 0.958 0.882 0.648

Kansas 1 ....................................................... 0.963 0.898 0.890

Kansas 1 ....................................................... 0.963 0.898 0.890

Kentucky ....................................................... 0.970 0.874 0.807

New Orleans, LA ........................................... 0.998 0.950 1.153

Rest of Louisiana ......................................... 0.969 0.881 1.031

Southern Maine ............................................ 0.979 1.030 0.708

Rest of Maine .............................................. 0.961 0.924 0.708

Baltimore/Surr Ctys, MD .............................. 1.019 1.039 1.098

Rest of Maryland ......................................... 0.985 0.986 0.866

Metropolitan Boston ..................................... 1.039 1.196 0.713

Rest of Massachusetts ................................ 1.010 1.093 0.713

Detroit, MI .................................................... 1.042 1.022 3.069

Rest of Michigan ......................................... 0.996 0.939 1.828

Minnesota ..................................................... 0.989 0.967 0.507

Mississippi ................................................... 0.957 0.846 0.721

Metropolitan Kansas City, MO ..................... 0.988 0.949 1.196

Metropolitan St. Louis, MO .......................... 0.994 0.943 1.198

1177

TABLE D–37.—GEOGRAPHIC PRACTICE COST INDICES BY MEDICARE STATE AND

LOCALITY, 1999–2000—Continued

Locality name

Cost indices

Work Practice expense Malpractice

Rest of Missouri 1 ........................................ 0.945 0.828 1.165

Rest of Missouri 1 ........................................ 0.945 0.828 1.165

Montana ....................................................... 0.951 0.877 0.732

Nebraska ...................................................... 0.949 0.873 0.443

Nevada ......................................................... 1.005 1.032 0.997

New Hampshire ............................................ 0.988 1.033 1.013

Northern New Jersey ..................................... 1.057 1.191 0.795

Rest of New Jersey ....................................... 1.028 1.094 0.795

New Mexico .................................................. 0.973 0.910 0.716

Manhattan, NY ............................................. 1.093 1.353 1.654

NYC Suburbs/LI, NY ..................................... 1.067 1.233 1.932

Poughkeepsie/N NYC suburbs, NY ............... 1.010 1.084 1.326

Queens, NY ................................................... 1.057 1.234 1.839

Rest of New York ......................................... 0.999 0.959 0.793

North Carolina .............................................. 0.970 0.924 0.497

North Dakota ................................................ 0.950 0.877 0.656

Ohio .............................................................. 0.990 0.939 1.074

Oklahoma ..................................................... 0.969 0.882 0.451

Portland, OR ................................................. 0.996 1.021 0.587

Rest of Oregon ............................................. 0.961 0.938 0.587

Metropolitan Philadelphia, PA ..................... 1.024 1.089 1.207

Rest of Pennsylvania ................................... 0.989 0.931 0.637

Puerto Rico ................................................... 0.882 0.729 0.359

Rhode Island ................................................ 1.018 1.069 1.189

South Carolina ............................................. 0.975 0.905 0.280

South Dakota ............................................... 0.935 0.873 0.435

Tennessee ..................................................... 0.975 0.899 0.552

Austin, TX ..................................................... 0.986 1.000 0.849

Beaumont, TX ............................................... 0.992 0.899 1.386

Brazoria, TX .................................................. 0.992 0.977 1.386

Dallas, TX ..................................................... 1.010 1.016 0.930

Fort Worth, TX .............................................. 0.987 0.971 0.930

Galveston, TX ............................................... 0.988 0.970 1.386

Houston, TX .................................................. 1.020 1.007 1.418

Rest of Texas ............................................... 0.966 0.888 0.871

Utah ............................................................. 0.977 0.909 0.594

Vermont ........................................................ 0.973 0.984 0.548

Virgin Islands ............................................... 0.965 1.034 1.032

Virginia ......................................................... 0.985 0.941 0.557

Seattle (King Co), WA .................................. 1.005 1.080 0.742

Rest of Washington ..................................... 0.982 0.976 0.742

West Virginia ................................................ 0.963 0.853 1.106

Wisconsin ..................................................... 0.981 0.933 0.841

Wyoming ....................................................... 0.967 0.895 0.705

1 Payment locality is serviced by two carriers.

Source: Federal Register (1999b).

1178

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Federal Register. (1991, August 30). Prospective Payment System

for Inpatient Hospital Capital-Related Costs, 56(169), 43358–

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Federal Register. (1999a, July 30). Medicare program; Changes to

the hospital inpatient prospective payment systems and fiscal

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Federal Register. (1999b, November 2). Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule

for Calendar Year 2000; Final rule. 64(211). 59379–590.

Federal Register. (2000, January 12). Medicare program; Changes

to the hospital inpatient prospective payment systems and fiscal year 2000 rates, corrections 65(8), 1817–23.

Medicare Payment Advisory Commission (1998, March) Report to

the Congress: Medicare Payment Policy. Volume II Analytic Papers. Washington, DC: Author.

Medicare Payment Advisory Commission (1999, March) Report to

the Congress: Medicare Payment Policy. Washington, DC: Author.

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Full Implementation. Chapel Hill, NC.

Prospective Payment Assessment Commission. (1997, March). Report and recommendations to the Secretary. Washington, DC:

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Prospective Payment Assessment Commission. (1997, June). Medicare prospective payment and the American health care system.

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