[Federal Register: November 28, 2003 (Volume 68, Number 229)]
[Proposed Rules]
[Page 66919-66978]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28no03-33]
[[Page 66919]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, and 424
Medicare Program; Prospective Payment System for Inpatient Psychiatric
Facilities; Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, and 424
[CMS-1213-P]
RIN 0938-AL50
Medicare Program; Prospective Payment System for Inpatient
Psychiatric Facilities
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This rule proposes a prospective payment system for Medicare
payment of inpatient hospital services furnished in psychiatric
hospitals and psychiatric units of acute care hospitals. This rule
proposes to implement section 124 of the Medicare, Medicaid, andSCHIP
Balanced Budget Refinement Act of 1999 (BBRA), which requires the
implementation of a per diem prospective payment system for hospital
services of psychiatric hospitals and psychiatric units. The
prospective payment system described in this proposed rule would
replace the reasonable cost-based payment system currently in effect.
DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on January 27, 2004.
ADDRESSES: In commenting, please refer to file code CMS-1213-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission. Mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-1213-P, P.O. Box 8012, Baltimore, MD 21244-8012. Please allow
sufficient time for mailed comments to be received timely in the event
of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security
Boulevard, Baltimore, MD 21244-1850. (Because access to the interior of
the HHH Building is not readily available to persons without Federal
Government identification, commenters are encouraged to leave their
comments in the CMS drop slots located in the main lobby of the
building. A stamp-in clock is available for persons wishing to retain a
proof of filing by stamping in and retaining an extra copy of the
comments being filed.) Comments mailed to the addresses indicated as
appropriate for hand or courier delivery may be delayed and could be
considered late.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Janet Samen, (410) 786-4533. Philip
Cotterill, (410) 786-6598, for information regarding the regression
analysis.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 4 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, phone (410) 786-9994.
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This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html
.
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.
Table of Contents
I. Background
A. General and Legislative History
B. Overview of the Payment System for Psychiatric Hospitals and
Psychiatric Units before the BBA
1. Description of the TEFRA Payment Methodology
2. BBA Amendments to TEFRA
3. BBRA Amendments to TEFRA
4. BIPA Amendments to TEFRA
II. Overview of the Proposed IPF Prospective Payment System
A. Use of Diagnostic Codes for Payment
1. ICD
2. DRGs
B. Limitations of the DRG System for Psychiatric Patients
C. Proposed DRG Adjustments Under the Proposed IPF Prospective
Payment System
D. DRGs not Recognized in the Proposed IPF Prospective Payment
System
E. Applicability of the Proposed IPF Prospective Payment System
III. Development of the Proposed IPF Per Diem Payment Amount
A. Proposed Market Basket
B. Development of the Proposed Case-Mix Adjustment Regression.
1. Proposed Patient-Level Characteristics
a. DRGs
b. Comorbidities
c. Patient Age and Gender
d. Length of Stay
2. Proposed Facility-Level Characteristics
a. Rural Location
b. Teaching Status
c. Disproportionate Share Hospital Status
d. Psychiatric Units in General Acute Care Hospitals
e. Adjustment for Alaska and Hawaii IPFs
3. Proposed Payment Adjustments
a. Proposed Outlier Adjustment
b. Methodology for Proposed Outlier Payments
c. Proposed Implementation of the Outlier Policy
1. Statistical Accuracy of Cost-to-Charge Ratio
2. Adjustment of IPF Outlier Payments
d. Computation of Proposed Outlier Payments
e. Interrupted Stays
C. Development of the Proposed Budget-Neutral Federal Per Diem
Base Rate
1. Data Used to Develop the Proposed Federal Per Diem Base Rate
2. Calculation of the Proposed Per Diem Amount
3. Determining the Proposed Update Factors for the Budget-
Neutrality Calculation
a. Cost Report Data for April 1, 2004 through June 30, 2005
b. Estimate of Total Payments under the TEFRA Payment System
c. Payments Under the Proposed Prospective Payment System
without a Budget-Neutrality Adjustment
d. Calculation of the Proposed Budget-Neutrality Adjustment
4. The Proposed Behavioral Offset
5. Proposed Federal Per Diem Base Rate
6. Proposed Changes to Physician Recertification Requirements
E. Proposed Area Wage Adjustment
F. Effect of the Proposed Transition on Budget Neutrality
G. Calculation of the Proposed Payment
IV. Implementation of the Proposed IPF Prospective Payment System
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A. Proposed Transition
B. New Providers
C. Claims Processing
D. Periodic Interim Payments (PIP)
E. Limitation on Beneficiaries Charges
V. Future Updates
A. Proposed Annual Update Strategy
B. Update of the ICD Codes and DRGs
C. Future Refinements
1. RTI International'' (trade name of Research Triangle
Institute)
a. Mode of Practice
b. Patient Characteristics
c. Analysis
2. University of Michigan Research
3. Case-Mix Tool
VI. Provisions of the Proposed Rule
VII. Collection of Information Requirements
VIII. Response to Comments
IX. Regulatory Impact Statement
A. Overall Impact
B. Anticipated Effects
1. Budgetary Impact
2. Impact on Providers
3. Results
a. Facility Type
b. Location
c. Teaching Status
d. Census Region
e. Size
4. Effect on the Medicare Program
5. Effect on Beneficiaries
6. Computer Hardware and Software
C. Alternatives Considered
Regulation Text
Addendum A: Proposed Psychiatric Prospective Payment Adjustment
Addendum B1: Proposed Pre-Reclassified Wage Index for Urban Areas
Addendum B2: Proposed Wage Index for Rural Areas
Addendum C: Proposed Case-Mix Assessment Tool
Acronyms
Because of the many terms to which we refer by acronym in this
proposed rule, we are listing the acronyms used and their corresponding
terms in alphabetical order below:
BBA Balanced Budget Act of 1997, (Pub. L. 105-33)
BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999, (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance
Program] Benefits Improvement and Protection Act of 2000, (Pub. L. 106-
554)
CMS Centers for Medicare & Medicaid Services DSM-IV-TR Diagnostic and
Statistical Manual of Mental Disorders Fourth Edition--Text Revision
DRGs Diagnosis-related groups
FY Federal fiscal year
HCRIS Hospital Cost Report Information System
ICD-9-CM International Classification of Diseases, 9th Revision,
Clinical Modification
IPFs Inpatient psychiatric facilities
IRFs Inpatient rehabilitation facilities
LTCHs Long-term care hospitals
MedPAR Medicare provider analysis and review file
PIP Periodic interim payments
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, (Pub. L. 97-
248)
I. Background
A. General and Legislative History
When the Medicare statute was originally enacted in 1965, Medicare
payment for hospital inpatient services was based on the reasonable
costs incurred in furnishing services to Medicare beneficiaries.
Section 223 of the Social Security Act Amendments of 1972 (Pub. L. 92-
603) amended section 1861(v)(1) of the Social Security Act (the Act) to
set forth limits on reasonable costs for hospital inpatient services.
The statute was later amended by section 101(a) of the Tax Equity and
Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248) to limit
payment by placing a limit on allowable costs per discharge.
The Congress directed implementation of a prospective payment
system for acute care hospitals in 1983, with the enactment of Pub. L.
98-21. Section 601 of the Social Security Amendments of 1983 (Pub. L.
98-21) added a new section 1886(d) to the Act that replaced the
reasonable cost-based payment system for most hospital inpatient
services with a prospective payment system.
Although most hospital inpatient services became subject to the
prospective payment system, certain specialty hospitals were excluded
from the prospective payment system and continued to be paid reasonable
costs subject to limits imposed by TEFRA. These hospitals included
psychiatric hospitals and psychiatric units in acute care hospitals,
long-term care hospitals (LTCHs), children's hospitals, and
rehabilitation hospitals and units. Cancer hospitals were added to the
list of excluded hospitals by section 6004(a) of the Omnibus Budget
Reconciliation Act of 1989 (Pub. L. 101-239).
The Congress enacted various provisions in the Balanced Budget Act
of 1997 (BBA) (Pub. L. 105-33), the Medicare, Medicaid, and SCHIP
[State Children's Health Insurance Program] Balanced Budget Refinement
ACT (BBRA) (Pub. L. 106-113), and the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act (BIPA) (Pub. L. 106-554) to
replace the cost-based methods of reimbursement with a prospective
payment system for the following excluded hospitals:
[sbull] Rehabilitation hospitals (including units in acute care
hospitals).
[sbull] Psychiatric hospitals (including units in acute care
hospitals.
[sbull] LTCHs.
The BBA also imposed national limits (or caps) on hospital-specific
target amounts (that is, annual per discharge limits) for these
hospitals until cost reporting periods beginning on or after October 1,
2002. A detailed description of the TEFRA payment methodology is
provided in section I.B.1. of this proposed rule.
Section 124 of the BBRA mandated that the Secretary--(1) develop a
per diem prospective payment system for inpatient hospital services
furnished in psychiatric hospitals and psychiatric units; (2) include
in the prospective payment system an adequate patient classification
system that reflects the differences in patient resource use and costs
among psychiatric hospitals and psychiatric units; (3) maintain budget
neutrality; (4) permit the Secretary to require psychiatric hospitals
and psychiatric units to submit information necessary for the
development of the prospective payment system; and (5) submit a report
to the Congress describing the development of the prospective payment
system.
Section 124 also required that the payment system for inpatient
psychiatric services be implemented for cost reporting periods
beginning on or after October 1, 2002. The creation of each new payment
system requires an extraordinary amount of lead-time to develop and
implement the necessary changes to our existing computerize claims
processing systems. In order to meet the BBRA requirement to develop an
adequate patient classification system, we undertook two research
projects. It became apparent that the two research projects could not
be completed in time for us to implement an inpatient psychiatric
facility prospective payment system by October 1, 2002. It was
impossible for us to analyze our existing administrative data in a
sufficient amount of time to go through notice and comment rulemaking
and implementation of the inpatient psychiatric facility prospective
payment system by the statutory deadline. This delay enabled us to
analyze our existing administrative data to determine the feasibility
and validity of using these data to develop the proposed inpatient
psychiatric facility prospective payment system. We are using a
combination of available facility and patient specific data for this
proposed rule. Our research efforts will
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continue and will be used to refine the proposed system.
In this proposed rule, as required under section 124 of the BBRA,
we set forth the proposed Medicare prospective payment system for
psychiatric hospitals and psychiatric units of acute care hospitals. We
note that many hospitals have ``psychiatric units,'' however; only
those units that are separately certified from the hospital and meet
the requirements of Sec. 412.23, Sec. 412.25, and Sec. 412.27 are
excluded from the hospital inpatient prospective payment system and
would be subject to this proposed prospective payment system.
Psychiatric units that are currently paid under the hospital inpatient
prospective payment system and do not meet the requirements of Sec.
412.22, Sec. 412.25 and Sec. 412.27 would not be paid under the
proposed IPF prospective payment system. The proposed system includes
an adequate patient classification system that would result in higher
prospective payments to providers treating more costly, resource
intensive patients using statistically objective criteria.
We are proposing to establish a base payment rate that would be
paid to inpatient psychiatric facilities for each day of inpatient
psychiatric care (the Federal per diem base rate). The proposed base
rate would be adjusted by certain proposed patient-level and facility-
level characteristics.
B. Overview of the Payment System for Psychiatric Hospitals and
Psychiatric Units Before the BBA
1. Description of the TEFRA Payment Methodology
Hospitals and units that are excluded from the hospital inpatient
prospective payment system under section 1886(d)(1)(B) of the Act are
paid for their inpatient operating costs under the provisions of Pub.
L. 97-248 (TEFRA). The TEFRA provisions are found in section 1886(b) of
the Act and implemented in regulations at 42 CFR Part 413. TEFRA
established payments based on hospital-specific limits for inpatient
operating costs. As specified in Sec. 413.40, TEFRA established a
ceiling on payments for hospitals excluded from the acute care hospital
inpatient prospective payment system. A ceiling on payments is
determined by calculating the product of a facility's base year costs
(the year in which its target reimbursement limit is based) per
discharge, updated to the current year by a rate-of-increase
percentage, and multiplied by the number of total current year
discharges. A detailed discussion of target amount payment limits under
TEFRA can be found in the final rule concerning the hospital inpatient
prospective payment system published in the Federal Register on
September 1, 1983 (48 FR 39746).
The base year for a facility varied, depending on when the facility
was initially determined to be a prospective payment system-excluded
provider. The base year for facilities that were established before the
implementation of the TEFRA provision was 1982. For facilities
established after the implementation of the TEFRA provision, facilities
were allowed to choose which of their first 3 cost-reporting years
would be used in the future to determine their target limit. In 1992,
the ``new provider'' period was shortened to 2 full years of cost-
reporting periods (Sec. 413.40(f)(1)).
Excluded facilities whose costs were below their target amounts
would receive bonus payments equal to the lesser of half of the
difference between costs and the target amount, up to a maximum of 5
percent of the target amount, or the hospital's costs. For excluded
hospitals whose costs exceeded their target amounts, Medicare provided
relief payments equal to half of the amount by which the hospital's
costs exceeded the target amount up to 10 percent of the target amount.
Excluded facilities that experienced a more significant increase in
patient acuity could also apply for an additional amount as specified
in Sec. 413.40(d) for Medicare exception payments.
2. BBA Amendments to TEFRA
The BBA amendments to section 1886 of the Act significantly altered
the payment provisions for hospitals and units paid under the TEFRA
provisions and added other qualifying criteria for certain hospitals
excluded from the hospital inpatient prospective payment system. A
complete explanation of these amendments can be found in the final rule
concerning the hospital inpatient prospective payment system we
published in the Federal Register on August 29, 1997 (62 FR 45966).
The BBA made the following changes to section 1886 of the Act for
TEFRA hospitals:
[sbull] Section 4411 of the BBA amended section 1886(b)(3)(B) of
the Act and restricted the rate-of-increase percentages that are
applied to each provider's target amount so that excluded hospitals and
units experiencing lower inpatient operating costs relative to their
target amounts receive lower rates of increase.
[sbull] Section 4412 of the BBA amended section 1886(g) of the Act
to establish a 15-percent reduction in capital payments for excluded
psychiatric and rehabilitation hospitals and units and LTCHs, for
portions of cost reporting periods occurring during the period of
October 1, 1997, through September 30, 2002.
[sbull] Section 4414 of the BBA amended section 1886(b)(3) of the
Act to establish caps on the target amounts for excluded hospitals and
units at the 75th percentile of target amounts for similar facilities
for cost reporting periods beginning on or after October 1, 1997,
through September 30, 2002. The caps on these target amounts apply only
to psychiatric and rehabilitation hospitals and units and LTCHs.
Payments for these excluded hospitals and units are based on the lesser
of a provider's cost per discharge or its hospital-specific cost per
discharge, subject to this cap.
[sbull] Section 4415 of the BBA amended section 1886(b)(1) of the
Act by revising the percentage factors used to determine the amount of
bonus and relief payments and establishing continuous improvement bonus
payments for excluded hospitals and units for cost reporting periods
beginning on or after October 1, 1997. If a hospital is eligible for
the continuous improvement bonus, the bonus payment is equal to the
lesser of: (1) 50 percent of the amount by which operating costs are
less than expected costs; or (2) 1 percent of the target amount.
[sbull] Sections 4416 and 4419 of the BBA amended sections 1886(b)
of the Act to establish a new framework for payments for new excluded
providers. Section 4416 added a new section 1886(b)(7) to the Act that
established a new statutory methodology for new psychiatric and
rehabilitation hospitals and units, and LTCHs. Under section 4416,
payment to these providers for their first two cost reporting periods
is limited to the lesser of the operating costs per case, or 110
percent of the national median of target amounts, as adjusted for
differences in wage levels, for the same class of hospital for cost
reporting periods ending during FY 1996, updated to the applicable
period.
3. BBRA Amendments to TEFRA
The BBRA of 1999 refined some of the policies mandated by the BBA
for hospitals and units paid under the TEFRA provisions. The provisions
of the BBRA, which amended section 1886(b)(3)(H) of the Act, were
explained in detail and implemented in the hospital inpatient
prospective payment system interim final rule published in the Federal
Register on August 1, 2000 (65 FR 47026) and in the hospital inpatient
prospective payment system
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final rule also published on August 1, 2000 (65 FR 47054).
With respect to the TEFRA payment methodology, section 4414 of the
BBA had provided for caps on target amounts for excluded hospitals and
units for cost reporting periods beginning on or after October 1, 1997.
Section 121 of the BBRA amended section 1886(b)(3)(H) of the Act to
provide for an appropriate wage adjustment to these caps on the target
amounts for certain hospitals and units paid under the TEFRA
provisions, effective for cost reporting periods beginning on or after
October 1, 1999 through September 30, 2002.
4. BIPA Amendments to TEFRA
Section 306 of BIPA amended section 1886 of the Act by increasing
the incentive payments for psychiatric hospitals and psychiatric units
to 3 percent for cost reporting periods beginning on or after October
1, 2000 and before October 1, 2001.
II. Overview of the Proposed IPF Prospective Payment System
As required by statute, we are proposing a per diem prospective
payment system for psychiatric hospitals and psychiatric units
(hereinafter referred to as inpatient psychiatric facilities (IPFs))
that would replace the current reasonable cost-based payment system
under the TEFRA provisions. In this rule, we are proposing to base the
system on data from the 1999 Medicare Provider Analysis and Review
(MedPAR) file, which includes patient characteristics (for example,
patients' diagnoses and age), and data from the 1999 Hospital Cost
Report Information System (HCRIS), which includes facility
characteristics (for example, location and teaching status). We are
using the 1999 MedPAR and HCRIS data because they are the best
available data.
Based on our analysis, we are proposing the following methodology
as the basis of the proposed IPF prospective payment system:
[sbull] Compute a Federal per diem base rate to be paid to all
psychiatric hospitals and psychiatric units based on the sum of the
average routine operating, ancillary, and capital costs for each
patient day of psychiatric care in an IPF adjusted for budget
neutrality (see section III.C. of this proposed rule). In computing the
Federal per diem base rate, our analysis showed that routine operating
and capital represent approximately 88 percent of total costs and the
remaining 12 percent of total costs are for ancillary services.
[sbull] Adjust the Federal per diem base rate to reflect certain
patient and facility characteristics that were found in the regression
analysis to be associated with statistically significant cost
differences (see section III.B. of this proposed rule). The variance
explained by patient characteristics (19 percent) in the regression
analysis is limited by the nature of the administrative data used to
develop this system, which assigns average facility routine costs to
individual patients. We are conducting research to better understand
the relationship between individual patient characteristics and average
facility routine costs that could be incorporated into the payment
system in future updates. We note that ancillary costs are already
identifiable at the individual patient level.
[sbull] Implement an April 1, 2004 effective date and a 3-year
transition period. As explained in section IV of this proposed rule, it
ultimately may be necessary to delay implementation beyond April 2004
as well as to increase the length of the transition period. However,
the rate development, budget-neutrality adjustment, and impact analysis
assume an April 1, 2004 effective date and a 3-year transition period.
[sbull] Include research information for future refinement of the
proposed patient classification system. Part of this research could
result in a new patient assessment instrument that could identify
additional patient level characteristics.
In addition, we are proposing to make the following types of
adjustments to appropriately make payments on a per-diem basis:
[sbull] Patient-level adjustments for age, specified diagnosis-
related groups, and selected high cost comorbidity categories. These
patient-level characteristics explain approximately 19 percent of the
variance in the cost of psychiatric care in the administrative data,
which establishes the empirical basis for this methodology.
[sbull] Facility adjustments that include a wage index adjustment,
rural location adjustment, and an indirect teaching adjustment. These
facility characteristics explain approximately 13 percent of the
variance in the costs of psychiatric care in the administrative data.
[sbull] Variable per diem adjustments to recognize the higher costs
incurred in the early days of a psychiatric stay.
[sbull] Outlier adjustments to target greater payment to the high
cost cases.
We are also proposing the following policies:
[sbull] Interrupted stay policy for the purpose of applying the
variable per diem adjustment and the outlier policy.
[sbull] Coding policy (see section II. A.) that would--(1) require
IPFs to report patient diagnoses using the International Classification
of Diseases-9th Revision, Clinical Modification (ICD-9-CM) code set to
report the psychiatric diagnosis; and (2) select the diagnosis-related
groups (DRGs) that would be used for payment adjustments in this
proposed rule.
A. Use of Diagnostic Codes for Payment
The patient's principal diagnosis of his or her physical or mental
condition is essential because it typically acts as a guide for
treatment and validates payment. It is for these reasons that
diagnostic information is routinely reported on hospital claims and is
used in other prospective payment systems. In mental health treatment,
the principal tool recognized and utilized by the psychiatric community
for diagnostic assessment is the Diagnostic and Statistical Manual of
Mental Disorders (DSM). The DSM provides a broad and comprehensive
description of patients through behavioral domains, or ``axes.'' This
multiaxial system is routinely used by clinical staff to diagnose
patients and plan treatment. The DSM is currently in its fourth
revision text revision (DSM-IV-TR). Although, the DSM is used for
patient assessment by IPFs, the ICD-9-CM coding system is used
currently for reporting diagnostic information for payment purposes.
1. ICD
The ICD coding system was designed for the classification of
morbidity and mortality information for statistical purposes and for
the indexing of hospital records by disease. Chapter Five of the ICD-9-
CM includes the codes for mental disorders.
In addition, the following definitions (as described in the 1984
Revision of the Uniform Hospital Discharge Data Set) are requirements
of the ICD-9-CM coding system.
[sbull] Diagnoses include all diagnoses that affect the current
hospital stay.
[sbull] Principal diagnosis is defined as the condition
established, after study, to be chiefly responsible for occasioning the
admission of the patient to the hospital for care.
[sbull] Other diagnoses (also called secondary diagnoses or
additional diagnoses) are defined as all conditions that coexist at the
time of admission, that develop subsequently, or that affect the
treatment received or the length of stay or both. Diagnoses that relate
to an earlier episode of care and have no bearing on the current
hospital stay are excluded.
[[Page 66924]]
We are proposing to require IPFs to use the psychiatric diagnosis
codes in Chapter Five (``Mental Disorder'') of the ICD-9-CM to report
diagnostic information for the proposed IPF prospective payment system.
All changes to the ICD coding system that would affect the proposed IPF
prospective payment system would be addressed annually in the hospital
inpatient prospective payment system rules. The updated codes are
effective October 1 of each year and must be used to report diagnostic
or procedure information. (Additional information regarding updates to
the ICD-9-CM and DRGs is included in section V.B. of this proposed
rule). The official version of the ICD-9-CM is available on CD-ROM from
the U.S. Government Printing Office. The FY 2004 version can be ordered
by contacting the Superintendent of Documents, U.S. Government Printing
Office, Department 50, Washington, D.C. 20402-9329, telephone: (202)
512-1800. The stock number is 017-022-01544-7, and the price is $25.00.
In addition, private vendors publish the ICD-9-CM.
Questions and comments concerning the codes should be addressed to:
Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination and
Maintenance Committee, CMS, Center for Medicare Management, Purchasing
Policy Group, Division of Acute Care, Mailstop C4-08-06, 7500 Security
Boulevard, Baltimore, Maryland 21244-1850. Comments may be sent via e-mail to: pbrooks@cms.hhs.gov.
2. DRGs
DRGs constitute the patient classification system used in the
hospital inpatient prospective payment system. DRGs provide a means of
relating the types of patients treated by a hospital to the costs
incurred by the hospital. While each patient is unique, groups of
patients have demographic, diagnostic, and therapeutic attributes in
common that determine their level of resource intensity.
Currently, IPF claims include ICD-9-CM diagnosis coding
information. The TEFRA payment methodology does not use the DRG
classification of IPF cases. Nonetheless, when IPF claims are submitted
to us, the DRG associated with the patient's principal ICD-9-CM
diagnosis code is assigned to the claim by the GROUPER software
program. As a result, our administrative data includes the DRG
assignments for all IPF cases.
We are proposing to require IPFs to use the psychiatric diagnosis
codes in Chapter Five (``Mental Disorders'') of the ICD-9-CM. This
decision is consistent with the Standards for Electronic Transaction
final rule published in the Federal Register on August 17, 2000 (65 FR
50312). The ICD-9-CM coding system is currently designated as the
standard medical data code set for capturing cause and manifestation of
injury, disease, impairments, or other health problems. These
guidelines are available through a number of sources, including the
following Web site: http://www.cdc.gov/nch/data/icdguide.pdf.
Current regulations at Sec. 412.27 require that a psychiatric unit
admit only those patients who have a principal diagnosis that is listed
in the DSM or classified in Chapter Five (``Mental Disorders'') of the
ICD-9-CM. The hospital must maintain records that substantiate the
psychiatric diagnoses of its patients. We specifically request public
comments on continuing to reference the DSM in light of the proposed
requirement that IPFs use the ICD-9-CM code set in the proposed IPF
prospective payment system.
B. Limitations of the DRG System for Psychiatric Patients
Adopting a patient classification system for IPFs based on
diagnosis alone may not explain the wide variation in resource use
among patients in IPFs for several reasons. For instance, the diagnosis
may not fully capture the reasons for hospitalization. A patient with a
chronic disorder, like schizophrenia, may be admitted for a variety of
acute problems (suicide attempt, catatonic withdrawal, or psychotic
episode) that require very different treatments (Goldman, H.H., Pincus,
H.A., Taube, C.A., and Reiger, D.A. (1984). Hospital and Community
Psychiatry, 35(5): 460-464).
Further, treatment patterns are more variable in psychiatry, with
multiple clinically accepted methods of care. As a result, resource use
varies substantially between acute care and chronic care patients, and
between the facilities that treat predominately one type of patient.
For example, public psychiatric hospitals tend to treat the chronically
mentally ill, with substantially longer lengths of stay, compared to
the patients generally treated in psychiatric units and private
psychiatric hospitals.
Predicated on the analysis of the administrative data and pending
refinements from the research, we believe the DRG is an appropriate
method to account for certain, although not all, clinical
characteristics and associated resources. Therefore, under this
prospective payment system, we are proposing to assign a DRG to each
case based on the principal diagnosis (ICD-9-CM code) reported by the
IPF as one adjustment to the Federal per diem base rate.
In making this decision, we analyzed past research as well as a
recent study supported by the American Psychiatric Association (APA).
In the study, APA partnered with the Health Economics and Outcomes
Research Institute (THEORI), a division of the Greater New York
Hospital Association, to assess whether our existing administrative
data could be used to develop a prospective payment system for IPFs.
This study found that a prospective payment system for IPFs could be
developed based on existing CMS administrative data, be clinically
relevant, and limit the administrative burden on providers. The system
they proposed included an adjustment for DRG assignment.
In summary, we acknowledge that the psychiatric community uses the
DSM as a tool to diagnose a patient's mental illness and to aid in
treatment planning. However, we are proposing to require IPFs to report
diagnoses in Chapter Five of the ICD-9-CM as required by the
Administrative Simplification Provisions found in 45 CFR subchapter C.
In addition, we are proposing to identify specific DRGs for payment
adjustment under the proposed IPF prospective payment system. The
rationale for the selection of the proposed DRGs for use in the
proposed IPF prospective payment system is described below.
C. Proposed DRG Adjustments Under the Proposed IPF Prospective Payment
System
As noted above, the principal diagnosis is defined as the
condition, after study (clinical evaluation), to be chiefly responsible
for admitting the patient to the hospital for care. Despite this
longstanding definition, our review of hospital claims data that were
used to develop the proposed IPF prospective payment system indicates
that a substantial number of claims have non-psychiatric diagnoses
identified as the principal diagnosis.
Medicare regulations as specified in Sec. 412.27(a) require
psychiatric units of acute care hospitals to admit only those patients
with a principal diagnosis in the DSM or Chapter Five (``Mental
Disorders'') in the ICD-9-CM. Therefore, if a patient is admitted to a
general hospital for a medical condition such as pneumonia, and also
presents psychiatric symptoms, which necessitates an admission to the
psychiatric unit, the principal diagnosis for the admission to the
psychiatric unit should be the psychiatric symptoms
[[Page 66925]]
exhibited by the patient in accordance with Sec. 412.27(a). We note
that current regulations applicable to psychiatric hospitals (Sec.
412.23(a)) do not include these requirements, however, historically,
psychiatric hospitals have limited admissions to psychiatric patients.
Section 412.27(a) also requires that patients be admitted to the
psychiatric units for active treatment that is of an intensity that can
be furnished appropriately only in an inpatient hospital setting. For
this reason, in order to be paid under the proposed IPF prospective
payment system, patients must be capable of participating in an active
treatment program.
In selecting the proposed DRGs for payment adjustment, we analyzed
the DRG assignments for ICD-9-CM diagnosis codes in Chapter Five. In
addition, as noted previously, IPFs use the DSM-IV-TR to establish
diagnoses and current regulations at Sec. 412.27(a) refer to DSM
diagnoses. However, most, but not all, DSM codes crosswalk to the codes
in Chapter Five of the ICD-9-CM. Although, all the DSM codes are
psychiatric, some of the corresponding ICD-9-CM codes are located in
other chapters of the ICD-9-CM coding system and are linked to the body
system affected. For example, the DSM diagnosis, Male Erectile
Disorder, crosswalks to ICD-9-CM code 607.84, Impotence of Organic
Nature which is found in Chapter 10, Diseases of the Genitourinary
Systems. Accordingly, we also analyzed the DRG assignments for certain
ICD-9-CM codes that are based on DSM diagnoses but are not in Chapter
Five of the ICD-9-CM. These codes are discussed in the next section of
this proposed rule.
As a result of this analysis, we identified 25 DRGs with one or
more psychiatric diagnoses that are included in Chapter Five of the
ICD-9-CM as well as those diagnoses that are in other chapters of the
ICD-9-CM. We are proposing payment adjustments for 15 out of the 25
DRGs we analyzed. The remaining 10 DRGs include codes for a specific
range of diseases other than psychiatric, but have a few codes for DSM
diagnoses that are included in Chapter Five or other body system
chapters of the ICD-9-CM. The rationale for our decisions regarding
these 10 codes is provided in section II.D. below.
Table 1 below lists the DRGs that we are proposing to recognize
under the proposed IPF prospective payment system and the proposed
adjustment factors. This information also is presented in Addendum A.
Table 1.--Proposed IPF Prospective Payment System DRGs
------------------------------------------------------------------------
Adjustment
DRG Description Factor
------------------------------------------------------------------------
12.......................... Degenerative Nervous System 1.07
Disorders.
23.......................... Nontraumatic Stupor and Coma 1.10
424*........................ O.R. Procedure with 1.22
Principal Diagnosis of
Mental Illness.
425......................... Acute Adjustment Reaction 1.08
and Psychosocial
Dysfunction.
426......................... Depressive Neurosis......... 1.00
427......................... Neurosis Except Depressive.. 1.01
428......................... Disorders of Personality and 1.03
Impulse Control.
429.......................... Organic Disturbances and 1.02
Mental Retardation.
430.......................... Psychosis................... 1.00
431.......................... Childhood Mental Disorders.. 1.02
432......................... Other Mental Disorder 0.96
Diagnoses.
433**....................... Alcohol/Drug Abuse or 0.88
Dependence, Left Against
Medical Advice.
521......................... Alcohol/Drug Abuse or 1.02
Dependence with
Complication or Comorbidity.
522......................... Alcohol/Drug Abuse or 0.97
Dependence with
Rehabilitation Therapy
without Complication or
Comorbidity.
523......................... Alcohol/Drug Abuse or 0.88
Dependence without
Rehabilitation Therapy
without Complication or
Comorbidity.
------------------------------------------------------------------------
* DRG 424--is an O.R. procedure code that must be billed with a
principal diagnosis of mental disorder.
** DRG 433--is used when providers indicate a patient left against
medical advice (discharge status code 07).
D. DRGs Not Recognized in the Proposed IPF Prospective Payment System
We are proposing not to recognize the following 10 DRGs in the
proposed IPF prospective payment system. They were determined not to be
clinically significant because the principal diagnoses did not result
in enough admissions to IPFs in order to establish an adjustment to the
payment rate:
[sbull] DRGs 34 and 35 include a range of cases for disorders of
the nervous system. The diagnoses in these DRGs also include five ICD-
9-CM codes for DSM diagnoses: Codes 333.1 (Tremor not elsewhere
classified), code 333.82 (Orofacial Dyskinesia), code 333.92
(Neuroleptic Malignant Syndrome), code 347 (Cataplexy and Narcolepsy),
and code 307.23 (Gilles de La Tourette's Disorder). In the 1999 MedPAR
records for admissions to IPFs, only one patient was grouped in these
DRGs. In addition, patients with these diagnoses generally do not
require management in an IPF unless there is a concomitant psychiatric
disorder.
[sbull] DRGs 182, 183, and 184 include a range of gastrointestinal
conditions, including esophagitis, gastroenteritis, and other digestive
system diseases. The diagnoses in these DRGs include one that is listed
in Chapter Five of the ICD-9-CM, code 306.4 (Psychogenic GI Disease).
In the 1999 MedPAR records for admissions to IPFs, we found that only a
few patients with this ICD-9-CM diagnosis were grouped in these DRGs.
[sbull] DRG 352 includes a range of diagnoses affecting the testes,
prostate, and male external genitalia. This DRG includes DSM diagnoses
that are not in Chapter Five of the ICD-9-CM: code 607.84 (Impotence of
an Organic Origin), and code 608.89 (Male Genital Diseases, not
elsewhere classified). In the 1999 MedPAR records for admissions to
IPFs, we were able to identify only one patient grouped in DRG 352.
[sbull] DRGs 358, 359, and 369 include a range of cases in which
procedures have been performed on the uterus and fallopian tubes
(Adnexa). These DRGs include two diagnoses that are in Chapter Five of
the ICD-9-CM: code 306.51 (Psychogenic Vaginismus), and code 306.52
(Psychogenic Dysmenorrhea). In the 1999 MedPAR records for admissions
to IPFs, we were able to identify only 11 patients grouped into DRGs
358, 359, and 369, and there were no patients diagnosed with codes
306.51 or 306.52.
[[Page 66926]]
[sbull] DRG 467 includes a range of cases in which other factors
influence health status. This DRG contains only one diagnosis code
listed in Chapter Five of the ICD-9-CM, code 305.1 (tobacco use
disorder). Patients with this diagnosis do not require inpatient
treatment in an IPF unless there is a concomitant psychiatric disorder.
We are proposing not to recognize these 10 DRGs for payment
adjustments (34, 35, 182, 183, 184, 352, 358, 359, 369, and 467)
because they generally do not include a psychiatric diagnosis. We
believe that failure to recognize these DRGs will not affect the care
of Medicare beneficiaries because our analysis shows few, if any, of
the patients with these diagnoses are admitted or treated in an IPF.
In addition, we believe that these cases would be classified into
one of the selected DRGs and grouped with other beneficiaries with
similar symptoms and requiring similar care. This approach would avoid
creating case-mix groups based on small numbers of cases.
We believe there is value in selecting only those DRGs that contain
a large enough number of psychiatric cases to ensure that individual
variability can be averaged. We specifically invite public comments on
this issue.
E. Applicability of the Proposed IPF Prospective Payment System
The following psychiatric hospitals and psychiatric units,
currently paid under section 1886(b) of the Act, would be paid under
the proposed IPF prospective payment system for cost reporting periods
beginning on or after April 1, 2004. We are proposing that the IPF
prospective payment system would apply to inpatient hospital services
furnished by Medicare participating entities that are classified as
psychiatric hospitals or psychiatric units as specified in Sec.
412.22, Sec. 412.23, Sec. 412.25, and Sec. 412.27. We note that
psychiatric units that are currently paid under the hospital inpatient
prospective payment system and do not meet the requirements of Sec.
412.25 and Sec. 412.27 would not be paid under the proposed IPF
prospective payment system.
As specified in Sec. 400.200, the United States means the fifty
States, the District of Columbia, the Commonwealth of Puerto Rico, the
Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.
Therefore, IPFs located within the United States would be subject to
the proposed IPF prospective payment system. However, the following
hospitals are paid under special payment provisions specified in Sec.
412.22(c) and, therefore, would not be paid under the proposed IPF
prospective payment system:
[sbull] Veterans Administration hospitals.
[sbull] Hospitals that are reimbursed under State cost control
systems approved under 42 CFR part 403.
[sbull] Hospitals that are reimbursed in accordance with
demonstration projects specified in section 402(a) of Pub. L. 90-248
(42 U.S.C. 1395b-1) or section 222(a) of Pub. L. 92-603 (42 U.S.C.
1395b-1(note)).
[sbull] Non-participating hospitals furnishing emergency services
to Medicare beneficiaries.
This proposed rule would not change the basic criteria for a
hospital or hospital unit to be classified as a psychiatric hospital or
psychiatric unit that is excluded from the hospital prospective payment
systems under sections 1886(d) and 1886(g) of the Act, nor would it
revise the survey and certification procedures applicable to entities
seeking this classification.
We note that we are proposing a technical change to Sec.
412.27(a). We are proposing to replace the Third Edition with the
Fourth Edition, Text Revision, of the DSM so that our rules reflect the
most current edition of the DSM.
As noted previously, we are requesting public comments on
continuing to require a DSM diagnosis for patients admitted to a
psychiatric unit in light of the proposed requirement that IPFs use the
ICD-9-CM code set in the proposed IPF prospective payment system.
III. Development of the Proposed IPF Per Diem Payment Amount
The primary goal in developing the proposed IPF prospective payment
system is to pay each IPF an appropriate amount for the efficient
delivery of care to Medicare beneficiaries. The system must be able to
account adequately for each IPF's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for those
beneficiaries who require more costly care.
The proposed IPF prospective payment system would establish a
standard per diem payment amount for inpatient psychiatric services
provided to Medicare beneficiaries. The proposed per diem amount would
reflect the average daily cost of inpatient psychiatric care in an IPF,
including capital-related costs. This proposed per diem payment amount,
after adjustment for budget neutrality, is then modified by factors for
patient and facility characteristics that account for variation in
patient resource use. The proposed IPF prospective payment system would
also include an outlier policy and account for interrupted stays. This
section includes a discussion of how the proposed Federal per diem base
rate was created, the factors that we considered to adjust the proposed
Federal per diem base rate, and how the proposed per diem payment
amount is calculated.
A. Proposed Market Basket
We are proposing to use a 1997-based excluded hospital with capital
market basket. We periodically revise and rebase the market basket to
reflect more current cost data. Rebasing means moving the base year for
the structure of costs (in this case from 1992 to 1997), while revising
means changing data sources, cost categories, or price proxies used.
The proposed updated market basket would replace the 1992-based
excluded hospital with capital market basket. This rebased (1997-base
year) and revised market basket would be used to update FY 1999 IPF
costs to the proposed 15-month period beginning April 1, 2004, the
first year under the IPF prospective payment system.
The operating portion of the 1997-based excluded hospital with
capital market basket is derived from the 1997-based excluded hospital
market basket. The methodology used to develop the operating portion
was described in the hospital inpatient prospective payment system
final rule published in the Federal Register on August 1, 2002 (67 FR
50042 through 50044). In brief, the operating cost category weights in
the 1997-based excluded hospital market basket were determined from the
Medicare cost reports, the 1997 Business Expenditure Survey, and the
1997 Annual Input-Output data from the Bureau of the Census. As
explained in that August 1, 2002 final rule, we revised the market
basket by making two methodological revisions to the 1997-based
excluded hospital market basket: (1) Changing the wage and benefit
price proxies to use the Employment Cost Index (ECI) wage and benefit
data for hospital workers; and (2) adding a cost category for blood and
blood products.
When we add the weight for capital costs to the excluded hospital
market basket, the sum of the operating and capital weights must still
equal 100.0. Because capital costs account for 8.968 percent of total
costs for excluded hospitals in 1997, it holds that operating costs
must account for 91.032 percent. Each operating cost category weight in
the 1997-based excluded hospital market basket was multiplied by
0.91032 to determine its weight in the 1997-based excluded hospital
with capital market basket.
[[Page 66927]]
The aggregate capital component of the 1997-based excluded hospital
market basket (8.968 percent) was determined from the same set of
Medicare cost reports used to derive the operating component. The
detailed capital cost categories of depreciation, interest, and other
capital expenses were also determined using the Medicare cost reports.
Two sets of weights for the capital portion of the revised and rebased
market basket needed to be determined. The first set of weights
identifies the proportion of capital expenditures attributable to each
capital cost category, while the second set represents relative vintage
weights for depreciation and interest. The vintage weights identify the
proportion of capital expenditures that is attributable to each year
over the useful life of capital assets within a cost category (see the
hospital inpatient prospective payment final rule published in the
Federal Register on August 1, 2002 (67 FR 50045 through 50047), for a
discussion of how vintage weights are determined).
The cost categories, price proxies, and base-year FY 1992 and
proposed FY 1997 weights for the excluded hospital with capital market
basket are presented in Table 2 below. The vintage weights for the
proposed 1997-based excluded hospital with capital market basket is
presented in Table 2(A) below.
TABLE 2.--Proposed Excluded Hospital With Capital Input Price IndeX (FY 1992 and Proposed FY 1997) Structure and
Weights
----------------------------------------------------------------------------------------------------------------
Proposed
Cost category Price wage variable Weights (%) weights (%)
base-year 1992 base-year 1997
----------------------------------------------------------------------------------------------------------------
TOTAL.................................... ................................. 100.000 100.000
Compensation......................... ................................. 57.935 57.579
Wages and Salaries................... ECI--Wages and Salaries, Civilian 47.417 47.355
Hospital Workers.
Employee Benefits.................... ECI--Benefits, Civilian Hospital 10.519 10.244
Workers to capture total costs
(operating and capital), In
order to capture total costs
(operating and capital), HCFA
Occupational Benefit Proxy.
Professional fees: Non-Medical........... ECI--Compensation: Prof. & 1.908 4.423
Technical.
Utilities................................ ................................. 1.524 1.180
Electricity.......................... WPI--Commercial Electric Power... 0.916 0.726
Fuel Oil, Coal, etc.................. WPI--Commercial Natural Gas...... 0.365 0.248
Water and Sewerage................... CPI-U--Water & Sewage............ 0.243 0.206
Professional Liability Insurance......... HCFA--Professional Liability 0.983 0.733
Premiums.
All Other Products and Services.......... ................................. 28.571 27.117
All Other Products................... ................................. 22.027 17.914
Pharmaceuticals...................... WPI--Prescription Drugs.......... 2.791 6.318
Food: Direct Purchase................ WPI--Processed Foods............. 2.155 1.122
Food: Contract Service............... CPI-U--Food Away from Home....... 0.998 1.043
Chemicals............................ WPI--Industrial Chemicals........ 3.413 2.133
Blood and Blood Products............. WPI--Blood and Derivatives....... ................ 0.748
Medical Instruments.................. WPI--Med. Inst. & Equipment...... 2.868 1.795
Photographic Supplies................ WPI--Photo Supplies.............. 0.364 0.167
Rubber and Plastics.................. WPI--Rubber & Plastic Products... 4.423 1.366
Paper Products....................... WPI--Convert. Paper and 1.984 1.110
Paperboard.
Apparel.............................. WPI--Apparel..................... 0.809 0.478
Machinery and Equipment.............. WPI--Machinery & Equipment....... 0.193 0.852
Miscellaneous Products............... WPI--Finished Goods excluding 2.029 0.783
Food and Energy.
All Other Services....................... ................................. 6.544 9.203
Telephone............................ CPI-U--Telephone Services........ 0.574 0.348
Postage.............................. CPI-U--Postage................... 0.268 0.702
All Other: Labor..................... ECI--Compensation: Service 4.945 4.453
Workers.
All Other: Non-Labor Intensive....... CPI-U--All Items (Urban)......... 0.757 3.700
Capital-Related Costs.................... ................................. 9.080 8.968
Depreciation......................... ................................. 5.611 5.586
Fixed Assets......................... Boeckh-Institutional 3.570 3.503
Construction: 23 Year Useful
Life.
Life Y--y--YYF e.................
Movable Equipment.................... WPI--Machinery & Equipment: 11 2.041 2.083
Year Useful life.
Interest Costs....................... ................................. 3.212 2.682
Non-profit........................... Avg. Yield Municipal Bonds: 23 2.730 2.280
Year Useful Life.
For-profit........................... Avg. Yield AAA Bonds: 23 Year 0.482 0.402
Useful Life.
Other Capital Related Costs.......... CPI-U--Residential Rent.......... 0.257 0.699
----------------------------------------------------------------------------------------------------------------
Note: The operating cost category weights in the proposed excluded hospital market basket add to 100.0. When we
add an additional set of cost category weights (total capital weight = 8.968 percent) to this original group,
the sum of the weights in the new index must still add to 100.0. Because capital costs account for 8.968
percent of the market basket, then operating costs account for 91.032 percent. Each weight in the proposed
1997-based excluded hospital market basket was multiplied by 0.91032 to determine its weight in the proposed
1997-based excluded hospital with capital market basket.
Note: Weights may not sum to 100.0 due to rounding.
[[Page 66928]]
Table 2(A).--Proposed Excluded Hospital With Capital Input Price Index
(FY 1997) Vintage Weights
------------------------------------------------------------------------
Interest:
Fixed Movable capital-
Year from farthest to most recent assets assets related
(23-year (11-year (23-year
weights) weights) weights)
------------------------------------------------------------------------
1...................................... 0.018 0.063 0.007
2...................................... 0.021 0.068 0.009
3...................................... 0.023 0.074 0.011
4...................................... 0.025 0.080 0.012
5...................................... 0.026 0.085 0.014
6...................................... 0.028 0.091 0.016
7...................................... 0.030 0.096 0.019
8...................................... 0.032 0.101 0.022
9...................................... 0.035 0.108 0.026
10..................................... 0.039 0.114 0.030
11..................................... 0.042 0.119 0.035
12..................................... 0.044 ......... 0.039
13..................................... 0.047 ......... 0.045
14..................................... 0.049 ......... 0.049
15..................................... 0.051 ......... 0.053
16..................................... 0.053 ......... 0.059
17..................................... 0.057 ......... 0.065
18..................................... 0.060 ......... 0.072
19..................................... 0.062 ......... 0.077
20..................................... 0.063 ......... 0.081
21..................................... 0.065 ......... 0.085
22..................................... 0.064 ......... 0.087
23..................................... 0.065 ......... 0.090
------------
Total.............................. 1.0000 1.0000 1.0000
------------------------------------------------------------------------
Note: Weights may not sum to 1.000 due to rounding.
Table 2(B) below compares the 1992-based excluded hospital with
capital market basket to the proposed 1997-based excluded hospital with
capital market basket. As shown below, the rebased and revised market
basket grows slightly faster over the 1999 through 2001 period than the
1992-based market basket. The main reason for this growth is the
switching of the wage and benefit proxy to the ECI for hospital workers
from the previous occupational blend. This revision had a similar
impact on the hospital inpatient prospective payment system and
excluded hospital market baskets, as described in the final rule
published in the Federal Register on August 1, 2002 (67 FR 50032
through 50041).
Table 2(B).--Percent Changes in the 1992-Based and Proposed 1997-Based
Excluded Hospital With Capital Market Baskets, FYs 1999 Through 2004
------------------------------------------------------------------------
Percent
Percent change,
change, proposed
Fiscal year 1992-based 1997-based
market market
basket basket
------------------------------------------------------------------------
1999...................................... 2.3 2.7
2000...................................... 3.4 3.1
2001...................................... 3.9 4.0
Average historical:....................... 3.2 3.3
2002...................................... 2.7 3.6
2003...................................... 3.0 3.5
2004...................................... 3.0 3.3
Average forecast:......................... 2.9 3.5
------------------------------------------------------------------------Source: Global Insights, Inc, 4th Qtr 2002,@USMARCO.MODTREND@CISSIM/@USMARCO.MODTREND@CISSIM/
TL1102.SIM. Historical data through 3rd Qtr 2002.
Based upon the analysis mentioned below, we believe the excluded
hospital with capital market basket provides a reasonable measure of
the price changes facing IPFs. However, we have also been researching
the feasibility of developing a market basket specific to IPF services.
This research includes analyzing data sources for cost category
weights, specifically the Medicare cost reports, and investigating
other data sources on cost, expenditure, and price information specific
to IPFs.
Our analysis of the Medicare cost reports indicates that the
distribution of costs among major cost report categories (wages,
pharmaceuticals, and capital) for IPFs is not substantially different
from the 1997-based excluded hospital with capital market basket we
propose to use. In addition, the only data available to us for these
cost categories (wages, pharmaceuticals, and capital) presented a
potential problem since no other major cost category weights would be
based on IPF data. Based on the research discussed below, at this time,
we are not proposing to develop a market basket specific to IPF
services.
We conducted an analysis of annual percent changes in the market
basket when the weights for wages, pharmaceuticals, and capital in IPFs
were substituted into the excluded hospital with capital market basket.
Other cost categories were recalibrated using ratios available from the
hospital inpatient prospective payment system hospital market basket.
On average, between 1995 and 2002, the excluded hospital with capital
market basket increased at nearly the same average annual rate (3.4
percent) as the market basket with IPF weights for wages,
pharmaceuticals, and capital (3.5 percent). This difference is less
than the 0.25 percentage point criterion that determines whether a
forecast error adjustment is warranted under the hospital inpatient
prospective payment system update framework.
Based upon this analysis, we believe that the excluded hospital
with capital market basket is doing an adequate job of reflecting the
price changes facing IPFs. We will continue to solicit comments about
issues particular to IPFs that should be considered in our development
of the proposed 1997-based excluded hospital with capital market
basket, as well as encourage suggestions for additional data sources
that may be available. Our hope is that the additional cost data being
collected under the proposed IPF prospective payment system will
eventually allow for the development of a market basket based primarily
on IPF data. We welcome comments on issues particular to IPFs that
should be considered in our use of the proposed 1997-based excluded
hospital with capital market basket, as well as on suggestions for
additional data sources that may be readily available on the cost
structure of IPFs.
As discussed more fully in section IV of this proposed rule, we are
proposing to implement the proposed IPF prospective payment system for
IPF cost reporting periods that begin on or after April 1, 2004. The
first update, however, would not be until July 1, 2005. This extends
the first year for 3 additional months in order to adjust the update
cycle for this proposed payment system. As a result, the effective
period for this proposed rule is April 1, 2004 through June 30, 2005.
To update payments between FY 2003 and the effective period, the update
must reflect the market basket increase over this period, which is
currently estimated at 5.3 percent. This would represent the proposed
increase in the excluded hospital with capital market basket for FY
2004 and the first 9 months of FY 2005.
B. Development of the Proposed Case-Mix Adjustment Regression
In order to ensure that the proposed IPF prospective payment system
would be able to account adequately for each IPF's case-mix, we
performed an extensive regression analysis of the relationship between
the per diem costs and both patient and facility characteristics to
determine those characteristics associated with statistically
significant cost differences. For characteristics with statistically
[[Page 66929]]
significant cost differences, we used the regression coefficients of
those variables to determine the size of the corresponding payment
adjustments. Based on the regression analysis, we are proposing to
adjust the per diem payment for differences in the patient's DRG, age,
comorbidities, and the day of the stay. Also, we are proposing
adjustments for area wage levels, rural IPFs, and teaching IPFs.
We computed a per diem cost for each Medicare inpatient psychiatric
stay, including routine operating, ancillary, and capital components
using information from the 1999 MedPAR file and data from the 1999
Medicare cost reports. The method described below that was used to
construct the proposed per diem cost for IPFs is a standard method that
has been used to construct a Medicare cost per discharge for inpatient
acute care (Newhouse, J.P., S. Cretin, and C. Witsberger. Predicting
Hospital Accounting Costs, Health Care Financing Review, V.11, No. 1.
Fall 1989). We believe that this method provides a full account of
IPF's per diem costs.
To calculate the cost per day for each inpatient psychiatric stay,
routine costs were estimated by multiplying the routine cost per day
from the IPF's 1999 Medicare cost report by the number of Medicare
covered days on the 1999 MedPAR stay record. Ancillary costs were
estimated by multiplying each departmental cost-to-charge ratio by the
corresponding ancillary charges on the MedPAR stay record. The total
cost per day was calculated by summing routine and ancillary costs for
the stay and dividing it by the number of Medicare covered days for
each day of the stay. We used the best available data and methods for
this proposed IPF prospective payment system. However, the data are
potentially limited for the purpose of determining the extent to which
differences in patient characteristics influence the per diem cost of
inpatient psychiatric care.
This potential limitation results from Medicare cost accounting
practices in which routine per diem costs are calculated as an average
and, therefore, do not vary among patients within a facility (that is,
a patient requiring intensive staff attention is assigned the same
routine cost as a patient requiring little staff attention). This
potential limitation assumes heightened importance for IPFs because
routine costs represent about 88 percent of total costs. As a result,
our cost measure may not capture the degree of variation in routine
cost attributable to differences in patient characteristics. Patient
differences are reflected in our measure of routine cost only to the
extent that facilities tend on average to treat different proportions
of patients with differing routine resource needs. For example, one IPF
may have higher routine per diem costs because it treats a higher
proportion of older patients (or patients who require continuous
monitoring) than another IPF. However, our cost variable will not
measure the extent to which older patients within the same IPF are more
costly than younger patients. We are currently conducting a research
study with the RTI International[reg] (trade name of
Research Triangle Institute) that will provide information as to the
effects of this data limitation. As a result, we expect to have more
information about the extent to which routine costs vary by certain
patient characteristics. We solicit suggestions on other data sets or
studies that could provide additional information on the relationship
between individual patients and average facility routine costs.
This routine cost limitation does not apply to ancillary costs
because they can be measured at the patient level using Medicare claims
as reported in the MedPAR file. However, there are differences in
charging practices between psychiatric hospitals and psychiatric units
that affect our measurement of ancillary costs. For example, there are
approximately 100 hospitals in our MedPAR data file that do not bill
ancillary charges; the majority of these providers are State
psychiatric hospitals who bill a single average per diem rate that
includes routine, ancillary, and other costs.
The proposed payment adjustors were derived from regression
analysis of 100 percent of the 1999 MedPAR data file. The MedPAR data
file used for the final regression contains 467,372 cases although the
complete file contains 476,541 cases. We deleted 5,822 cases (1.24
percent) from this file because routine cost data for certain IPFs was
not available. In order to include as many IPFs as possible in the
regression, we substituted the 1998 Medicare cost report data for
routine cost and ancillary cost to charge ratios (using the 1998
Medicare cost report data).
For the remaining 470,719 cases, we used the following method to
trim extraordinarily high or low cost values that most likely contained
data errors, in order to improve the accuracy of our results. The means
and standard deviations of the logged per diem total cost were computed
separately for cases from psychiatric hospitals and psychiatric units.
Separate statistics were computed for the groups of IPFs, because we
did not want to systematically exclude a larger proportion of cases
from the higher cost psychiatric units. Before calculating the means of
the logged per diem total cost, we trimmed cases from the file when
covered days were zero, or routine costs were less than $100 or greater
than $3,000, (because we believe this range captured the grossly
aberrant cases), so that the means would not be distorted. We trimmed
cases when the logged per diem cost was outside the standard and
generally used statistical trim points of plus or minus 3 standard
deviations from the respective means for hospitals and psychiatric
units. These criteria eliminated another 3,347 cases, leaving 467,372
cases that were used in the final regression.
The log of per diem cost, like most health care cost measures,
appears to be normally distributed. Therefore, the natural logarithm of
the per diem cost was the dependent variable in the regression
analysis. To control for psychiatric hospitals that do not bill
ancillary costs, we included a categorical variable that identified
them.
The proposed per diem cost was adjusted for differences in labor
cost across geographic areas using the FY 1999 hospital wage index
unadjusted for geographic reclassifications, in order to be consistent
with our use of the market basket labor share in applying the wage
index adjustment.
We computed a proposed wage adjustment factor for each case by
multiplying the Medicare hospital wage index for each facility by the
proposed labor-related share (.72828) and adding the proposed non-labor
share (.27172). We used the proposed excluded hospital with capital
market basket to determine the labor-related share (see section III.A.
of this proposed rule). The per diem cost for each case was divided by
this factor before taking the natural logarithm (that is, a standard
mathematical practice accepted by the scientific community). The
payment adjustment for the wage index was computed consistently with
the wage adjustment factor, which is equivalent to separating the per
diem cost into a labor portion and a non-labor portion and adjusting
the labor portion by the wage index.
With the exception of the proposed payment adjustment for teaching
facilities, the independent variables were specified as one or more
categorical variables. Once the regression model was finalized based on
the log normal variables, the regression coefficients for these
variables were converted to payment adjustment factors by treating each
coefficient as an exponent of the base e for natural
[[Page 66930]]
logarithms, which is approximately equal to 2.718. The proposed payment
adjustment factors represent the proportional effect of each variable
relative to a reference variable.
1. Proposed Patient-Level Characteristics
Subject to the limitations of the proposed cost variable described
above and the availability of patient characteristic information
contained in the administrative data, we attempted to use patient
characteristics to explain the cost variation amongst IPFs. By
adjusting for DRGs, comorbidities, age, and day of the stay, we were
able to explain approximately 19 percent of the variation in the per
diem cost. This result is comparable to that obtained by THEORI in the
analysis they conducted for the APA. The study is described in section
II.B. of this proposed rule.
a. DRGs
The principal diagnosis ICD code listed on the claim is used to
assign each case to one of the 15 DRGs that we are proposing to
recognize in this IPF prospective payment system (see section II.C of
this proposed rule). The coefficients of these DRGs from the cost
regression analysis were used to determine the magnitude of the payment
adjustment for each of the proposed 15 DRGs. The payment adjustments
are expressed relative to the most frequently assigned DRG (DRG 430,
Psychoses). That is, the proposed adjustment factor for DRG 430 would
be 1.00, and the proposed adjustment factors for the other 14 DRGs
would vary above and below 1.00. For 8 DRGs, the proposed adjustments
would be relatively small (between .96 and 1.04, that is, between 4
percent lower to 4 percent higher). The following 4 DRGs would receive
relatively large payment adjustments:
[sbull] DRG 424 (Surgical procedure with Principal Diagnosis of
Mental Illness) would have the largest payment adjustment of
approximately 1.22.
[sbull] DRG 023 (Non-traumatic stupor and coma) would receive an
adjustment of approximately 1.10.
[sbull] DRG 425 (Acute Adjustment Reaction and Psychosocial
Dysfunction) would receive an adjustment of approximately 1.08.
[sbull] DRG 12 (Degenerative Nervous System Disorders) would
receive an adjustment of approximately 1.07.
Both of the following two DRGs would be paid substantially less
than DRG 430 with payment adjustments of approximately 0.88:
[sbull] DRG 433 (Alcohol/Drug Abuse or Dependence, left against
medical advice).
[sbull] DRG 523 (Alcohol/Drug Abuse or Dependence, without
Complications and/or Comorbidity and without Rehabilitation Therapy).
Cases in our MedPAR data file whose principal diagnosis classified
them in DRGs other than one of the 15 DRGs that we are proposing to
recognize in this proposed IPF prospective payment system were grouped
into a single ``other'' category.
b. Comorbidities
Our analysis of the data indicates that patients who have certain
comorbid conditions in addition to their psychiatric condition
generally require more expensive care while they are hospitalized.
After a thorough review of the ICD-9-CM codes, some comorbid conditions
were identified as being more costly on a per diem basis. Groups of
similar diagnosis codes were created to describe these conditions,
which tend to be chronic illnesses that require additional medications,
supplies, laboratory, or diagnostic testing in addition to the care
provided for their psychiatric condition. Conditions in which the
patient is acutely ill requiring care in a general hospital, for
example, myocardial infarction, were not included in our analysis.
Based upon this analysis, we are proposing payment adjustments for
17 comorbidity categories that we would recognize for payment
adjustments under the proposed IPF prospective payment system. Table 3
below provides a listing of the proposed comorbidity categories, the
ICD-9-CM diagnostic codes comprising each category, and the payment
adjustment factors. The adjustment factors are also in Addendum A.
As in the case of the DRGs, the cost regression analysis was used
to determine the magnitude of the proposed payment adjustments for the
comorbidity groups. Of the 17 comorbidity categories, the following 4
groups would have proposed payment adjustment factors ranging from 1.11
to 1.17 more than a case that did not have any of the 17 comorbid
conditions: (1) Coagulation factor deficits; (2) renal failure,
chronic; (3) chronic cardiac conditions; and (4) atherosclerosis of
extremity with gangrene. Seven categories would be paid payment
adjustments from 1.08 to 1.14: (1) Tracheotomy; (2) renal failure,
acute; (3) malignant neoplasms; (4) severe protein calorie
malnutrition; (5) chronic obstructive pulmonary disease; (6) poisoning;
and (7) severe musculoskeletal and connective tissue diseases. The
remaining 6 comorbidity categories would receive payment adjustments
ranging from 1.03 to 1.10: (1) HIV; (2) infectious diseases; (3)
uncontrolled type I diabetes mellitus; (4) artificial openings
digestive and urinary; (5) drug and/or alcohol induced mental
disorders; and (6) eating and conduct disorders.
Other potential conditions were considered as potentially more
expensive, but the small number of cases in the MedPAR data file made
it impossible to propose an appropriate adjustment for those
conditions. We solicit comments suggesting other conditions that may be
expected to increase the per diem cost of care in IPFs. In addition, we
expect that as facilities become aware of the importance of providing
accurate information on the diagnoses of patients, we will have more
data to use as a basis for refinements to the list of proposed comorbid
conditions affecting the per diem cost of care.
Table 3.--Diagnosis Codes for Proposed Comorbidity Categories
------------------------------------------------------------------------
Proposed
Description of proposed ICD-9-CM code adjustment
comorbidity factor
------------------------------------------------------------------------
HIV............................ 042.................... 1.06
Coagulation Factor Deficits.... 2860 through 2864...... 1.11
Tracheotomy.................... 51900 and V440......... 1.14
Renal Failure, Acute........... 5846 through 5849; 1.08
7885; 9585; V451;
V560, V561; and V562.
Renal Failure, Chronic......... 40301; 40311; 40391; 1.14
40402; 40412; 40492,
585; and 586.
Malignant Neoplasms............ 1400 through 1720; 1740 1.10
through 1840; and 1850
through 2080.
[[Page 66931]]
Uncontrolled Type I Diabetes- 25003; 25083; 25013; 1.10
Mellitus, with or without 25023; 25033; 25093;
complications. 25043; 25053; 25063;
and 25073.
Severe Protein Calorie 260 through 262........ 1.12
Malnutrition.
Eating and Conduct Disorders... 3071; 30750; 31203; 1.03
31233; and 31234.
Infectious Diseases............ 01000 through 04110; 1.08
04500 through 05319,
05440 through 05449;
0550 through 0770;
0782 through 0789; and
07950 through 07595.
Drug and/or Alcohol Induced 2920; 2922; 2910; 1.03
Mental Disorders. 29212; 30300; and
30400.
Cardiac Conditions............. 3910; 3911; 3912; 1.13
40201; 41403; 4160;
and 4210.
Atherosclerosis of Extremity 44024.................. 1.17
with Gangrene.
Chronic Obstructive Pulmonary 5100; 51883; 51884; 1.12
Disease. 4920; 494; 49120
through 49122, and
V461.
Artificial Openings-Digestive 56960; V441 through 1.09
and Urinary. V443; and V4450.
Severe Musculoskeletal and 6960; 7100; 73000 1.12
Connective Tissue Diseases. through73009; 73010
through 73019; 73020
through 73029; and
7854.
Poisoning...................... 96500 through 96509; 1.14
and 9654; 9670 through
9700; 9800 through
9809; 9830 through
9839; 986; 9890
through 9897.
------------------------------------------------------------------------
c. Patient Age and Gender
The cost regressions explored several alternative configurations of
age and gender variables. The results indicate that the per diem cost
rises as a patient's age increases, and the per diem cost are higher
for female patients.
We examined the variation in the per diem cost for 5-year age
intervals ranging from age 40 to 80 with open-ended categories ranging
above age 80 and below 40 and determined that the effect of age was
statistically significant. We initially ran the regression for three
age groups consistent with the natural breaks in the distribution of
age (under 55, 55 to 64, and 65 and over). The distribution showed that
most Medicare psychiatric patients are under age 55 and over age 65. In
addition, the distribution showed that the age group between 55 and 65
years of age increased the predictive power of the model only by a
factor of .002 percent because there were few patients in that age
category. For this reason, we are not proposing adjustments reflecting
the three age groups. Rather, we are proposing to make a single
adjustment of 13 percent for patients 65 years and over. We are
proposing two age groups (under 65 and over 65) to correspond with the
major populations within Medicare: the disabled and the elderly, which
we believe are largely responsible for the age-related cost differences
that we observed. In addition, preliminary results from the RTI
International[reg] research that used estimates of patient-
specific routine cost per day (from a sample of 40 IPFs) found that
splitting age into two groups (under 65 and over 65) has greater
explanatory power than alternative age group configurations. The
research study is described in more detail in section V.C.1. of this
proposed rule.
The cost regression implies that female patients are approximately
3 percent more costly than male patients. However, the explanatory
power of the equation increases by less than .002 percentage points.
There is also a small reduction in the age effect for the 65 and over
age group (less than one percentage point). We also examined the
alternative of including gender along with the three age groups (under
55, 55 to 64, and 65 and over) and compared the results to the
regression without gender and with two age groups (under 65 and 65 and
over). The fuller specification of age and gender only increased the
explanatory power by .003 points and had little effect on the size of
the age effects.
We know that the elderly and women are more frequently treated in
psychiatric units than in freestanding psychiatric hospitals. When an
indicator variable for psychiatric units is included in the cost
regression, the age and gender effects decrease (the 65 and over age
effect declines from approximately 13 percent to approximately 9
percent, and the gender effect decreases from approximately 3 percent
to 2 percent). We are unable to determine the extent to which this
interaction of psychiatric unit status with age and gender indicates
higher direct costs of treating the elderly and women, as opposed to
other reasons for the higher costs of psychiatric units. However, RTI
International's[reg] preliminary results, which used a
better patient-specific cost variable for a sample of 40 hospitals
found a much stronger effect for age than for gender. This is because
the evidence currently available to us is limited and we believe we
cannot identify a direct link between the costs of psychiatric care in
psychiatric units and treatment of female IPF patients. We are not
proposing to adjust the per diem payment rate to account for gender. We
invite comments on the appropriateness of including a gender variable
as a payment adjustment as well as comments on the age categories used
to identify variations in costs. We will continue to assess the effects
of gender and age as we analyze more current data in the development of
the final rule.
d. Length of Stay
Cost regressions indicate that the per diem cost declines as the
length of stay increases. We are proposing adjustments to account for
ancillary and certain administrative costs that occur
disproportionately in the first days after being admitted to an IPF
(the variable per diem adjustments). We examined the per diem cost over
a range of 1 to 14 days. According to the 1999 MedPAR data file, the
per diem costs were highest on day 1 and declined for days 2 through 8
as indicated below. Per diem costs for days 9 and thereafter remained
relatively consistent with the median length of stay in an IPF for
Medicare beneficiaries. The cost regression analysis was used to
determine the following proposed payment adjustments. Relative to a
stay of 9 or more days, the resulting adjustments for the first 8 days
of a stay that we are proposing to use in this IPF prospective payment
system are as follows:
[sbull] The variable per diem adjustment for day 1 would be an
increase of approximately 26 percent.
[[Page 66932]]
[sbull] The variable per diem adjustment for days 2 to 4 would be
an increase of approximately 12 percent.
[sbull] The variable per diem adjustment for days 5 to 8 would be
an increase of approximately 5 percent.
[sbull] No variable per diem adjustment would be paid after the 8th
day.
The higher payments for earlier days are offset through the budget
neutrality adjustment, which has the effect of lowering the average
payment to account for the increased payments.
2. Proposed Facility-Level Characteristics
As noted earlier, we were able to explain 19 percent of the
variation in wage-adjusted per diem cost using patient characteristics.
We explored a variety of ways to incorporate facility characteristics
into the cost regressions in order to raise the explanatory power and
refine the proposed payment system to better align payments with cost
differences across facility types.
Per diem costs are strongly related to facility occupancy, because
occupancy (as measured by the ratio of actual days to available days)
measures the extent to which the facility is efficiently utilizing its
capacity. When occupancy is low, fixed costs must be spread across
relatively few days of care and the per diem costs are high. Because we
do not want to pay for inefficiency, we are not proposing that
occupancy be used as a payment adjuster. However, this variable is
included in the cost regression to improve the estimates of the effects
of other factors that may more appropriately be used to adjust
payments.
An analysis of the facility-level characteristics we considered
follows. To summarize the analysis, we are proposing that payments be
adjusted based on the IPF's wage index, rural location, and teaching
status. We considered, and explain below, the reasons why we are
proposing not to provide adjustments for psychiatric units,
disproportionate share intensity, or IPFs in Alaska or Hawaii.
a. Rural Location
We found that, controlling for the patient characteristics and
other facility variables included in our cost regression, facilities
located in non-metropolitan area counties had per diem costs about 16
percent higher than facilities located in metropolitan area counties.
Most of the higher cost of rural IPFs is related to the fact that the
vast majority are psychiatric units within small general acute care
hospitals. Small-scale facilities are more costly on a per diem basis
because there are minimum levels of fixed costs that cannot be avoided.
Based on this analysis, we are proposing to make an adjustment of 16
percent for IPFs located in rural areas.
b. Teaching Status
One option for paying psychiatric teaching facilities for their
higher costs relies on past experience with the teaching adjustment for
other Medicare prospective payment systems. As in other inpatient
prospective payment systems, we measured teaching status as one plus
the ratio of the number of interns and residents assigned to the
facility divided by the IPF's average daily census (ADC). Similarly for
psychiatric units, we used the number of interns and residents assigned
to the psychiatric unit.
The advantages of using the ADC rather than the number of beds for
the denominator of the ratio noted above was discussed in the final
rule we published in the Federal Register on August 30, 1991 (56 FR
43380) for putting inpatient hospital capital payments under a
prospective payment. As described in that rule, the two key advantages
of the ADC are that it is--(1) easier to define more precisely than
number of beds; and (2) less subject to understatement in an effort to
increase the size of the teaching variable. We believe that these
advantages apply equally to IPFs.
The teaching variable in our cost regressions, that is, the
logarithm of one plus the ratio of interns and residents to ADC, has a
coefficient value of .5215. This cost effect is converted to a payment
adjustment by treating the regression coefficient as an exponent and
raising the teaching variable to the .5215 power. Applying this method
for a facility with a teaching variable of 1.10 would yield a 5.1
percent increase in the per diem payment; for a facility with a
teaching variable of 1.25, there would be a 12.3 percent higher
payment.
Our impact tables are based on the assumption that we would pay a
proposed IPF teaching adjustment in this manner and our proposed
regulatory text is also based on this approach. However, we are
considering alternatives because we are concerned that this method
creates incentives for teaching hospitals to add residents and to
increase their payments under an open-ended formula that pays higher
teaching payments as teaching intensity, as measured by resident to ADC
ratios, increases.
The BBA, sections 4621 and 4623, limited the incentives to add
residents in hospitals paid under the hospital inpatient prospective
payment system by adopting caps for both direct and indirect teaching
payments. The number of residents was capped for the purpose of
computing both the direct and indirect teaching adjustments and the
resident to ADC was capped for purposes of computing the indirect
teaching adjustment. Because IPFs would now be paid on a prospective
basis similar to acute care hospitals, we are considering extending the
indirect teaching caps to IPF teaching hospitals. Regulations, as
specified at Sec. 413.86, already apply the BBA caps to direct medical
education payments for all teaching hospitals.
We are also exploring whether there are other alternatives for
paying IPF teaching hospitals their higher teaching costs. We are
interested in developing methodologies for estimating these higher
costs and then, based on the newly available estimates and current
data, distributing those costs fairly to individual teaching hospitals.
We invite comments on obtaining the estimates and current data and on
other approaches to paying psychiatric teaching hospitals for their
higher medical-education costs based on that data.
c. Disproportionate Share Hospital Status
We measured the extent to which a facility provides care to low
income patients using the disproportionate share hospital (DSH)
variable used in other Medicare prospective payment systems (that is,
the sum of the proportion of Medicare days of care provided to
recipients of Supplemental Security Income and the proportion of the
total days of care provided to Medicaid beneficiaries). For psychiatric
units, both proportions are specific to the unit and not the entire
hospital. A limitation of the Medicaid proportion as applied to
psychiatric hospitals is that Medicaid does not pay for services
provided to individuals under the age of 65 in an institution for
mental diseases (IMD), as specified in section 1905(h) of the Act. As a
result, low-income beneficiaries in IMDs cannot be identified as
Medicaid beneficiaries, and the Medicaid proportion will be biased
downwards.
The DSH variable was highly significant in our cost regressions;
however, we found that facilities with higher DSH had lower per diem
costs. We note that the previously cited study for the APA also found
the same results. The relationship of high DSH with lower costs cannot
be attributed to downward bias in the Medicaid proportion due to the
IMD exclusion. This is because public psychiatric
[[Page 66933]]
hospitals already have lower costs on average than other types of IPFs.
Therefore, if we propose a DSH adjustment based on the regression
analysis, IPFs with high DSH shares would be paid lower per diem rates.
We tried a variety of supplemental analyses in an attempt to better
understand the observed relationship, but did not find a positive
relationship between the per diem cost and the DSH ratio. Therefore, we
are not proposing a payment adjustment for DSH intensity but will
monitor the effect of DSH for possible future adjustments.
d. Psychiatric Units in General Acute Care Hospitals
On average, psychiatric units have higher per diem costs than
psychiatric hospitals. According to the 1999 MedPAR file, the average
per diem cost for psychiatric units was $615, compared to $444 for
psychiatric hospitals.
Some of the patient characteristics and facility variables that we
included in our cost regressions explain part, but not all, of the cost
difference between hospitals and psychiatric units. Controlling for
facility size, occupancy, and selected comorbidities reduces the
magnitude of the estimated cost difference from approximately 37
percent to 19 percent. Several factors may account for the remaining 19
percent difference: (1) A large proportion of psychiatric admissions to
these units enter the hospital through the emergency room (ER), and ER
charges are included on the inpatient claims used in our analysis (this
issue will not be relevant to IPF payment in the future because ER
services have been paid under the outpatient hospital prospective
payment system since August 2000); (2) some of these admissions have
medical conditions in addition to psychiatric symptoms and require more
treatments resulting in higher costs due to more services and
equipment; (3) psychiatric hospitals and psychiatric units may utilize
different patterns of care and staffing; and (4) accounting differences
may account for some of the cost difference.
We have decided not to propose a specific adjustment for
psychiatric units. We are concerned about applying such an adjustment
to all psychiatric units regardless of an individual unit's costs,
efficiency, or case mix.
We hope that with further research, we will be able to gain a
better understanding of the cost differences that would enable us to
propose even more refined payment adjustments to directly measure the
differences in patient care needs in psychiatric units.
e. Adjustment for Alaska and Hawaii IPFs
Some of the prospective payment systems that have been developed
include a cost-of-living adjustment for the unique circumstances of
Medicare providers located in Alaska and Hawaii. Therefore, we analyzed
our data to determine the existence of IPFs located in Alaska and
Hawaii. Currently, in Alaska, there are only two psychiatric hospitals
and no psychiatric units. In Hawaii, there is one psychiatric hospital
and one psychiatric unit. In the absence of a cost-of-living
adjustment, our analyses indicates that some facilities in Alaska and
Hawaii would ``profit'' and other facilities would experience a
``loss.'' Due to the limited number of cases, the results of our
analysis are inconclusive regarding whether a cost-of-living adjustment
would improve payment equity for these facilities. Therefore, we are
not proposing an adjustment for IPFs located in Alaska and Hawaii. We
will continue to assess the impact of the proposed IPF prospective
payment system on IPFs located in Alaska and Hawaii as we obtain more
current data.
3. Proposed Payment Adjustments
a. Proposed Outlier Adjustment
While we are not statutorily required to provide outlier payments,
we believe that it is appropriate to propose an outlier payment policy
in connection with this prospective payment system in order to both
ensure that IPFs treating unusually costly cases do not incur
substantial ``losses'' and promote access to IPFs for patients
requiring expensive care. Providing additional payments for costs that
are beyond the IPF's control can strongly improve the accuracy of the
proposed IPF prospective payment system in determining resource costs
at the patient and facility level.
Notwithstanding the factors that we are proposing to recognize in
the IPF prospective payment system as proposed adjustments to the per
diem payment rate, the cost of care for some psychiatric patients may
still substantially exceed the otherwise applicable payments during the
course of a stay. This may occur because of multiple comorbid
conditions and complications that require a high utilization of
ancillary services. Since this is a per diem payment system, the extent
to which length of stay is a factor would be mitigated because payment
is made for each day of the stay.
We have determined that it is important to provide some protection
from financial risk caused by treating patients who require more costly
care and to reduce the incentives to under serve these patients.
Therefore, in order to protect IPFs from significant ``losses'' on
very costly cases, we are proposing to provide outlier payments and set
outlier numerical criteria prospectively so that outlier payments are
projected to equal 2 percent of total payments under the proposed IPF
prospective payment system. Based on the regression analysis and
payment simulations, we believe that using a 2 percent threshold
optimizes our ability to protect vulnerable IPFs while providing
adequate payment for all other cases that are not outlier cases.
We are proposing, in Sec. 412.424(c), to make an outlier payment
for any case in which the estimated total cost exceeds an outlier
threshold amount equal to the total IPF prospective payment system
payment amount plus a fixed dollar loss amount. The fixed dollar loss
amount is the amount used to limit the loss that an IPF would incur
under the proposed outlier policy (see section III.C.3. of this
proposed rule for an explanation of how the fixed dollar loss amount is
calculated). Once the cost of a case exceeds the outlier threshold
amount, an outlier payment would be made. A basic principle of an
outlier policy is that outlier payments should cover less than the full
amount of the additional costs above the outlier threshold in order to
preserve the incentive to contain costs once a case qualifies for
outlier payments (see Emmett B. Keeler, Grace M. Carter, and Sally
Trude, ``Insurance Aspects of DRG Outlier Payments,'' The Rand
Corporation, N-2762-HHS, October 1988). This results in Medicare and
the IPF sharing financial risk in the treatment of extraordinarily
costly cases.
b. Methodology for Proposed Outlier Payments
We are proposing to make outlier payments on a per case basis
rather than on a per diem basis. Outlier payments would be made for IPF
cases when the estimated cost of the entire stay exceeds the outlier
threshold amount. We believe it is appropriate to determine outlier
status on a per case basis in order to accurately assess the ``losses''
associated with the care of a patient for the entire stay. If we
propose to establish a per diem fixed dollar loss threshold, outlier
payments could occur for part of an inpatient stay when no ``losses''
actually occur. If we review the stay in terms of the resources
expended each day, the facility may incur a ``loss'' on some days of
the stay and may experience ``gains'' on other days of the stay. Thus,
assessing the resources
[[Page 66934]]
expanded over the course of the entire stay provides a fuller picture
of the actual resources needed to provide care for the complete episode
of care. After assessing the entire stay, one can determine if a
``loss'' was actually incurred by the IPF.
Therefore, we are proposing to define the outlier threshold amount
as the total IPF prospective payment for an IPF stay, plus a fixed
dollar loss amount. As explained below, the fixed dollar amount is
determined to be the dollar amount per stay that achieves a total
outlier percentage of 2 percent of the proposed prospective payments.
The proposed outlier payment would be defined as a proportion of the
estimated cost beyond the outlier threshold. The proportion of
additional costs paid as outlier payments is referred to as the loss-
sharing ratio. We chose to propose the fixed dollar loss amount and the
loss-sharing ratios to allow the estimated total outlier payments to be
2 percent of the total estimated proposed IPF prospective payments.
In order to determine the most appropriate outlier policy, our goal
was to analyze the extent to which the various outlier percentages
reduce financial risk, reduce incentives to under serve costly
beneficiaries, and improve the overall fairness of the payment system.
Our analysis showed that the higher the outlier percentage, the more
cases qualified for outlier payments, and the less payment was made per
case. Conversely, a low outlier percentage resulted in a higher fixed
dollar loss threshold and although fewer cases exceeded the threshold,
the amount paid was more substantial.
We began our analysis by determining that if approximately 10
percent of IPF cases received an outlier payment, we would be
maintaining the basic premise behind establishing an outlier policy,
that is, to compensate IPFs for their truly high cost cases. Also, this
percentage of cases, that is 10 percent, is not inconsistent with the
percentage of total outlier cases paid in other prospective payment
systems.
Initially, we believed that a 5 percent outlier policy would result
in outlier payments for approximately 10 percent of total IPF cases.
However, our analysis showed that a 5 percent outlier policy resulted
in outlier payments for approximately 20 percent of IPF cases, paying
an average of $1,975 per case. Since 20 percent of IPF cases would
receive an outlier payment, we do not believe that a 5 percent outlier
policy limits outlier payments to only the truly high cost cases. We
then reduced the outlier policy to 3 percent and found that 12 percent
of IPF cases received outlier payments, with an average payment of
$2,125 per case. Although a 3 percent outlier policy reduced the number
of cases that would qualify for outlier payments, 12 percent of cases
still exceeded our target of 10 percent of total IPF cases.
However, we have determined that an outlier policy of 2 percent of
the total proposed IPF payments would allow us to achieve a balance of
the above stated goals. A 2 percent outlier policy would appropriately
compensate for the truly high cost cases with a much more appropriate
level of payment and reduced financial risk without causing a
significant reduction in the per diem base rate. Under a 2 percent
outlier policy, approximately 7 percent of IPF cases qualify for
outlier payments with an average payment of $2,350 per case. Providing
outlier payments to 7 percent of cases meets the 10 percent target and
would provide outlier payment for only the high cost IPF cases.
Accordingly, we are proposing the outlier policy to be 2 percent of the
total proposed IPF payments. The amount of outlier payments would be
funded by prospectively reducing the non-outlier payment rates in a
budget-neutral manner.
Under our proposed outlier policy, we would make outlier payments
for discharges in which estimated costs exceed an adjusted threshold
amount ($4,200 multiplied by the IPF's facility adjustments, that is
wages, rural location, and teaching status) plus the total IPF
prospective payment system adjusted payment amount for the discharge.
The estimated cost for a case would be calculated by multiplying the
overall facility-specific cost-to-charge ratio by the total charges for
the inpatient stay.
In establishing the loss-sharing ratio, we considered establishing
a single ratio consistent with the hospital inpatient prospective
payment system, which is set at a marginal cost of 80 percent of the
difference between the cost for the discharge and the adjusted
threshold amount. However, the proposed IPF prospective payment system
unlike the hospital inpatient prospective payment system is a per diem
payment system, we are concerned that a single loss-sharing ratio at 80
percent might provide an incentive to increase length of stay in order
to receive additional outlier payments. Therefore, we are proposing to
reduce the loss-sharing ratio when the length of the stay increases
beyond the median length of stay. We believe that a reduction to the
outlier loss-sharing ratio should occur in a similar manner to the
declining per diem payment. The per diem payment amount under the
proposed IPF prospective payment system is highest on days 1 through 4,
declines on days 5 through 8, and declines further for all days beyond
8. Similarly, we are proposing to establish an 80-percent loss-sharing
ratio for days 1 through 8 in order to reflect higher costs early in an
IPF stay and reduce the ratio by 20 percent for days 9 and thereafter.
This is consistent with the median length of stay for IPFs. Reducing
the amount Medicare would share in the loss of high cost cases would
provide an incentive for an IPF to contain costs once a case qualifies
for outlier payments. We solicit comments on this approach.
c. Proposed Implementation of the Outlier Policy
The intent of proposing an outlier policy is to adequately pay for
truly high-cost cases. However, we have become aware that under the
hospital inpatient prospective payment system, some hospitals have
taken advantage of two system features in the outlier policy to
maximize their outlier payments. The first is the time lag between the
current charges on a submitted claim and the cost-to-charge ratio taken
from the most recent settled cost report. Second, statewide average
cost-to-charge ratios are used in those instances in which an acute
care hospital's operating or capital cost-to-charge ratios fall outside
reasonable parameters. We set forth these parameters and the statewide
cost-to-charge ratios for acute care hospitals in the annual
publication of prospective payment rates that are published by August 1
of each year in accordance with Sec. 412.8(b)(2). Currently, these
parameters represent 3.0 standard deviations (plus or minus) from the
geometric mean of cost-to-charge ratios for all hospitals. Hospitals
could arbitrarily increase their charges so far above costs that their
cost-to-charge ratios would fall below 3 standard deviations from the
geometric mean of the cost-to-charge ratio. Thus, a higher statewide
average cost-to-charge ratio would be applied to determine if the
hospital should receive an outlier payment. This disparity results in
their cost-to-charge ratios being set too high, which in turn results
in an overestimation of their current costs per case.
The intention of the outlier policy under both the hospital
inpatient prospective payment system and the proposed IPF prospective
payment system is to make payments only when the cost of care is
extraordinarily high in relation to the average cost of treating
comparable conditions or illnesses. We
[[Page 66935]]
believe that if hospitals' charges are not sufficiently comparable in
magnitude to their costs, the legislative purpose underlying payment
for outliers is thwarted. Thus, on June 9, 2003, we published a final
rule in the Federal Register (68 FR 34494) to ensure that outlier
payments are paid for truly high-cost cases under the hospital
inpatient prospective payment system.
We believe the use of parameters is appropriate for determining
cost-to-charge ratios to ensure these values are reasonable and that
outlier payments can be made in the most equitable manner possible.
Further, we believe the proposed methodology of computing IPF outlier
payments is susceptible to the same payment enhancement practices
identified under the hospital inpatient prospective payment system
because it depends on the cost-to-charge ratio to determine the IPF's
cost. Accordingly, as discussed below, we are proposing provisions for
implementing the outlier policy to ensure the statistical accuracy of
cost-to-charge ratios and appropriate adjustment of IPF outlier
payments.
1. Statistical Accuracy of Cost-to-Charge Ratios
We believe that there is a need to ensure that the cost-to-charge
ratio used to compute an IPF's estimated costs should be subject to a
statistical measure of accuracy. Removing aberrant data from the
calculation of outlier payments will allow us to enhance the extent to
which outlier payments are equitably distributed and continue to reduce
incentives for IPFs to under serve patients who require more costly
care. Further, using a statistical measure of accuracy to address
aberrant cost-to-charge ratios would also allow us to be consistent
with the outlier policy under the hospital inpatient prospective
payment system. Therefore, we are making the following two proposals:
[sbull] We will calculate two national ceilings, one for IPFs
located in rural areas and one for facilities located in urban areas.
We propose to compute this ceiling by first calculating the national
average and the standard deviation of the cost-to-charge ratios for
both urban and rural IPFs.
To determine the rural and urban ceilings, we propose to multiply
each of the standard deviations by 3 and add the result to the
appropriate national cost-to-charge ratio average (either rural or
urban). We believe that the method explained above results in
statistically valid ceilings. If an IPF's cost-to-charge ratio is above
the applicable ceiling, the ratio is considered to be statistically
inaccurate. Therefore, we are proposing to assign the national (either
rural or urban) median cost-to-charge ratio to the IPF. Due to the
small number of IPFs compared to the number of acute care hospitals, we
believe that statewide averages used in the hospital inpatient
prospective payment system, would not be statistically valid in the IPF
context.
In addition, the distribution of cost-to-charge ratios for IPFs is
not normally distributed and there is no limit to the upper ceiling of
the ratio. For these reasons, the average value tends to be overstated
due to the higher values on the upper tail of the distribution of cost-
to-charge ratios. Therefore, we are proposing to use the national
median by urban and rural type as the substitution value when the
facility's actual cost-to-charge ratio is outside the trim values.
Cost-to-charge ratios above this ceiling are probably due to faulty
data reporting or entry, and, therefore, should not be used to identify
and make payments for outlier cases because these data are clearly
erroneous and should not be relied upon. In addition, we propose to
update and announce the ceiling and averages using this methodology
every year.
[sbull] We will not apply the applicable national median cost-to-
charge ratio when an IPF's cost-to-charge ratio falls below a floor. We
are proposing this policy because we believe IPFs could arbitrarily
increase their charges in order to maximize outlier payments.
Even though this arbitrary increase in charges should result in a
lower cost-to-charge ratio in the future (due to the lag time in cost
report settlement), if we propose a floor on cost-to-charge ratios, we
would apply the applicable national median for the IPFs actual cost-to-
charge ratio. Using the national median cost-to-charge ratio in place
of the provider's actual cost-to-charge ratio would estimate the IPF's
costs higher than they actually are and may allow the IPF to
inappropriately qualify for outlier payments.
Accordingly, we are proposing to apply the IPF's actual cost-to-
charge ratio to determine the cost of the case rather than creating and
applying a floor. In such cases as described above, applying an IPF's
actual cost-to-charge ratio to charges in the future to determine the
cost of the case will result in more appropriate outlier payments.
Consistent with the policy change under the hospital inpatient
prospective payment system, we are proposing that IPFs would receive
their actual cost-to-charge ratios no matter how low their ratios fall.
We are still assessing the procedural changes that would be necessary
to implement this change.
2. Adjustment of IPF Outlier Payments
As discussed in the hospital inpatient prospective payment system
final rule for outliers, we have implemented changes to the outlier
policy used to determine cost-to-charge ratios for acute care
hospitals, because we became aware that payment vulnerabilities exist
in the current outlier policy. Because we believe the IPF outlier
payment methodology is likewise susceptible to the same payment
vulnerabilities, we are proposing the following:
[sbull] Include in proposed Sec. 412.424(c)(2)(v) a cross-
reference to Sec. 412.84(i) that was included in the final rule
published in the Federal Register on June 9, 2003 (68 FR 34515).
Through this cross-reference, we are proposing that fiscal
intermediaries would use more recent data when determining an IPF's
cost-to-charge ratio. Specifically, as provided in Sec. 412.84(i), we
are proposing that fiscal intermediaries would use either the most
recent settled IPF cost report or the most recent tentatively settled
IPF cost report, whichever is later to obtain the applicable IPF cost-
to-charge ratio. In addition, as provided under Sec. 412.84(i), any
reconciliation of outlier payments will be based on a ratio of costs to
charges computed from the relevant cost report and charge data
determined at the time the cost report coinciding with the discharge is
settled.
[sbull] Include in proposed Sec. 412.424(c)(2)(v) a cross
reference to Sec. 412.84(m) (that was included in the final rule
published in the Federal Register on June 9, 2003 (68 FR 34415) to
revise the outlier policy under the hospital inpatient prospective
payment system). Through this cross-reference, we are proposing that
IPF outlier payments may be adjusted to account for the time value of
money during the time period it was inappropriately held by the IPF as
an ``overpayment.'' We also may adjust outlier payments for the time
value of money for cases that are ``underpaid'' to the IPF. In these
cases, the adjustment will result in additional payments to the IPF. We
are proposing that any adjustment will be based upon a widely available
index to be established in advance by the Secretary, and will be
applied from the midpoint of the cost reporting period to the date of
reconciliation. We are still assessing the procedural changes that
would be necessary to implement this change.
d. Computation of Proposed Outlier Payments
In order to illustrate the proposed outlier payment mechanism, we
present
[[Page 66936]]
the following example of how we would calculate the outlier payment.
Example: John Smith was hospitalized at a non-teaching IPF
facility in Richmond, Virginia for 14 days. His total allowable
billed charges for the 14 days was $20,000. The prospective payment
amount (per diem payments plus adjustments) was $8,000.
To determine whether this case qualifies for outlier payments, it
would be necessary to compute the cost of the case by multiplying the
facility's overall cost-to-charge ratio of .72 by the allowable charge
of $20,000. In this case, the total allowable costs for Mr. Smith's
case is $14,400 ($20,000 x .72). Because the IPF is a non-teaching
urban facility, the fixed dollar threshold is adjusted by the wage
index 0.9477.
Table 4.--Computation Example of the Proposed Outlier Payment
------------------------------------------------------------------------
------------------------------------------------------------------------
Steps to Calculate the Proposed Outlier Payment
------------------------------------------------------------------------
Calculate the Fixed Dollar Loss
Threshold:
Fixed Dollar Threshold............. .............. $4,200
Wage adjusted labor share $2,899 ..............
(.72828x4,200)*0.9477..............
Non Labor Share (0.27172 x $4.200).. 1,141 ..............
Adjusted Fixed Dollar Threshold 4.040 ..............
($2,899+$1,141)....................
Calculate Eligible Outlier Costs:
Hospital Costs...................... 14,400 ..............
Adjusted Fixed Dollar Threshold..... 4,040
Prospective Payment System Adjusted 8,000 ..............
Payment............................
Eligible for Outlier Costs ($14,400- 2,360
$4,040-$8,000).....................
Calculate the Loss Sharing Ratio
Amount:
Per Diem Outlier Costs ($2,360/14 .............. 169
days)..............................
Loss-sharing Ratio Days 1 through 8 1,079 ..............
($169x.80x8 days)..................
Loss-sharing Ratio Days 9 through 14 607 ..............
$169x.60 x6 days)..................
The Total Outlier Payment Amount 1,686 ..............
$1,079+$607)...........................
------------------------------------------------------------------------
e. Interrupted Stays
Since per diem payments under the proposed IPF prospective payment
system would be higher for the first 8 days of a stay (the variable per
diem adjustment discussed earlier in this section), we are proposing to
adopt an interrupted stay policy. The policy is intended to reduce
incentives to move patients among Medicare-covered sites of care in
order to maximize Medicare payment. We are concerned that IPFs could
maximize payment by prematurely discharging patients after the 8 days
during which they receive higher payments (the variable per diem
adjustments), and then readmitting the same patient. In some cases a
discharge and subsequent readmission within a short period of time may
be appropriate. For example, we are concerned, in particular, that when
there is a psychiatric unit within an acute care hospital, a patient
could be transferred from the unit after only a few days of care to
another part of the hospital and then be readmitted to the psychiatric
unit. In this scenario, the hospital could receive the per diem
adjustments for both stays in the psychiatric unit as well as receive
the DRG payment associated with the acute hospital stay.
In proposed Sec. 412.402, we define an interrupted stay as one in
which the patient is discharged from an IPF and returns to the same IPF
within 5 consecutive calendar days. Specifically, we are proposing in
Sec. 412.424(d) that if a patient is discharged from an IPF and
returns to the same IPF within 5 consecutive calendar days, we would
treat both stays as a single stay. Therefore, we would not apply the
variable per diem adjustment for the second admission and would combine
the costs of both stays for the purpose of determining whether the case
qualifies for outlier payments.
We considered defining an interrupted stay as a readmission within
8 days of discharge since the variable per diem adjustments are not
applied after the 8th day of the stay. We are not proposing this
definition for an interrupted stay because we believe that after an 8-
day absence from the IPF, many of the services that account for
increased costs early in an inpatient psychiatric stay would need to be
repeated, for example, assessments and laboratory testing. After a
shorter absence from the IPF of 1 through 4 days, however, many of
those admission-related services such as psychiatric evaluations and
the patient's medical history would not need to be repeated. Therefore,
we believe the lower end of the last range of payment adjustment, that
is, 5 days, would provide for appropriate per diem payment adjustment
as well as provide a disincentive to inappropriately shift patients
between Medicare-covered sites of care. In addition, we intend to
monitor the extent and timing of readmissions to IPFs and plan to
account for changes in practice patterns as we refine the proposed IPF
prospective payment system. Public comments are welcome on the proposed
definition of an interrupted stay.
For the purposes of counting the 5-calendar day time period to
determine the length of the interrupted stay, the day of discharge
would be counted as ``day 1'', with midnight of that day serving as the
end of that calendar day. The 4 calendar days that immediately follow
day 1 would be days 2 through 5.
C. Development of the Proposed Budget-Neutral Federal Per Diem Base
Rate
1. Data Used To Develop the Proposed Federal Per Diem Base Rate
Based on the regression analysis, we are proposing a prospective
payment system for IPFs based on a per diem payment amount calculated
from average costs adjusted for budget neutrality. The per diem amount
would be adjusted by a budget-neutrality factor to arrive at the
Federal per diem base rate used as the standard payment per day for the
proposed IPF prospective payment system. The proposed Federal per diem
base payment would be adjusted by the proposed wage index and the
proposed patient-level and facility-level characteristics identified in
the regression analysis. To calculate the proposed per diem amount, we
would estimate the average cost per day for--(1) routine services from
the most recent available cost report data (cost reports beginning in
FY 1999 supplemented with 1998 cost reports if the 1999 cost report is
missing); and (2) ancillary costs per day using data from the 1999
Medicare bills and corresponding data from facility cost reports.
[[Page 66937]]
2. Calculation of the Proposed Per Diem Amount
For routine services, the proposed per diem operating and capital
costs would be used to develop the base for the psychiatric per diem
amount. The per diem routine costs were obtained from each facility's
Medicare cost report. To estimate the costs for routine services
included in developing the proposed per diem amount, we summed the
total routine costs (including costs for capital) submitted on the cost
report for each provider and divided it by the total Medicare days.
Some average routine costs per day were determined to be aberrant, that
is, the costs were extraordinarily high or low and most likely
contained data errors. The following method was used to trim
extraordinarily high or low cost values in order to improve accuracy of
our results. First, the average and standard deviations of the total
per diem cost (routine and ancillary costs) were computed separately
for cases from psychiatric hospitals and psychiatric units (separate
statistics were computed for the groups of IPFs, because we did not
want to systematically exclude a larger proportion of cases from the
higher cost psychiatric units). Before calculating the means, we
trimmed cases from the file when covered days were zero or routine
costs were less than $100 or greater than $3,000. We selected these
amounts because we believe this range captured the grossly aberrant
cases. Elimination of the grossly aberrant cases would prevent the
means from being distorted. Second, we trimmed cases when the
provider's total cost per day was outside the standard and generally
used statistical trim points of plus or minus 3 standard deviations
from the respective means for each facility type (psychiatric hospitals
and psychiatric units). If the total cost per day was outside the trim
value, we would delete the data for that provider from the per diem
rate development file. This method of trimming is consistent with the
method used for the regression analysis. After trimming the data, the
average routine cost per day would be $495.
For the ancillary services, we would calculate the costs by
converting charges from the 1999 Medicare claims into costs using
facility-specific, cost-center specific cost-to-charge ratios obtained
from each provider's applicable cost reports. We matched each
provider's departmental cost-to-charge ratios from their Medicare cost
report to each charge on their claims reported in the MedPAR file.
Multiplying the total charges for each type of ancillary service by the
corresponding cost-to-charge ratio provided an estimate of the costs
for all ancillary services received by the patient during the stay. For
those departmental cost-to-charge ratios that we considered to be
aberrant because they were outside the statistically valued trim points
of plus or minus 3.00 standard deviations from the facility-type mean,
we replaced the individual cost-to-charge ratios for each department
with the median department cost-to-charge ratio by facility type
(psychiatric hospital or psychiatric unit). Because the distribution of
ratios of cost-to-charges is not normally distributed and because there
is no limit to the upper ceiling of the ratio, the mean value tends to
be overstated due to the higher values on the upper tail of the bell
curve. Therefore, we chose the median by facility type as a better
measure for the substitution value when the facility's actual cost-to-
charge ratio was outside the trim values.
After computing the estimated costs by applying the cost-to-charge
ratios to the total ancillary charges for each patient stay, we would
determine the average ancillary amount per day by dividing the total
ancillary costs for all stays by the total covered Medicare days. Using
this methodology, the average ancillary cost per day would be $67.
Adding the average ancillary costs per day ($67) and the facility's
average routine costs per day including capital costs ($495) provides
the base payment amount ($562) for the estimated average per diem
amount for each patient day of inpatient psychiatric care.
3. Determining the Update Factors for the Budget-Neutrality Calculation
Section 124(a)(1) of Pub. L. 106-113 requires that the proposed IPF
prospective payment system be budget neutral. In other words, the
amount of total payments under the proposed IPF prospective payment
system, including any payment adjustments, must be projected to be
equal to the amount of total payments that would have been made if the
proposed prospective payment system were not implemented. Therefore, we
are proposing to calculate the budget-neutrality factor for the
implementation period by setting the total estimated prospective
payment system payments equal to the total estimated payments that
would have been made under the TEFRA methodology had the proposed
prospective payment system not been implemented.
As discussed in section IV of this proposed rule, the
implementation date of the proposed IPF prospective payment system is
cost reporting periods beginning on or after April 1, 2004. In order to
create a more even and efficient process of updates for the various
Medicare payment systems, we are recommending that the first Federal
base rate update occur on July 1, 2005. Therefore, we calculated the
proposed Federal base rate to be budget neutral for the 15-month period
April 1, 2004 through June 30, 2005.
The data sources we used to calculate the budget-neutrality factor
were the most complete data available for IPFs and included cost report
data from FY 1999 and the 1999 Medicare claims data from the June 2001
update of the MedPAR files. We updated the cost report data for each
IPF to the midpoint of that 15-month period (April 1, 2004 through June
30, 2005) and used the projected market basket update factors for each
applicable year.
We note that the FY 1999 cost report file is not complete because
of the lag in the filing of cost reports for some providers, therefore,
a small number of IPFs do not have cost report data for the 1999 cost
report period. To include as many IPFs in the payment calculation as
possible, we filled in the missing data using data from the previous
year for those IPFs. The prospective payment projections were based on
case level data from the 1999 MedPAR files and the facility level
characteristics from the 1999 cost reports. These data provide the
input for the development of the appropriate update factors to be
applied to the proposed prospective payment model.
a. Cost Report Data for April 1, 2004 Through June 30, 2005
In order to determine each provider's projected costs for the
proposed implementation period, we are proposing to update each IPF's
cost to the midpoint of the period April 1, 2004 through June 30, 2005.
To calculate operating costs, we would use the applicable percentage
increases to the TEFRA target amounts for FYs 1999 through 2002 (in
accordance with Sec. 413.40(c)(3)(vii)) and the full excluded hospital
market-basket percentage increase for FY 2003 and later. For FYs 1999
through 2002, we would determine the appropriate update factor for each
year by using the methodology described below:
[sbull] For IPFs with costs that equal or exceed their target
amounts by 10 percent or more for the most recent cost reporting period
for which information is available, the update factor would be the
market-basket percentage increase.
[sbull] For IPFs that exceed their target amounts by less than 10
percent, the
[[Page 66938]]
update factor would be equal to the market basket minus 0.25 percentage
points for each percentage point in which operating costs are less than
10 percent over the target (but in no case less than 0 percent).
[sbull] For IPFs that are at or below their target amounts but
exceed 66.7 percent of the target amounts, the update factor would be
the market basket minus 2.5 percentage points (but in no case less than
0 percent).
[sbull] For IPFs that do not exceed 66.7 percent of their target
amounts, the update factor would be 0 percent.
[sbull] For FYs 2003 and later, we use the most recent estimate of
the percentage increase projected by the excluded hospital market-
basket index.
In addition, since the proposed prospective payment system would
include both the operating and capital-related costs, we needed to
project the capital-related cost under the TEFRA system as well. We
used the excluded capital market basket to project the capital-related
costs under the TEFRA system. Table 5 below, summarizes the excluded
hospital market basket and the excluded capital market basket indexes.
Table 5.--Proposed Excluded Hospital Market Basket and Excluded Capital
Market Basket
------------------------------------------------------------------------
Excluded
hospital Excluded
Fiscal year market basket capital market
percent basket percent
------------------------------------------------------------------------
FY 1999................................. 2.9 0.9
FY 2000................................. 3.3 1.2
FY 2001................................. 4.3 1.0
FY 2002................................. 3.9 0.9
FY 2003*................................ 3.7 0.8
FY 2004*................................ 3.5 1.1
FY 2005*................................ 3.2 1.1
------------------------------------------------------------------------
*Note: Projected Percentage.
b. Estimate of Total Payments Under the TEFRA Payment System
We estimated payments for inpatient operating and capital services
under the current TEFRA system using the following methodology:
Step 1: IPF's Facility-Specific Target Amount.
The facility-specific target amount for an IPF would be calculated
based on the IPF's allowable inpatient operating cost per discharge for
the base period, excluding capital-related, nonphysician anesthetist,
and medical education costs. We would update this target amount using a
rate-of-increase percentage as specified in Sec. 413.40(c)(3)(viii).
From FYs 1998 through 2002, there were two national caps on the
payment amounts for IPFs. As specified in Sec. 413.40(c)(4)(iii), an
IPF's facility-specific target is the lower of its net allowable base-
year costs per discharge increased by the applicable update factors or
the cap for the applicable cost reporting period. In determining each
IPF's facility-specific target amount, we would use the labor-related
and non-labor related shares of the national cap amounts for FY 2002
that appeared in the hospital inpatient prospective payment system
final rule published in the Federal Register on August 1, 2001 (66 FR
39916). For existing IPFs (that is, IPFs paid under TEFRA before
October 1, 1997), we adjusted the labor-related share ($8,429) by the
applicable geographic wage index and added that amount to the non-labor
related share ($3,351). For new IPFs (that is, IPFs first paid under
TEFRA after October 1, 1997), we adjusted the labor-related share
($6,815) and added that amount to the non-labor related share ($2,709).
Step 2: IPF's Payment Amount for Inpatient Operating Services
Under the TEFRA system, an IPF's payment amount for inpatient
operating services is the lower of--
[sbull] The hospital-specific target amount (subject to application
of the cap as determined in Step (1) multiplied by the number of
Medicare discharges (the ceiling); or
[sbull] The hospital's average inpatient operating cost per case
multiplied by the number of Medicare discharges.
In addition, under the TEFRA system, payments may include a bonus
or relief payment, as follows:
[sbull] IPFs whose net inpatient operating costs are lower than or
equal to the ceiling, would receive the lower payment of either the net
inpatient operating costs plus 15 percent of the difference between the
inpatient operating costs and the ceiling; or the net inpatient
operating costs plus 2 percent of the ceiling.
[sbull] IPFs whose net inpatient operating costs are greater than
the ceiling, but less than 110 percent of the ceiling, would receive
the ceiling payment.
[sbull] IPFs whose net inpatient operating costs are greater than
110 percent of the ceiling would receive the ceiling payment plus the
lower of 50 percent of the difference between the 110 percent of the
ceiling and the net inpatient operating costs or 10 percent of the
ceiling payment.
Step 3: IPF's Payment for Capital-Related Costs
Under the TEFRA system, in accordance with section 1886(g) of the
Act, Medicare allowable capital-related costs are paid on a reasonable
cost basis. Each IPF's payment for capital-related costs would be taken
directly from the cost report and updated for inflation using the
excluded capital market basket.
Step 4: IPF's Total (Operating and Capital-Related Costs) Payment Under
the TEFRA Payment System
Once estimated payments for inpatient operating costs are
determined (including bonus and relief payments, as appropriate), we
would add the TEFRA adjusted operating payments and capital-related
cost payments together to determine each IPF's total payments under the
TEFRA payment system.
c. Payments Under the Proposed Prospective Payment System Without a
Budget-Neutrality Adjustment
Payments under the proposed prospective payment system would be
estimated without a budget-neutrality adjustment. We used $562 (the
average cost per day consistent with the average cost per day used in
the regression model) as the starting point for the Federal per diem
base rate. By applying the aggregate cost increase factor using the
applicable market basket increase factors, we updated the base rate to
the April 1, 2004 through June 30, 2005 period. The updated cost per
day of $671 was then used in the payment model to project future
payments under the proposed IPF prospective payment system. The next
step was to apply the associated proposed wage index and all applicable
proposed patient-level and facility-level adjustments to determine the
appropriate proposed prospective payment amount for each stay in the
final payment model file.
We note that no separate wage or standardization factors were
applied to the per diem amount used to derive the total proposed
prospective payment system payments as these factors would be accounted
for through the budget-neutrality computation described below. Thus,
when the total proposed prospective payment system payments are
compared to projected TEFRA payments, the resulting factor applied to
the per diem amount would implicitly account for the effects of wage
and standardization adjustments to the per diem costs.
d. Calculation of the Proposed Budget-Neutral Adjustment
In determining the proposed budget-neutrality factor, we compared
the proposed prospective payment system amounts calculated from the
psychiatric stays in the 1999 MedPAR file to the projected TEFRA
payments from the
[[Page 66939]]
1999 cost report file (as explained in greater detail in section b.
above). The proposed budget-neutrality adjustment was calculated by
dividing total estimated payments under the TEFRA payment system by
estimated payments under the proposed IPF prospective payment system
without a budget-neutrality adjustment.
Since the proposed IPF prospective payment system amount for each
provider would include applicable outlier amounts, we reduced the
proposed budget neutral per diem base rate by 2 percent to account for
the 2 percent of aggregate proposed prospective payments to be made for
outlier payments. The appropriate proposed outlier amount was
determined by comparing the adjusted prospective payment amount for the
entire stay to the computed cost per case. If costs were above the
prospective payment amount plus the adjusted fixed dollar loss
threshold, an outlier payment was computed using the applicable risk-
sharing percentages as explained in greater detail in section III.B.3
of this proposed rule. The outlier amount was computed for all stays
and the total outlier amount was added to the final proposed
prospective payment amount. If the total outlier amount for all
providers was determined to be higher or lower than 2 percent of the
total payments under the proposed prospective payment system, then the
fixed dollar loss threshold was adjusted accordingly. The proposed
fixed dollar loss threshold was determined to be $4,200.
4. Proposed Behavioral Offset
We would calculate the proposed budget-neutral Federal per diem
base rate by applying the budget-neutrality factor calculated above and
the 2 percent adjustment for outlier payments to $671 (the average cost
per day for the 15-month period, April 1, 2004 through June 30, 2005).
However, if the proposed IPF prospective payment system is implemented
as proposed, we would expect that IPFs may experience usage patterns
that are significantly different from their current usage patterns. Two
examples are--(1) the proposed IPF prospective payment system is a per-
diem system, therefore, IPFs might have an incentive to keep patients
in the facility longer to maximize use of their beds or to receive the
proposed outlier payments; and (2) the current TEFRA payment system
does not rely on ICD-9-CM coding. Proper comorbidity coding, however,
will have an impact on the proposed prospective payments under this
proposed rule. Therefore, we expect that IPFs will have an incentive to
comprehensively code for the presence of comorbidities, thus,
ultimately, the coding practice of IPFs should improve once the
proposed IPF prospective payment system is implemented.
As a result, Medicare may incur higher payments than assumed in our
calculation. These effects were taken into account when we calculated
the proposed budget-neutral Federal per diem base rate. Accounting for
these effects through an adjustment is commonly known as a behavioral
offset. Based on accepted actuarial practices and consistent with the
assumptions made under the inpatient rehabilitation facilities (IRF)
prospective payment system, in determining this proposed behavioral
offset, we assumed that the IPFs would regain 15 percent of potential
``losses'' and augment payment increases by 5 percent. We applied this
actuarial assumption, which was based on consideration of our
historical experience with new payment systems, to the estimated
``losses'' and ``gains'' among the IPFs. We intend to monitor the
extent to which current practice in IPFs such as the average length of
stay is affected by implementation of a per diem payment system and may
propose adjustments to the behavioral assumptions accordingly. The
above methodology made no behavioral assumptions for changes in the
number of total psychiatric beds or the shift of utilization among
types of psychiatric hospitals.
5. Proposed Federal Per Diem Base Rate
The proposed Federal per diem base rate with an outlier adjustment
and budget neutrality with a behavioral offset would be $530. This
proposed dollar amount would include a 2-percent reduction to account
for outlier payments, and a 19-percent reduction to account for budget
neutrality and the behavioral offset to the proposed Federal per diem
base rate otherwise calculated under the proposed methodology as
described above.
6. Proposed Changes to Physician Recertification Requirements
In addition to the monitoring efforts mentioned above, we are
proposing changes in the physician recertification requirements for
inpatient psychiatric care as specified in Sec. 424.14. This section
states that Medicare Part A pays for inpatient psychiatric care only if
a physician certifies and recertifies the need for services. Therefore,
we are proposing to revise Sec. 424.14(c), regarding the content of
the physician recertification and Sec. 424.14(d), regarding the timing
of physician recertification to ensure that a patient's continued stay
in an IPF is medically necessary.
As specified in existing Sec. 424.14(c), a physician must
recertify that inpatient psychiatric services furnished since the
previous certification were, and continue to be required: (1) For
treatment that could reasonably be expected to improve the patient's
condition or for diagnostic study; and (2) the hospital's records show
that the services furnished were intensive treatment services,
admission and related services necessary for diagnostic study, or
equivalent services. We are proposing to add a requirement that the
physician recertify that the patient continues to need, on a daily
basis, inpatient psychiatric care (furnished directly by or requiring
the supervision of inpatient psychiatric facility personnel) or other
professional services that, as a practical matter can only be provided
on an inpatient basis.
Section 424.14(d)(2) requires the first recertification after
admission to occur as of the 18th day of hospitalization. We are
proposing to revise the timing of the first recertification to the 10th
day of hospitalization in order to align the physician recertification
of the need for continuation of the inpatient stay with the median
length of stay. As noted previously, according to the 1999 MedPAR data,
the median length of stay for Medicare beneficiaries was 9 days. These
proposed changes are intended to ensure that a patient's continued stay
in an IPF is medically necessary and more closely tied to the median
length of stay.
We acknowledge that the additional protections afforded by the
unique psychiatric hospital conditions of participation (COPs) in
subpart E of part 482, which create administrative criteria and
documentation requirements for psychiatric patients, are an additional
protection in this regard. We believe these requirements provide
adequate protection against the shift of lower cost nursing home
patients with similar but less severe diagnoses into psychiatric
hospitals. However, if we observe a shift of less severe cases into
psychiatric hospitals, we may perform targeted reviews of admissions to
assure that the COPs and physician certification requirements are being
appropriately followed.
E. Proposed Area Wage Adjustment
Due to the variation in costs, because of the differences in
geographic wage levels, we are proposing that payment rates under the
proposed IPF prospective payment system be adjusted by a geographic
index. In addition, we are proposing to use the inpatient acute care
hospital wage data to compute the
[[Page 66940]]
IPF wage indices, because there is not an IPF-specific wage index
available. We believe that the inpatient acute care hospital wage data
reflects wage levels similar to psychiatric units as well as free-
standing psychiatric hospitals. We also believe that IPFs generally
compete in the same labor market as inpatient acute care hospitals.
Furthermore, we are proposing to adjust the labor-related portion
of the proposed prospective payment rates for area differences in wage
levels by a factor reflecting the relative facility wage level in the
geographic area of the IPF compared to the national average wage level
for these hospitals. We believe that the actual location of the IPF as
opposed to the location of affiliated providers is most appropriate for
determining the wage adjustment because the data support the premise
that the prevailing wages in the area in which the IPF is located
influence the cost of a case. Thus, we are using the inpatient acute
care hospital wage data without regard to any approved geographic
reclassification as specified in section 1886(d)(8) or 1886(d)(10) of
the Act. We note this policy is consistent with the area wage
adjustments used in other non-acute care facility prospective payment
systems.
To account for wage differences, we first identified the proportion
of labor and non-labor components of costs. We used our proposed 1997-
based excluded hospital market basket with capital to determine the
labor-related share. We calculated the proposed labor-related share as
the sum of the weights for those cost categories contained in the
proposed 1997-based excluded hospital with capital market basket that
are influenced by local labor markets. These cost categories include
wages and salaries, employee benefits, professional fees, labor-
intensive services, and a 46 percent share of capital-related expenses.
The labor-related share for the base period of the proposed prospective
payment system (April 1, 2004 through June 30, 2005) is the sum of the
relative importance of each labor-related cost category for this
period, and reflects the different rates of price change for these cost
categories between the base year (FY 1997) and this period. The sum of
the relative importance for operating costs (wages and salaries,
employee benefits, professional fees, and labor-intensive services) is
69.348 percent, as shown below in Table 6. The portion of capital that
is influenced by local labor markets is estimated to be 46 percent.
Because the relative importance of capital is 7.566 percent of the
proposed 1997-based excluded hospital with capital market basket for
the period April 1, 2004 through June 30, 2005, we would take 46
percent of 7.566 percent to determine the proposed labor-related share
of capital. The result, 3.48 percent, is then added to the proposed
69.348 percent calculated for operating costs to determine the total
proposed labor-related relative importance. The resulting labor-related
share that we propose to use for the proposed IPF prospective payment
system is 72.828 percent. The table below shows that the proposed
labor-related share would have been 73.570 percent if we had not
rebased the excluded hospital with capital market basket using more
recent 1997 data rather than using 1992 data. As shown in Table 6,
rebasing results in a lowering of the labor-related share by .742
percent.
Table 6.--Proposed Labor-Related Share Relative Importance
------------------------------------------------------------------------
Relative Relative
Importance Importance
1992-based 1997-based
Cost Category Market Basket Market Basket
(April 2004 to (April 2004 to
June 2005) June 2005)
------------------------------------------------------------------------
Wages and salaries...................... 50.714 49.158
Employee benefits....................... 11.930 11.077
Professional fees....................... 2.060 4.540
Postage................................. 0.252 ..............
All other labor intensive services...... 5.252 4.572
Subtotal................................ 70.209 69.348
Labor-related share of capital costs.... 3.360 3.480
-----------------
Total............................... 73.570 72.828
------------------------------------------------------------------------
A precedent exists for using this method to determine the
proportion of payments adjusted for geographic differences in labor
costs. Specifically, the labor-related share for acute care hospitals
is determined from the prospective payment system hospital operating
market basket using a similar method.
We believe that a wage index based on acute care hospital wage data
is the best and most appropriate wage index to use in adjusting
payments for IPFs, since both the acute care hospitals and IPFs compete
in the same labor markets. This wage data includes the following
categories of data: (1) Salaries and hours from short-term acute care
hospitals; (2) home office costs and hours; (3) certain contract labor
costs and hours; and (4) wage-related costs. The wage data excludes
wages for services provided by teaching physicians, interns and
residents, and nonphysician anesthetists under Medicare Part B, because
we would not cover these services under the proposed IPF prospective
payment system.
Consistent with the wage index methodologies in other prospective
payment systems, we are proposing to divide IPFs into labor market
areas. For the purpose of defining labor market areas, we are proposing
to define an urban area as a Metropolitan Statistical Area (MSA) or New
England County Metropolitan Area (NECMA), as defined by the Office of
Management and Budget (OMB). In addition, we are proposing to define a
rural area as any area outside an urban area. The proposed IPFs wage
indices would be computed as follows:
[sbull] Compute an average hourly wage for each urban and rural
area.
[sbull] Compute a national average hourly wage.
[sbull] Divide the average hourly wage for each urban and rural
area by the national average hourly wage.
The result is a proposed wage index for each urban and rural area
(see Addendum B1 for the proposed wage index for urban areas and
Addendum B2 for the proposed wage index for rural areas).
[[Page 66941]]
To calculate the wage-adjusted facility payments, we are proposing
the following method: (1) Multiply the prospectively determined Federal
base rate by the labor-related percentage to determine the labor-
related portion; (2) multiply this labor-related portion by the
applicable IPF wage index; and (3) add the resulting wage-adjusted
labor-related portion to the nonlabor-related portion, resulting in a
wage-adjusted base rate.
F. Effect of the Proposed Transition on Budget Neutrality
Section 124(a)(1) of Pub. L. 106-113 requires that the proposed IPF
prospective payment system maintain budget neutrality. As discussed in
further detail in section IV of this proposed rule, we are proposing a
3-year transition period from the cost-based TEFRA reimbursement to
payment based on 100-percent prospective payment. During the transition
period, we are proposing that an IPF would be paid a blend of an
increasing percentage of the IPF Federal per diem payment amount and a
decreasing percentage of its TEFRA rate for each discharge. Since the
estimated prospective payments were calculated in a budget-neutral
manner, this proposed transition methodology would result in the same
total estimated payments that are expected under the current rules.
G. Calculation of the Proposed Payment
Payments under the proposed IPF prospective payment system would be
determined by adjusting the per diem base amount by the appropriate
wage index and applicable IPF prospective payment system payment
adjustments and adding any applicable outlier amounts. An example of
how to calculate payment under the proposed IPF prospective payment
system follows.
Example: Jane Doe, a 78-year-old female, is admitted to a
psychiatric unit within the Get Well General Hospital located in
Richmond, Virginia. Ms. Doe presents with signs and symptoms
indicating a primary diagnosis of Major Depressive Disorder (ICD-
296.33, DRG-430). Her medical history includes Uncontrolled Type 1
Diabetes with Ophthalmic manifestations (ICD-250.53) and Chronic
Renal Failure (ICD-585). Ms. Doe remains in the hospital for 5 days.
Table 7.--Example of Proposed Payment
------------------------------------------------------------------------
------------------------------------------------------------------------
Steps To Determine the Proposed Per Diem Payment
------------------------------------------------------------------------
Federal Base Prospective Payment Rate:
Calculate Wage Adjusted Federal Base .............. $530
Rate...............................
Calculate the labor portion of the .............. 386
Federal base rate (.72828 x $530)..
Apply wage index factor from $366 ..............
Addendum B1 for Richmond Virginia
(0.9477 x $386)....................
Calculate the non-labor of the $144 ..............
Federal base rate: (0.27172 x $530)
Calculate total wage-adjusted $510 ..............
Federal base rate: ($366 + $144)...
Apply Facility Level Adjusters:
Teaching adjustment (not applicable) .............. ..............
Rural adjustment (not applicable)... .............. ..............
Apply Patient Level Adjusters:
DRG adjustment for DRG 430.......... 1.00 ..............
Age adjustment (over 65)............ 1.13 ..............
Comorbidity adjusters:
Diabetes............................ 1.11 ..............
Chronic renal failure............... 1.12 ..............
Total prospective payment adjustment 1.405 ..............
factor: (1.00 x 1.13 x 1.11 x
1.12):.............................
Calculate Wage Adjustment and .............. 716
Prospective Payment System Adjusted
Federal Per Diem: ($510 x 1.405)...
Apply Variable Per Diem Adjustments:
Day 1: (1.26 x $716)................ $902 ..............
Days 2 to 4: (1.12 x $716 x 3)...... $2,406 ..............
Day 5: (1.05 x $716)................ $752 ..............
The Total Proposed Prospective Payment $4,060 ..............
System Payment for Jane Doe's IPF Stay.
------------------------------------------------------------------------
IV. Implementation of the Proposed IPF Prospective Payment System
We are proposing that payment to an IPF would convert to the IPF
prospective payment system at the beginning of its first cost reporting
period beginning on or after April 1, 2004.
A. Proposed Transition
We are proposing a 3-year transition to fully implement the IPF
prospective payment system. During that time, we propose to use two
payment percentages to determine an IPF's total payment under the
proposed IPF prospective payment system. In addition, during the
proposed transition, IPFs would receive a blended payment of the
Federal per diem payment amount and a hospital-specific amount based on
the IPF's TEFRA payment. As noted above, we are proposing that the
system would become effective for cost reporting periods beginning on
or after April 1, 2004.
As discussed in section V. of this proposed rule, we are proposing
that the first year of the transition would continue for 15 months,
thereby, moving the IPF prospective payment system to a July 1 update
cycle. As a result, the first year of the transition period would be
for cost reporting periods beginning on or after April 1, 2004 and
before July 1, 2005. The total payment for this period would consist of
75 percent based on the TEFRA payment system and 25 percent based on
the proposed IPF prospective payment amount. We are also proposing that
for cost reporting periods beginning on or after July 1, 2005 and
before July 1, 2006, the total payment would consist of 50 percent
based on the TEFRA payment system, and 50 percent based on the proposed
IPF prospective payment amount. In addition, we are also proposing that
for cost reporting periods beginning on or after July 1, 2006 and
before July 1, 2007, the total payment would consist of 25 percent
based on the TEFRA payment system and 75 percent based on the proposed
IPF prospective payment amount. Thus, we are proposing that payments to
IPFs would be at 100 percent of the proposed IPF prospective payment
amount for cost reporting periods beginning on or after July 1, 2007.
Given the complex and redistributive nature of the
[[Page 66942]]
proposed prospective payment system and in order to thoroughly review
the anticipated volume of comments we expect to receive on this
proposed rule, it may ultimately be necessary to delay implementation
beyond April 2004. In addition, it may be helpful to increase the
transition period because a longer transition period would allow us to
adjust the payment system if necessary before the full implementation
of the IPF prospective payment system. Also, a longer transition period
may be appropriate if the research designed to refine the payment
system takes longer than we currently anticipate. We specifically
request public comments on these implementation issues.
In order to mitigate the impacts of the prospective payment system,
we are not proposing to allow an IPF to elect to be paid based on 100
percent of the Federal per diem payment amount in lieu of the blended
methodology. In this way, the transition will allow IPFs time to become
familiar with the prospective payment system and gradually move to the
full Federal per diem amount over a 3-year period.
B. New Providers
We believe that we need to propose a definition of a new IPF
because new IPFs will not participate in the 3-year transition from
cost-based reimbursement to a prospective payment system (section IV.A.
of this proposed rule). The transition period described is intended to
provide currently existing IPFs time to adjust to payment under the new
system. A new IPF would not have received payment under TEFRA for the
delivery of IPF services before the effective date of the IPF
prospective payment system. We do not believe that new IPFs require a
transition period in order to make adjustments to their operating and
capital financing, as will IPFs that have been paid under TEFRA, or
need to otherwise integrate the effects of changing from one payment
system to another payment system.
For purposes of Medicare payment under the proposed IPF prospective
payment system, we are defining a new IPF as a provider of inpatient
psychiatric hospital services that otherwise meets the qualifying
criteria for IPFs, set forth in Sec. 412.22, Sec. 412.23, Sec.
412.25, and Sec. 412.27 under present or previous ownership (or both),
and its first cost reporting period as an IPF begins on or after April
1, 2004, the proposed implementation date of the IPF prospective
payment system.
C. Claims Processing
With respect to the proposed IPF prospective payment system, we are
proposing to continue processing claims in a manner similar to the
current claims processing system. Hospitals would continue to report
diagnostic information on the claim form and the Medicare fiscal
intermediaries would continue to enter clinical and demographic
information in their claims processing systems for review by the
Medicare Code Editor (MCE). The MCE reviews claims to determine if they
are improperly coded (for example, diagnosis inappropriate to sex of
the patient) or require more information (imprecise coding) in order to
be processed. After screening, each claim would be classified into the
appropriate DRG by a software program called the ``GROUPER.'' If the
``GROUPER'' assigns a DRG that is not recognized under the proposed IPF
prospective payment system, the claim would be returned to the IPF. If
the ``GROUPER'' assigns a DRG recognized by the system, a ``PRICER''
program would calculate the Federal per diem payment amount, including
the DRG adjustment and other patient-level and facility-level
adjustments appropriate to the claim.
D. Periodic Interim Payments (PIP)
Under the TEFRA payment system--(1) a psychiatric hospital may be
paid using the PIP method as specified in Sec. 413.64(h); (2)
psychiatric units are paid under the PIP method if the hospital of
which they are a part is paid as specified in Sec. 412.116(b); and (3)
an IPF may be eligible to receive accelerated payments as specified in
Sec. 413.64(g) or for psychiatric units specified in Sec. 412.116(f).
We are proposing in Sec. 412.432 to continue to allow for PIP and
accelerated payment methods under the proposed IPF prospective payment
system.
In addition, we are proposing that an IPF receiving prospective
payments, whether or not it received a PIP under cost reimbursement,
may receive a PIP if it meets the requirements specified in proposed
Sec. 412.432(b)(1) and receives approval by its intermediary. If an
intermediary determines that an IPF, which received a PIP under cost
reimbursement, is no longer entitled to receive a PIP, it will remove
the IPF from the PIP method. As specified in proposed Sec.
412.432(b)(1), intermediary approval of a PIP is conditioned upon the
intermediary's best judgment as to whether payment can be made under
the PIP method without undue risk of its resulting in an overpayment to
the provider.
Excluded from PIP amounts are outlier payments that are paid upon
the submission of a discharge bill. Also, Part A costs that are not
paid under the proposed IPF prospective payment system, including
Medicare bad debts and costs of an approved education program, and
other costs paid outside the IPF prospective payment system, will be
subject to the interim payment provisions as specified in Sec. 413.64.
Under the proposed prospective payment system, if an IPF is not
paid under the PIP method it may qualify to receive an accelerated
payment. As specified in proposed Sec. 412.432(e), the IPF must be
experiencing financial difficulties due to a delay by the intermediary
in making payment to the IPF, or there is a temporary delay in the IPFs
preparation and submittal of bills to the intermediary beyond its
normal billing cycle, because of an exceptional situation. A request
for an accelerated payment must be made by the IPF and approved by the
intermediary and us. The amount of an accelerated payment would be
computed as a percentage of the net payment for unbilled or unpaid
covered services. Recoupment of an accelerated payment would be made as
bills are processed or by direct payment by the IPF.
E. Limitation on Beneficiaries Charges
In accordance with Sec. 409.82 and Sec. 409.83 and consistent
with other established prospective payment systems policies, we are
proposing in Sec. 412.404(c) that an IPF may not charge a beneficiary
for any service for which payment is made by Medicare. This policy will
apply, even if the IPF's costs of furnishing services to that
beneficiary are greater than the amount the IPF would be paid under the
proposed IPF prospective payment system. In addition, we are proposing
that an IPF receiving a prospective payment for a covered hospital stay
(that is, a stay that includes at least one covered day) may charge the
Medicare beneficiary or other person only for the applicable deductible
and coinsurance amounts as specified in Sec. 409.82, Sec. 409.83,
Sec. 409.87, and Sec. 489.20.
V. Future Updates
A. Proposed Annual Update Strategy
Section 124 of Pub. L. 106-113 does not specify an update strategy
for the proposed IPF prospective payment system and is broadly written
to give the Secretary a tremendous amount of discretion in proposing an
update methodology. Therefore, we reviewed the update approach used in
other hospital prospective payment systems
[[Page 66943]]
(specifically, the IRF and LTCH prospective payment system
methodologies). As a result of this analysis, we are proposing the
following strategy for updating the IPF prospective payment system: (1)
Use the FY 2000 bills and cost report data, and the most current ICD-9-
CM codes and DRGs, when we issue the IPF prospective payment system
final rule; (2) implement the system effective for cost reporting
periods beginning on or after April 1, 2004; and (3) update the Federal
per diem base rate on July 1, 2005, since a July 1 update coincides
with more hospital cost reporting cycles and would be administratively
easier to manage. This means that the first year of the proposed
Federal per diem base rate would be the 15-month period April 1, 2004
to June 30, 2005.
We believe it is important to delay updating the adjustment factors
until the IPF data includes as much information as possible regarding
the patient-level characteristics of the population that each IPF
serves. For this reason, we do not intend to update the regression and
recalculate the proposed Federal per diem base rate until we have
analyzed 1 complete year of data under the IPF prospective payment
system, that is, no earlier than July 1, 2007. We note that the ability
of a regression analysis to appropriately identify variation in costs
is dependent upon continued submission of claims and cost reports that
are as accurate and complete as possible. Until that analysis is
complete, we are proposing to publish a notice each spring that would
do the following:
[sbull] Update the Federal per diem base rate using the excluded
hospital with capital market basket increase in order to reflect the
price of goods and services used by IPFs.
[sbull] Apply the most current hospital wage index with an
adjustment factor to the Federal per diem base rate to ensure that
aggregate payments to IPFs are not affected by an updated wage index.
[sbull] Update the fixed dollar loss threshold to maintain an
outlier percentage that is 2 percent of total estimated IPF payments.
[sbull] Describe the impact of the ICD-9-CM coding changes
discussed in the hospital inpatient prospective payment system proposed
rule that would effect the proposed IPF prospective payment system.
In the future, we may propose an update methodology for the IPF
prospective payment system that would be based on the excluded hospital
with capital market basket index along with other appropriate
adjustment factors relevant to psychiatric service delivery such as
productivity, intensity, new technology, and changes in practice
patterns.
B. Update of the ICD Codes and DRGs
In the health care industry, annual changes to the ICD-9-CM codes
and the DRGs used in the hospital inpatient prospective payment system
are effective for discharges occurring on or after October 1 of each
year. Changes in ICD-9-CM codes and composition of the DRGs are
presented in the hospital inpatient prospective payment system proposed
rule published in the Federal Register in the spring of each year. We
are proposing that through the hospital inpatient prospective payment
system proposed rule, we would notify IPFs of any revised ICD-9-CM
codes or proposed DRG modifications that would become effective on
October 1 of that year if finalized. As noted earlier, all health care
providers are required to used the updated ICD-9-CM codes on or after
October 1 of each year.
Under the IPF prospective payment system, we are proposing to
establish a base rate and provide for adjustments to the rate,
including adjustments to reflect the DRG assigned to the patient's
principal diagnosis and the comorbidity category for certain secondary
or tertiary diagnoses. These adjustments would be driven by the ICD-9-
CM codes provided on the IPF's claims.
For this reason, we urge IPFs to review the hospital inpatient
prospective payment proposed rule to determine if any changes have been
made to the ICD-9-CM codes or are being proposed in the composition of
the 15 DRGs we are proposing to recognize under the IPF prospective
payment system. In the event that occurs, we would explain in the
hospital inpatient prospective payment system rules how the change
would be handled under the IPF prospective payment system for claims on
or after October 1 of each year.
C. Future Refinements
1. RTI International[reg]
We have contracted with RTI International[reg] to examine the
extent to which modes of practice and staffing patterns explain the per
diem cost differences among the various types of IPF facilities
(private psychiatric hospitals, psychiatric units, and government
hospitals). In addition, RTI International[reg] will analyze the extent
to which the different types of facilities treat different types of
patients. We anticipate that this study may assist us in proposing
refinements to the prospective payment system in the future.
Approximately two-thirds of the direct expense for providing
inpatient psychiatric services is captured in the routine cost category
of the Medicare cost report. After the allocation of overhead, this
category represents 88 percent of the cost presently being reimbursed.
The RTI International[reg] project will collect patient-level and
facility-level data from a small sample of psychiatric hospitals and
psychiatric units nationwide. These data will provide information on
the extent to which variation in the per diem cost across facilities
can be explained by the differences in the mix of services and staffing
that characterize their modes of practice. RTI International[reg] will
also analyze the links among costs, practice mode, and patient
characteristics.
a. Mode of Practice
The mode of practice can be defined by treatment modality (services
delivered) and by staffing levels. To analyze the mode of practice, RTI
International[reg] first developed a typology of therapeutic services
(activities) provided in inpatient settings. The services range from
labor-intensive activities (one-on-one intake assessments and
evaluations), to less labor-intensive activities (therapies). In
addition, RTI International[reg] developed a classification of
psychiatric labor resources that could be used to depict different
staffing models. The RTI International[reg] used these typologies to
organize the collection of service and staffing data within the sampled
psychiatric facilities. The RTI International[reg] study hypothesized
that lower cost facilities use lower cost practice modalities that can
result from either the use of lower cost labor or lower cost treatment
methods.
b. Patient Characteristics
To link the mode of practice with patient characteristics, modality
must be collected at the patient level. Resource usage can be defined
by estimating the type and cost of staff involved with providing
patient care. This can be accomplished by linking each patient's
activity with the time spent by each staffing type for an activity with
the average wage rate for that staff. Adding the cost of each activity
over a 24-hour period determines the per diem resource cost for a
patient. These per diem costs can then be compared and linked with
patient characteristics in order to explain resource use.
The RTI International[reg] used patient characteristics that were
available from claims data (age and diagnoses).
[[Page 66944]]
However, other variables are not collected on claims (Global Assessment
of Functioning scores and functional deficits, such as, activities of
daily living). This limited set of candidate variables was selected
with input from RTI International's[reg] technical evaluation panel. We
will continue to investigate the functional status, and we are
soliciting comments specifically on this issue.
c. Analysis
Using a cluster analysis technique, RTI International[reg] will
attempt to develop an index that could be highly predictive of resource
use among the resulting psychiatric patient classification categories.
The RTI International[reg] is also investigating whether a more
refined payment model is possible. Such a model might reduce the need
for a sophisticated psychiatric patient classification system.
Currently, data are being collected for a 7-day period to analyze the
change in resources over time. This study will allow a test of a
hypothesis advocated by Frank, R.G., and Lave, HR. (1986). Journal of
Human Resources, 21(3): (321-337). They suggested that when using a per
diem rate that declines with the length of stay, the rate would be
higher at the beginning of the stay to cover the higher costs
associated with admission, and decline over time as treatment achieved
stabilization of the patient's condition.
2. University of Michigan Research
We are also currently contracting with the University of Michigan's
Public Health Institute to conduct research to assist us in developing
a patient classification system based on a standard assessment tool. We
believe that additional patient level information such as patient
functioning and patient resource use is necessary to augment our
administrative data and would result in a more equitable and accurate
payment system. We are in the early stages of developing a preliminary
tool, the Case Mix Assessment Tool (CMAT) instrument. We have attached
a draft copy to this proposed rule for review and comment (see Addendum
C.).
We believe that this assessment tool would collect minimal but
necessary information. The draft instrument contains 36 questions. Each
item in the draft assessment tool resulted from the University of
Michigan's evaluation of existing instruments and clinical scales. It
reflects the input and feedback to the contractor of both the technical
evaluation panel and mental health associations as well as related
psychological and psychiatric industry groups. This input included
mental health professionals with experience in both payment methodology
and assessment instruments. The tool would collect information on the
patient characteristics, clinical characteristics, functional status,
services, and treatments.
The information that would be collected in the CMAT is available in
the patient's medical record and treatment plans. We do not believe
that completing the assessment tool would require additional data
collection on the part of the clinical staff. We have assumed that in
addition to the medical record, a team of clinical staff provides
services and treatment to these patients, including but not limited to
nurses, psychiatric nurses, physicians, clinical psychologists, social
workers, psychiatrists, and rehabilitation, physical, and speech
therapists. To reduce both the complexity of the information collection
process and the burden, the instrument would be completed at discharge.
We are requesting comments on the availability of the information to
complete this instrument.
In order to collect information in the most efficient manner
possible, the CMAT would be automated. This approach would shorten the
time to complete the instrument and simplify the input process. Upon
completion, the instrument would be transmitted to us. We would develop
and provide the software to perform the transmission to IPFs at no
cost. In addition, we would provide training and manuals to facilitate
both the transmission process and the completion of the assessment
tool.
Finally, once the instrument has been pilot-tested and the
instrument reflects changes resulting from this testing, we would
pursue clearance by the Office of Management and Budget (OMB). A
detailed OMB information collection package will be prepared and
available for public comment. The package will include delineation of
the technical evaluation panel membership, comments on specific items
in the instrument, justifications for including selected questions (for
example, activities of daily living), and the scaling for individual
items. In addition, the OMB package will contain manuals and training
material that support the instrument. Any comments on this preliminary
draft instrument will assist us in developing a potential instrument.
3. Case-Mix Tool
The Ashcraft study used a patient assessment instrument to develop
additional variables beyond psychiatric diagnosis to predict
differences in the length of stay. The study led to a further effort
(Fries, et al., 1990), which resulted in the development of a
classification system for long stay Veterans Administration's
psychiatric patients (length of stay greater than 100 days). This
research was the first to consider which characteristics could explain
measured resource use for chronic psychiatric residents. Those
characteristics included a broad assessment of patients' medical
conditions, functional status, mental deficits, treatments, as well as
the direct measurement of daily staff time spent with each patient.
Using only six patient categories developed from these variables, the
resulting long-stay classification system (PPCs) explained 11.4 percent
of the variability in per diem resource use. While this number seems
low, the Ashcraft and Fries Veterans Administration's studies were the
first to offer a patient assessment instrument approach for the
construction of case mix measures potentially useful in an IPF
prospective payment system.
VI. Provisions of the Proposed Rule
We are proposing to make a number of revisions to the regulations
in order to implement the proposed prospective payment system for IPFs.
Specifically, we are proposing to make conforming changes in 42 CFR
parts 412 and 413. We would establish a new subpart N in part 412,
``Prospective Payment System for Hospital Inpatient Services of
Psychiatric Facilities.'' This subpart would implement section 124 of
the BBRA, which requires the implementation of a per diem prospective
payment system for IPFs. This subpart would set forth the framework for
the proposed IPF prospective payment system, including the methodology
used for the development of the payment rates and related rules. These
proposed revisions and others are discussed in detail below.
Section 412.1 Scope of Part
We propose to revise Sec. 412.1 by redesignating paragraphs (a)(2)
and (a)(3) as paragraphs (a)(3) and (a)(4).
We propose to add a new paragraph (a)(2) that would specify that
this part implements section 124 of Pub. L. 106-113 by establishing a
per diem based prospective payment system for inpatient operating and
capital costs of hospital inpatient services furnished to Medicare
beneficiaries by a psychiatric facility that meets the conditions of
subpart N.
[[Page 66945]]
We propose to revise Sec. 412.1 by redesignating paragraphs
(b)(12) and (b)(13) as paragraphs (b)(13) and (b)(14).
We propose to add a new paragraph (b)(12) that would summarize the
content of the new subpart N which sets forth the general methodology
for paying operating and capital costs for inpatient psychiatric
facilities effective with cost reporting periods beginning on or after
April 1, 2004.
Section 412.20 Hospital Services Subject to the Prospective Payment
Systems
We propose to amend Sec. 412.20(a) by adding a reference to IPFs.
We propose to revise Sec. 412.20 by redesignating paragraphs (b),
(c), and (d), as paragraphs (c), (d), and (e).
We propose to add a new paragraph (b) that would indicate that
effective for cost reporting periods beginning on or after April 1,
2004, covered hospital inpatient services furnished by a psychiatric
facility as specified in Sec. 412.404 of subpart N are paid under the
prospective payment system.
Section 412.22 Excluded Hospitals and Hospital Units: General Rules
We propose to amend Sec. 412.22(b) by revising paragraph (b) to
state that except for those hospitals specified in paragraph (c) of
this section, and Sec. 412.20(b), (c), and (d), all excluded hospitals
(and excluded hospital units, as described in Sec. 412.23 through
Sec. 412.29) are reimbursed under the cost reimbursement rules set
forth in part 413 of this chapter, and are subject to the ceiling on
the rate of hospital cost increases as specified in Sec. 413.40.
Section 412.23 Excluded Hospitals: Classifications
We propose to revise Sec. 412.23 by redesignating paragraphs
(a)(1) and (a)(2) as paragraphs (a)(2) and (a)(3).
We propose to add a new paragraph (a)(1) that would specify the
requirements a psychiatric hospital must meet in order to be excluded
from reimbursement under the prospective payment system as specified in
Sec. 412.1(a)(1) and to be paid under the IPF prospective payment
system as specified in Sec. 412.1(a)(2).
Section 412.25 Excluded Hospital Units: Common Requirements
We propose to amend Sec. 412.25(a) by adding a reference to Sec.
412.1(a)(2).
Section 412.27 Excluded Psychiatric Units: Additional Requirements
We propose to amend the introductory text of Sec. 412.27 by adding
the reference to Sec. 412.1(a)(1) and (a)(2).
We propose to amend Sec. 412.27(a) by removing the words the
``Third Edition,'' and adding in its place, ``Fourth Edition, Text
Revision.''
Section 412.116 Method of Payment
We propose to revise Sec. 412.116 by redesignating paragraphs
(a)(3) and (a)(4) as paragraphs (a)(4) and (a)(5).
We propose to add a new paragraph (a)(3) that would specify the
cost reporting period to which the proposed IPF prospective payment
system applies and how payments for inpatient psychiatric services are
made to a qualified IPF.
Subpart N--Prospective Payment System for Hospital Inpatient Services
of Psychiatric Facilities
We propose to add a new subpart N as follows:
Section 412.400 Basis and Scope of Subpart
We are proposing to add a new section Sec. 412.400. In Sec.
412.400(a), we would provide the requirements for the implementation of
a prospective payment system for IPFs.
In proposed Sec. 412.400(b), we would specify that this subpart
sets forth the framework for the prospective payment system, including
the methodology used for the development of payment rates and
associated adjustments, the application of a transition period, and the
related rules for IPFs for cost reporting periods beginning on or after
April 1, 2004.
Section 412.402 Definitions
In Sec. 412.402, we are proposing to define the following terms
for purposes of this new subpart:
[sbull] Comorbidity.
[sbull] Fixed dollar loss threshold.
[sbull] Inpatient psychiatric facilities.
[sbull] Interrupted stay.
[sbull] Outlier payment.
[sbull] Per diem payment amount.
[sbull] Principal diagnosis.
[sbull] Rural area.
[sbull] Urban area.
Section 412.404 Conditions for Payment Under the Prospective Payment
System for Hospital Inpatient Services of Psychiatric Facilities
In proposed Sec. 412.404(a), we would specify that IPFs must meet
the following general requirements to receive payment under the IPF
prospective payment system:
[sbull] The IPF must meet the conditions as specified in this
subpart.
[sbull] If the IPF fails to comply fully with the provisions of
this part then the following are applicable--
++ Withhold (in full or in part) or reduce payment to the IPF until
the facility provides adequate assurances of compliance; or
++ Classify the IPF as an hospital subject to the hospital
inpatient prospective payment system.
In proposed paragraph (b), we would specify that, subject to the
special payment provisions of Sec. 412.22(c), an inpatient psychiatric
facility must meet the general criteria set forth in Sec. 412.22. For
exclusion from the hospital inpatient prospective payment system as
specified in Sec. 412.1(a)(1), a psychiatric hospital must meet the
criteria set forth in Sec. 412.23(a) and psychiatric units must meet
the criteria set forth in Sec. 412.25 and Sec. 412.27.
In proposed paragraph (c), we would specify the prohibited and
permitted charges that may be imposed on Medicare beneficiaries.
In proposed paragraph (c)(1), we would specify that an IPF may not
charge the beneficiary for any services which payment is made by
Medicare, even if the IPFs costs are greater than the amount the
facility is paid under the IPF prospective payment system.
In proposed paragraph (c)(2), we would specify that an IPF
receiving payment for a covered stay may charge the Medicare
beneficiary or other person for only the applicable deductible and
coinsurance amounts under Sec. 409.82, Sec. 409.83, and Sec. 409.87.
In proposed paragraph (d), we would specify the following
provisions for furnishing IPF services directly or under arrangement:
[sbull] Applicable payments made under the IPF prospective payment
system are considered payment in full for all hospital inpatient
services (as defined in Sec. 409.10) other than physicians' services
to individual patients (as specified in Sec. 415.102(a)) that are
reimbursed on a fee schedule basis.
[sbull] Hospital inpatient services do not include physician,
physician assistant, nurse practitioner, clinical nurse specialist,
certified nurse midwives, qualified psychologist, and certified
registered nurse anesthetist services.
[sbull] Payment is not made to a provider or supplier other than
the IPF, except for services provided by a physician, physician
assistant, nurse practitioner, clinical nurse specialist, certified
nurse midwives, qualified psychologist, and certified registered nurse
anesthetist.
[sbull] The IPF must furnish all necessary covered services to the
Medicare beneficiary directly or under arrangement (as defined in Sec.
409.3).
In proposed paragraph (e), we would specify that IPFs must meet the
recordkeeping and cost reporting
[[Page 66946]]
requirements of Sec. 412.27(c), Sec. 413.20, and Sec. 413.24.
Section 412.422 Basis of Payment
In proposed Sec. 412.422(a), we would specify that under the
prospective payment system, IPFs would receive a predetermined per diem
amount, adjusted for patient characteristics and facility
characteristics, for inpatient services furnished to Medicare
beneficiaries. In addition, we would specify that during the transition
period, payment would be based on a blend of the Federal per diem
payment amount and the facility-specific payment rate.
In proposed Sec. 412.422(b), we would specify that payments made
under the prospective payment system represent payment in full for
inpatient operating and capital-related costs associated with services
furnished in an IPF but not for the cost of an approved medical
education program described in Sec. 413.85 and Sec. 413.86 and for
bad debts of Medicare beneficiaries as specified in Sec. 413.80.
Section 412.424 Methodology for Calculating the Federal Per Diem
Payment Rate
In proposed Sec. 412.424, we would specify the methodology for
calculating the Federal per diem payment rate for IPFs.
In proposed paragraph (a), we would specify the data sources used
to calculate the prospective payment rate.
In proposed paragraph (b), we would specify that the methodology
used for determining the Federal per diem base rate would include the
following:
[sbull] The updated average per diem amount.
[sbull] The budget-neutrality adjustment factor.
In proposed paragraph (c), we would specify that the Federal per
diem payment amount for IPFs would be the product of the Federal per
diem base rate, the facility-level adjustments, and the patient-level
adjustments applicable to the case as described below:
[sbull] Facility-level adjustments include:
[sbull] Adjustment for wages
[sbull] Location in rural areas
[sbull] Teaching status
[sbull] Patient-level adjustments include:
[sbull] Age
[sbull] Principal diagnosis
[sbull] Comorbodities
[sbull] Variable per diem adjustments
[sbull] Adjustment for high-cost outlier cases
In proposed paragraph (d), we would specify the special payment
provisions for interrupted stays.
Section 412.426 Transition Period
In proposed Sec. 412.426(a), we would specify the duration of the
transition period to the IPF prospective payment system. In addition,
we would specify that IPFs would receive a payment that is a blend of
the Federal per diem payment amount and the facility-specific payment
amount the IPF would receive under the TEFRA payment methodology.
In proposed paragraph (b), we would specify how the facility-
specific payment amount is calculated.
In proposed paragraph (c), we would specify that new IPFs, that is,
facilities that under present or previous ownership, or both, have its
first cost reporting period as an IPF beginning on or after April 1,
2004, are paid the full Federal per diem rate.
Section 412.428 Publication of the Federal Per Diem Payment Rates
In proposed Sec. 412.428, we would specify how we plan to publish
information each year in the Federal Register to update the IPF
prospective payment system.
Section 412.432 Method of Payment Under the Inpatient Psychiatric
Facility Prospective Payment System
In proposed Sec. 412.432, we would specify the following method of
payment used under the IPF prospective payment system:
[sbull] General rules for receiving payment.
[sbull] Periodic interim payments including--
[sbull] Criteria for receiving periodic interim payments
[sbull] Frequency of payments
[sbull] Termination of periodic interim payments
[sbull] Interim payment for Medicare bad debts and for costs not paid
under the prospective payment system and other costs paid outside the
prospective payment system.
[sbull] Outlier payments.
[sbull] Accelerated payments including--
[sbull] General rule for requesting accelerated payments
[sbull] Approval of accelerated payments
[sbull] Amount of the accelerated payment
[sbull] Recovery of the accelerated payment
Section 413.1 Introduction
We propose to amend Sec. 413.1(d)(2)(ii) by removing the words
``psychiatric hospitals (as well as separate psychiatric units
(distinct parts) of short-term general hospitals).''
We propose to revise Sec. 413.1 by redesignating paragraphs
(d)(2)(iv), (d)(2)(v), (d)(2)(vi), and (d)(2)(vii) as paragraphs
(d)(2)(vi), (d)(2)(vii), (d)(2)(viii), and (d)(2)(ix).
We propose to add a new paragraph (iv) that would specify that for
cost reporting periods beginning before April 1, 2004, payment to
psychiatric hospitals (as well as separate psychiatric units of short-
term general hospitals) that are excluded under subpart B of part 412
of this chapter from the prospective payment system is on a reasonable
cost basis, subject to the provisions of Sec. 413.40.
We propose to add a new paragraph (v) that would specify that for
cost reporting periods beginning on or after April 1, 2004, payment to
psychiatric hospitals (as well as separate psychiatric units of short-
term general hospitals) that meet the conditions of Sec. 412.404 of
this chapter is based on prospectively determined rates under subpart N
of part 412.
Section 413.40 Ceiling on the Rate of Increase in Hospital Costs
Section 413.40(a)(2)(i) specifies the types of facilities to which
the ceiling on the rate of increase in hospital inpatient costs is not
applicable.
We propose to revise Sec. 413.40(a)(2)(i) by redesignating
paragraphs (a)(2)(i)(C) and (a)(2)(i)(D) as paragraphs (a)(2)(i)(D) and
(a)(2)(i)(E).
We propose to add a new paragraph (C) to Sec. 413.40 to clarify
that Sec. 413.40 is not applicable to psychiatric hospitals and
psychiatric units under subpart N of part 412 of this chapter for cost
reporting periods beginning on or after April 1, 2004.
We propose to revise paragraph (a)(2)(ii)(B) to specify the
facilities to which the ceiling applies for cost reporting periods
beginning on or after October 1, 1983 through March 31, 2004.
We propose to revise paragraph (a)(2)(iii) by redesignating
paragraphs (a)(2)(iii) and (a)(2)(iv) as paragraphs (a)(2)(iv) and
(a)(2)(v).
We propose to add a new paragraph (a)(2)(iii) that would specify
psychiatric facilities are excluded from the prospective payment system
as specified in Sec. 412.1(a)(1) and paid under Sec. 412.1(a)(2) for
cost reporting periods beginning on or after April 1, 2004.
Section 413.64 Payment to Providers: Special Rules
We propose to amend Sec. 413.64(h)(2)(i) by adding a reference to
hospitals paid under the IPF prospective payment system.
[[Page 66947]]
Section 424.14 Requirements for Inpatient Services of Psychiatric
Hospitals
We propose to amend Sec. 424.14 by adding a new paragraph (c)(3)
to state that for recertification a physician must indicate that the
patient continues to need, on a daily basis, inpatient psychiatric care
(furnished directly by or requiring the supervision of inpatient
psychiatric facility personnel) or other professional services that, as
a practical matter, can be provided only on a inpatient basis.
We propose to amend Sec. 424.14(d)(2) by removing the word ``18th
day of hospitalization'' and replacing it with ``10th day of
hospitalization.''
VII. Collection of Information Requirements
These regulations do not impose any new information collection
requirements. The burden of the requirements in Sec. 412.404(e),
reporting and recordkeeping requirements, are captured in the burden
for the cross-referenced Sec. 412.27(c), Sec. 413.20, and Sec.
413.24 under OMB approval numbers 0938-0301, 0938-0500, 0938-0358, and
0938-0600.
VIII. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this proposed rule, and, if we proceed with a subsequent
document, we will respond to the major comments in the preamble to that
document.
IX. Regulatory Impact Statement
A. Overall Impact
We have examined the impact of this proposed rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of
1995 (UMRA) (Pub. L. 104-4), and Executive Order 13132).
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
Based on analysis of the aggregate dollar impacts for each of the
different facility types, we have determined that the re-distributive
impact among facility types is $78 million. In addition, our analysis
showed that a payment reduction of $40 million would occur for
psychiatric units and a payment increase of $10 million would occur
for-profit hospitals, $26 million for government hospitals, and $2
million for non-profit hospitals. Therefore, we have determined that
this proposed rule would not be a major rule within the meaning of
Executive Order 12866 because the redistributive effects do not
constitute a shift of $100 million in any 1 year. In addition, because
the proposed IPF prospective payment system must be budget neutral in
accordance with section 124(a)(1) of Pub. L. 106-113, we estimate that
there will be no budgetary impact for the Medicare program (section
IX.B.6. of this proposed rule).
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and government agencies.
Most hospitals and most other providers and suppliers are small
entities, either by nonprofit status or by having revenues of $29
million or less in any 1 year. Medicare fiscal intermediaries are not
considered to be small entities. Individuals and States are not
included in the definition of a small entity.
HHS considers that a substantial number of entities are affected if
the rule impacts more than 5 percent of the total number of small
entities as it does in this rule. We included all freestanding
psychiatric hospitals (88 are nonprofit hospitals) in the analysis
since their total revenues do not exceed the $29 million threshold. We
also included small psychiatric units as well as psychiatric units of
small hospitals, that is, fewer than 100 beds. We did not include
psychiatric units within larger hospitals in the analysis because we
believe this proposed rule would not significantly impact total
revenues of the entire hospital that supports the unit. We have
provided the following RFA analysis in section B, to emphasize that
although the proposed rule would impact a substantial number of IPFs
that were identified as small entities, we do not believe it would have
a significant economic impact. Based on the analysis of the 917
psychiatric facilities that were classified as small entities by the
definitions described above, we estimate the combined impact of the
proposed rule would be a 1-percent increase in payments relative to
their payments under TEFRA. This estimated impact does not meet the
threshold established by HHS to be considered a significant impact.
Nonetheless, we have prepared the following analysis to describe the
impact of the proposed rule.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of an MSA and has fewer
than 100 beds. We have determined that this proposed rule would have a
substantial impact on hospitals classified as located in rural areas.
As discussed earlier in this preamble, we are proposing to adjust
payments by 16 percent for IPFs located in rural areas. In addition, we
are proposing a 3-year transition to the new system to allow IPFs an
opportunity to adjust to the new system. Therefore, the impacts shown
in Table 8 below reflect the adjustments that are designed to minimize
or eliminate the negative impact that the proposed IPF prospective
payment may otherwise have on small rural IPFs.
Section 202 of the UMRA also requires that agencies assess
anticipated costs and benefits before issuing any proposed rule that
may result in expenditures in any 1 year by State, local, or tribal
governments, in the aggregate, or by the private sector, of $110
million or more. This proposed rule does not mandate any requirements
for State, local, or tribal governments nor would it result in
expenditures by the private sector of $110 million or more in any 1
year.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications.
We have examined this proposed rule under the criteria set forth in
Executive Order 13132 and have determined that this proposed rule will
not have any negative impact on the rights, roles, and responsibilities
of State, local, or tribal governments or preempt State law.
[[Page 66948]]
B. Anticipated Effects
Below, we discuss the impact of this proposed rule on the Federal
Medicare budget and on IPFs.
1. Budgetary Impact
Section 124(a)(1) of Pub. L. 106-113 requires us to set the payment
rates contained in this proposed rule to ensure that total payments
under the IPF prospective payment system are projected to equal the
amount that would have been paid if this proposed prospective payment
system had not been implemented. As a result of this analysis, which is
discussed in section III of this proposed rule, we are proposing a
budget-neutrality adjustment to the Federal per diem base rate. Thus,
there will be no budgetary impact to the Medicare program by
implementation of the proposed IPF prospective payment system.
2. Impacts on Providers
To understand the impact of the proposed IPF prospective payment
system on providers, it is necessary to estimate payments that would be
made under the current TEFRA payment methodology (current payments) and
payments under the proposed IPF prospective payment system. The IPFs
were grouped into the categories listed below based on characteristics
provided in the Online Survey and Certification and Reporting (OSCAR)
file and the 1999 cost report data from HCRIS:
[sbull] Facility Type
[sbull] Location
[sbull] Teaching Status
[sbull] Census Region
[sbull] Size
To estimate the impacts among the various categories of IPFs, we
had to compare estimated future payments that would have been made
under the TEFRA payment methodology to estimated payments under the
proposed IPF prospective payment system. We estimated the impacts using
the same set of providers (1,975 IPFs) that was used for the regression
analysis to calculate the budget-neutral Federal per diem base rate,
and to determine the appropriateness of various adjustments to the
Federal per diem base rate. A detailed explanation of the methods we
used to simulate TEFRA payments and estimated payments under the
proposed IPF prospective payment system is provided in section III.C.
of this proposed rule.
The impacts reflect the estimated ``losses'' or ``gains'' among the
various classifications of IPF providers for the first year of the
proposed IPF prospective payment system. Proposed prospective payments
were based on the proposed budget-neutral Federal per diem base rate of
$530 adjusted by the IPFs' estimated patient-level, facility-level
adjustments, and simulated outlier amounts. This payment was compared
to the IPF's payments based on its cost from the cost report inflated
to the midpoint of the effective period (April 1, 2004 through June 30,
2005) and subject to the updated per discharge target amount.
Table 8 below illustrates the aggregate impact of the proposed IPF
prospective payment system on various classifications of IPFs. The
first column identifies the type of IPF, the second column indicates
the number of IPFs for each type of IPF, and the third column indicates
the ratio of the proposed IPF prospective payment system payments to
the current TEFRA payments in the first year of the transition.
Table 8.--Aggregate Impact
------------------------------------------------------------------------
Ratio of
proposed
prospective
Facility by type Number of payment amount
facilities to TEFRA
payment with
transition
------------------------------------------------------------------------
All Facilities.......................... 1975 1.00
By Type of Ownership:
Psychiatric Hospitals
Government.................. 181 1.14
Non-profit.................. 88 1.01
For-profit.................. 236 1.02
Psychiatric Units............... 1470 0.99
All Facilities.......................... 1975 1.00
Rural........................... 445 0.99
Urban........................... 1530 1.00
By Urban or Rural Classification:
Urban by Facility Type..........
Psychiatric Hospitals:
Government.................. 138 1.14
Non-profit.................. 80 1.01
For-profit.................. 221 1.02
Psychiatric Units............... 1091 0.99
Rural by Facility Type:
Psychiatric Hospitals:
Government.................. 43 1.14
Non-profit.................. 8 0.99
For-profit.................. 15 1.02
Psychiatric Units............... 379 0.98
By Teaching Status:
Non-teaching.................... 1676 0.99
Less than 10% interns and 163 1.02
residents to beds..............
10% to 30% interns and residents 80 1.02
to beds........................
More than 30% interns and 56 1.03
residents to beds..............
By Region:
New England..................... 128 0.99
Mid-Atlantic.................... 316 1.04
[[Page 66949]]
South Atlantic.................. 283 1.00
East North Central.............. 369 0.98
East South Central.............. 161 0.99
West North Central.............. 174 0.99
West South Central.............. 270 0.97
Mountain........................ 88 1.00
Pacific......................... 181 1.00
By Bed Size:
Psychiatric Hospitals:
Under 10 beds............... 2 0.99
10 to 25 beds............... 36 0.99
25 to 50 beds............... 71 1.01
50 to 100 beds.............. 199 1.02
100 to 200 beds............. 127 1.05
200 to 400 beds............. 49 1.10
Over 400 beds............... 21 1.19
Psychiatric Units...............
Under 10 beds............... 55 0.96
10 to 25 beds............... 749 0.97
25 to 50 beds............... 443 0.98
50 to 100 beds.............. 184 1.00
100 to 200 beds............. 32 1.02
200 to beds 400............. 6 1.07
Over 400 beds............... 1 1.12
------------------------------------------------------------------------
3. Results
We measured the impact of the proposed IPF prospective payment
system by comparing proposed payments under the IPF prospective payment
system relative to current TEFRA payments. This was computed as a ratio
of the proposed prospective payment to the current TEFRA payment for
each classification of IPF. We have prepared the following summary of
the impact of the proposed IPF prospective payment system set forth in
this proposed rule.
a. Facility type
We grouped the IPFs into the following four categories: (1)
Psychiatric units; (2) government hospitals; (3) for-profit hospitals;
and (4) non-profit hospitals. Roughly 75 percent of all IPFs are
psychiatric units. The impact analysis in Table 8 indicates that under
the proposed IPF prospective payment system, freestanding psychiatric
hospitals would receive an increase relative to the current payment.
The psychiatric units would have a proposed prospective payment to the
current TEFRA payment ratio of 0.99, the government hospitals would
have a proposed prospective payment to the current TEFRA payment ratio
of 1.14, and the non-profit and for-profit hospitals would have a
proposed prospective payment to the current TEFRA payment ratio of 1.01
and 1.02, respectively.
b. Location
Approximately 23 percent of all IPFs are located in rural areas.
The impact analysis in Table 8 indicates that under the proposed IPF
prospective payment system, the proposed prospective payment to the
current TEFRA payment ratio would be approximately 0.99 for rural IPFs
and 1.00 for urban IPFs. If we grouped all of the IPFs by facility type
within urban and rural locations, the impact analysis would indicate
that the estimated proposed prospective payment to current TEFRA
payment ratios would be between approximately 0.98 and 1.02 for all
IPFs except government hospitals. Under the proposed IPF prospective
payment system, the payment ratios for rural and urban government
hospitals are both estimated to be approximately 1.14.
c. Teaching Status
Using the ratio of interns and residents to the average daily
census for each facility as a measure of the magnitude of the teaching
status, we grouped facilities into the following four major categories:
(1) non teaching; (2) less than 10 percent ratio of interns and
residents to average daily census; (3) 10 to 30 percent ratio of
interns and residents to average daily census; and (4) more than 30
percent of interns and residents to average daily census. Facilities
that are classified with a teaching ratio greater than 0 percent would
benefit under the proposed IPF prospective payment system.
d. Census Region
Under the proposed IPF prospective payment system, IPFs in the Mid-
Atlantic region would receive a higher payment ratio of approximately
1.04. IPFs in other regions would receive payment ratios between
approximately 0.97 and 1.00. Specifically, the South Atlantic States,
the Mountain States, and the Pacific States would receive payment
ratios of 1.00. The New England States, East South Central States, and
the West North Central States, would receive payment ratios of
approximately 0.99. The proposed IPF prospective payments would be
slightly lower than 0.99 for IPFs in the West South Central and East
North Central States.
e. Size
We grouped the IPFs into 7 categories for each group of psychiatric
facilities based on bed size: (1) Under 10 beds; (2) 10 to 25 beds; (3)
25 to 50 beds; (4) 50 to 100 beds; (5) 100 to 200 beds; (6) 200 to 400
beds; and (7) over 400 beds. Under the proposed IPF prospective
[[Page 66950]]
payment system, the payment ratios for all bed size categories would be
greater than 0.96. The majority of IPFs' bed sizes were categories in
which the payment ratio would be greater than 0.98. Under the proposed
IPF prospective payment system, large IPFs with over 400 beds would
receive the highest payment ratio (1.19 percent for psychiatric
hospitals and 1.12 for psychiatric units), while psychiatric units with
less than 10 beds would receive the lowest payment ratio of 0.96.
4. Effect on the Medicare Program
Based on actuarial projections resulting from our experience with
other prospective payment systems, we estimate that Medicare spending
(total Medicare program payments) for IPF services over the next 5
years would be as follows:
Table 9.--Estimated Payments
------------------------------------------------------------------------
Dollars in
Fiscal time periods millions
------------------------------------------------------------------------
April 1, 2004 to June 30, 2005............................. 5,311
July 1, 2005 to June 30, 2006.............................. 4,531
July 1, 2006 to June 30, 2007.............................. 4,788
July 1, 2007 to June 30, 2008.............................. 5,053
July 1, 2008 to June 30, 2009.............................. 5,328
------------------------------------------------------------------------
These estimates are based on the current estimate of increases in
the proposed excluded hospitals with capital market basket as follows:
[sbull] 3.3 percent for FY 2004;
[sbull] 3.1 percent for FY 2005;
[sbull] 3.0 percent for FY 2006;
[sbull] 2.9 percent for FY 2007;
[sbull] 3.0 percent for FY 2008; and
[sbull] 3.0 percent for FY 2009.
We estimate that there would be an increase in fee-for-service
Medicare beneficiary enrollment as follows:
[sbull] 1.8 percent in FY 2004;
[sbull] 1.5 percent in FY 2005;
[sbull] 1.5 percent in FY 2006;
[sbull] 1.9 percent in FY 2007;
[sbull] 2.0 percent in FY 2008; and
[sbull] 1.9 percent in FY 2009.
Consistent with the statutory requirement for budget neutrality in
the initial year of implementation, we intend for estimated aggregate
payments under the proposed IPF prospective payment system to equal the
estimated aggregate payments that would be made if the IPF prospective
payment system were not implemented. Our methodology for estimating
payments for purposes of the budget-neutrality calculations uses the
best available data. After the proposed IPF prospective payment system
is implemented, we will evaluate the accuracy of the assumptions used
to compute the budget-neutrality calculation. We intend to analyze
claims and cost report data from the first year of the prospective
payment system to determine whether the factors used to develop the
Federal per diem base rate are not significantly different from the
actual results experienced in that year. We are planning to compare
payments under the final Federal per diem rate (which relies on an
estimate of cost-base TEFRA payments using historical data from a base
year and assumptions that trend the data to the initial year of
implementation) to estimated cost-based TEFRA payments based on actual
data from the first year of the IPF prospective payment system. The
percent difference (either positive or negative) would be applied
prospectively to the established prospective payment rates to ensure
the rates accurately reflect the payment levels intended by the
statute. We intend to perform this analysis within the first 5 years of
the implementation of the prospective payment system.
Section 124 of Pub. L. 106-113 provides the Secretary broad
authority in developing the proposed IPF prospective payment system,
including the authority for appropriate adjustments. In accordance with
this authority, we may make a one-time prospective adjustment to the
Federal per diem base rate in an effort to ensure that the best
historical data available forms the foundation of the prospective
payment rates in future years.
5. Effect on Beneficiaries
Under the proposed IPF prospective payment system, IPFs would
receive payment based on the average resources consumed by patients for
each day. We do not expect changes in the quality of care or access to
services for Medicare beneficiaries under the proposed IPF prospective
payment system. In fact, we believe that access to IPF services would
be enhanced due to the proposed adjustment factors for comorbid
conditions and the proposed outlier policy, which are intended to
adequately reimburse IPFs for expensive cases. In addition, we expect
that paying prospectively for IPF services will enhance the efficiency
of the Medicare program.
6. Computer Hardware and Software
We do not anticipate that IPFs will incur additional systems
operating costs in order to effectively participate in the proposed IPF
prospective payment system. We believe that IPFs possess the computer
hardware capability to handle the billing requirements under the
proposed IPF prospective payment system. Our belief is based on
indications that approximately 99 percent of hospital inpatient claims
are submitted electronically. In addition, we are not proposing any
significant changes in claims processing (see section IVC. of this
proposed rule).
C. Alternatives Considered
We considered the following alternatives in developing the proposed
IPF prospective payment system:
[sbull] One option we considered incorporated not only the patient-
level and facility-level variables described previously, but also a
site-of-service distinction. Under this approach, psychiatric units
would have received a higher per diem payment, all other factors being
equal, based on the assumption that psychiatric units on average treat
a more complex and costly case-mix. A psychiatric unit adjustment to
the otherwise applicable per diem payment rate would reflect the
absence of a more sophisticated patient classification system
specifically linked to resource use. Our analysis of the 1999 cost
report and billing data used to develop this proposed rule reveals that
an adjustment would have increased the otherwise applicable per diem
payment to psychiatric units by approximately 33 percent.
The average 1999 inpatient psychiatric per diem cost were $615 for
psychiatric units, $534 for non-profit hospitals, $448 for proprietary
providers, and $378 for governmental facilities. While some of the
higher than average per diem cost in psychiatric units may be due to a
greater medical and surgical acuity among patients treated in
psychiatric units, part of the difference is undoubtedly attributable
to economy of scale inefficiencies associated with operating small
units, including higher overhead expenses, and generally lower
occupancy rates. A psychiatric unit site-of-service distinction in
payment rates would represent a proxy adjuster in lieu of a more
refined classification system. Therefore, we are concerned about
applying such an adjustment to all psychiatric units regardless of
cost, efficiency, or case-mix. In addition, no other Medicare
prospective payment system has a distinction in payments solely based
on the site of service.
We strongly believe that payments on behalf of Medicare
beneficiaries should reflect the resource needs of patients, not simply
where patients are treated. A higher per diem payment to psychiatric
units compared to psychiatric hospitals may create powerful incentives
to increase the number of psychiatric units without regard to patient
need or acuity. Pending the development of a more refined facility-
specific case-mix
[[Page 66951]]
system, we believe that the proposed payment system appropriately
accommodates the higher costs of those psychiatric units with a more
complex case-mix. The proposed DRG and comorbidity payment adjustments,
the proposed 3-year transition period that would allow a gradual phase-
in of the proposed IPF prospective payment system, and the proposed
outlier payment policy would ensure that those psychiatric units with
more costly, resource-intensive cases are not unfairly disadvantaged.
Although the use of a psychiatric unit adjustment in connection
with the proposed IPF prospective payment system was described in our
August 21, 2002 Report to the Congress as a potential payment option,
as discussed in section III.B.2. of this proposed rule, we have not
adopted this approach.
[sbull] Another option we considered was a facility model based on
the IPF's historical payment and patient mix.
In order to address the limitation of routine cost data that is
discussed in section III.B. of this proposed rule, we considered a
model based on facility-level routine costs and patient-level ancillary
costs separately. Under this model, the variables in the facility
routine cost regression are defined differently than in the ancillary
cost and proposed rule regressions. For example, in the ancillary cost
regression, length of stay is each patient's length of stay, but in the
routine cost regression it is the facility's average length of stay.
Similarly, in the ancillary cost regression, the age variable indicates
whether an individual patient is over 65 years of age, but in the
routine cost regression it indicates the percentage of the facility's
patients who are over 65 years of age. This difference in the routine
and ancillary cost regressions also applies to the comorbidity and DRG
variables. These differences in measurement mean that the coefficient
values of these variables are not directly comparable between the
facility-level routine cost regression and the patient-level regression
for ancillary cost or total cost. In addition, operationalizing this
model would present claims processing and systems issues to keep the
facility-level data up to date. Therefore, we rejected this approach.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 412
Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
42 CFR Part 424
Emergency medical services, Health facilities, Health professions,
Medicare, Reporting and recordkeeping.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as follows:
PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT PSYCHIATRIC
SERVICES
1. The authority citation for part 412 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Provisions
2. Section 412.1 is amended as follows:
a. Redesignating paragraphs (a)(2) and (a)(3) as paragraphs (a)(3)
and (a)(4).
b. Adding a new paragraph (a)(2).
c. Redesignating paragraphs (b)(12) and (b)(13) as paragraphs
(b)(13) and (b)(14).
d. Adding a new paragraph (b)(12).
The additions read as follows:
Sec. 412.1 Scope of part.
(a) * * *
(2) This part implements section 124 of Public Law 106-113 by
establishing a per diem prospective payment system for the inpatient
operating and capital costs of hospital inpatient services furnished to
Medicare beneficiaries by a psychiatric facility that meets the
conditions of subpart N of this part.
* * * * *
(b) * * *
(12) Subpart N describes the prospective payment system specified
in paragraph (a)(2) of this section for inpatient psychiatric
facilities and sets forth the general methodology for paying the
operating and capital-related costs of hospital inpatient services
furnished by inpatient psychiatric facilities effective with cost
reporting periods beginning on or after April 1, 2004.
* * * * *
Subpart B--Hospital Services Subject to and Excluded From the
Prospective Payment Systems for Inpatient Operating Costs and
Inpatient Capital Related Costs
3. Section 412.20 is amended as follows:
a. Revising paragraph (a).
b. Redesignating paragraphs (b), (c), and (d) as paragraphs (c),
(d), and (e).
c. Adding a new paragraph (b).
The revision and addition read as follows:
Sec. 412.20 Hospital services subject to the prospective payment
systems.
(a) Except for services described in paragraphs (b), (c), (d), and
(e) of this section, all covered hospital inpatient services furnished
to beneficiaries during the subject cost reporting periods are paid
under the prospective payment system as specified in Sec. 412.1(a)(1).
(b) Effective for cost reporting periods beginning on or after
April 1, 2004, covered hospital inpatient services furnished to
Medicare beneficiaries by an inpatient psychiatric facility that meets
the conditions of Sec. 412.404 are paid under the prospective payment
system described in subpart N of this part.
* * * * *
4. Section 412.22 is amended by revising paragraph (b).
Sec. 412.22 Excluded hospitals and hospital units: General rules.
* * * * *
(b) Cost reimbursement. Except for those hospitals specified in
paragraph (c) of this section, and Sec. 412.20(b), (c), and (d), all
excluded hospitals (and excluded hospital units, as described in Sec.
412.23 through Sec. 412.29) are reimbursed under the cost
reimbursement rules set forth in part 413 of this chapter, and are
subject to the ceiling on the rate of hospital cost increases as
specified in Sec. 413.40 of this chapter.
* * * * *
5. Section 412.23 is amended as follows:
a. Republishing paragraph (a) introductory text.
b. Redesignating paragraphs (a)(1) and (a)(2) as paragraphs (a)(2)
and (a)(3).
c. Adding a new paragraph (a)(1).
The republication and addition read as follows:
Sec. 412.23 Excluded hospitals: Classifications.
* * * * *
(a) Psychiatric hospitals. A psychiatric hospital must--
(1) Meet the following requirements to be excluded from the
prospective
[[Page 66952]]
payment system as specified in Sec. 412.1(a)(1) and to be paid under
the prospective payment system as specified in Sec. 412.1(a)(2) and in
subpart N of this part;
* * * * *
6. Section 412.25 is amended by revising the paragraph (a)
introductory text to read as follows:
Sec. 412.25 Excluded hospital units: Common requirements.
(a) Basis for exclusion. In order to be excluded from the
prospective payment systems as specified in Sec. 412.1(a)(1) and to be
paid under the inpatient prospective payment system as specified in
412.1(a)(2), a psychiatric unit must meet the following requirements.
* * * * *
Sec. 412.27 [Amended]
7. Section 412.27 is amended as follows:
a. Revising the introductory text.
b. Amending paragraph (a) by removing the words ``Third Edition'',
and adding in its place, ``Fourth Edition, Text Revision''.
The revision reads as follows:
Sec. 412.27 Excluded psychiatric units: Additional requirements.
In order to be excluded from the prospective payment system as
specified in Sec. 412.1(a)(1), and paid under the inpatient
psychiatric prospective payment system as specified in Sec.
412.1(a)(2), a psychiatric unit must meet the following requirements:
* * * * *
8. Section 412.116 is amended as follows:
a. Redesignating paragraphs (a)(3) and (a)(4) as paragraphs (a)(4)
and (a)(5).
b. Adding a new paragraph (a)(3).
The addition reads as follows:
Sec. 412.116 Method of payment.
(a) * * *
(3) For cost reporting periods beginning on or after April 1, 2004,
payments for hospital inpatient services furnished by a psychiatric
hospital and psychiatric unit that meet the conditions of Sec. 412.404
are made as described in Sec. 412.432.
* * * * *
9. A new subpart N is added to read as follows:
Subpart N--Prospective Payment System for Hospital Inpatient Services
of Psychiatric Facilities.
Sec.
412.400 Basis and scope of subpart.
412.402 Definitions.
412.404 Conditions for payment under the prospective payment system
for hospital inpatient services of psychiatric facilities.
412.422 Basis of payment.
412.424 Methodology for calculating the Federal per diem payment
rates.
412.426 Transition period.
412.428 Publication of the Federal per diem payment rates.
412.432 Method of payment under the inpatient psychiatric facility
prospective payment system.
Subpart N--Prospective Payment System for Hospital Inpatient
Services of Psychiatric Facilities.
Sec. 412.400 Basis and scope of subpart.
(a) Basis. This subpart implements section 124 of Public Law 106-
113, which provides for the implementation of a per diem based
prospective payment system for inpatient psychiatric hospitals and
psychiatric units (inpatient psychiatric facilities).
(b) Scope. This subpart sets forth the framework for the
prospective payment system for inpatient psychiatric facilities,
including the methodology used for the development of the per diem rate
and associated adjustments, the application of a transition period, and
the related rules. Under this system, for cost reporting periods
beginning on or after April 1, 2004, payment for the operating and
capital-related costs of hospital inpatient services furnished by
inpatient psychiatric facilities is made on the basis of prospectively
determined rates and applied on a per diem basis.
Sec. 412.402 Definitions.
As used in this subpart--
Comorbidity means all specific patient conditions that are
secondary to the patient's primary diagnosis and that coexists at the
time of admission, develop subsequently, or that affect the treatment
received or the length of stay or both. Diagnoses that relate to an
earlier episode of care that have no bearing on the current hospital
stay are excluded.
Fixed dollar loss threshold means a dollar amount by which the
costs of a case exceed payment in order to qualify for an outlier
payment.
Inpatient psychiatric facilities means hospitals that meet the
requirements as specified in Sec. 412.22, Sec. 412.23(a) and units
that meet the requirements as specified in Sec. 412.22, Sec. 412.25,
and Sec. 412.27.
Interrupted stay means a Medicare inpatient is discharged from the
inpatient psychiatric facility and returns to the same inpatient
psychiatric facility within 5 consecutive calendar days. The 5
consecutive calendar days begin with the day of discharge.
Outlier payment means an additional payment beyond the Federal
prospective payment amount for cases with unusually high costs.
Per diem payment amount means payment based on the average cost of
1 day of inpatient psychiatric services.
Principal diagnosis means the condition established after study to
be chiefly responsible for occasioning the admission of the patient to
the inpatient psychiatric facility.
Rural area means an area as defined in Sec. 412.62(f)(1)(iii).
Urban area means an area as defined in Sec. 412.62(f)(1)(ii).
Sec. 412.404 Conditions for payment under the prospective payment
system for hospital inpatient services of psychiatric facilities.
(a) General requirements. (1) Effective for cost reporting periods
beginning on or after April 1, 2004, an inpatient psychiatric facility
must meet the conditions of this section to receive payment under the
prospective payment system described in this subpart for hospital
inpatient services furnished in psychiatric facilities to Medicare
beneficiaries.
(2) If an inpatient psychiatric facility fails to comply fully with
these conditions, CMS may, as appropriate--
(i) Withhold (in full or in part) or reduce Medicare payment to the
inpatient psychiatric facility until the facility provides adequate
assurances of compliance; or
(ii) Classify the inpatient psychiatric facility as a hospital that
is subject to the conditions of subpart C of this part and is paid
under the prospective payment system as specified in Sec. 412.1(a)(1).
(b) Inpatient psychiatric facilities subject to the prospective
payment system. Subject to the special payment provisions of Sec.
412.22(c), an inpatient psychiatric facility must meet the general
criteria set forth in Sec. 412.22. For exclusion from the hospital
inpatient prospective payment system as specified in Sec. 412.1(a)(1),
a psychiatric hospital must meet the criteria set forth in Sec.
412.23(a) and psychiatric units must meet the criteria set forth in
Sec. 412.25 and Sec. 412.27.
(c) Limitations on charges to beneficiaries--(1) Prohibited
charges. Except as permitted in paragraph (c)(2) of this section, an
inpatient psychiatric facility may not charge a beneficiary for any
services for which payment is made by Medicare, even if the facility's
cost of furnishing services to that beneficiary are greater than the
amount the facility is paid under the prospective payment system.
(2) Permitted charges. An inpatient psychiatric facility receiving
payment
[[Page 66953]]
under this subpart for a covered hospital stay (that is, a stay that
included at least one covered day) may charge the Medicare beneficiary
or other person only the applicable deductible and coinsurance amounts
under Sec. 409.82, Sec. 409.83, and Sec. 409.87 of this chapter and
for items or services as specified under Sec. 489.20(a) of this
chapter.
(d) Furnishing of hospital inpatient services directly or under
arrangement. (1) Subject to the provisions of Sec. 412.422, the
applicable payments made under this subpart are payment in full for all
hospital inpatient services, as specified in Sec. 409.10 of this
chapter. Hospital inpatient services do not include the following:
(i) Physicians' services that meet the requirements of Sec.
415.102(a) of this chapter for payment on a fee schedule basis.
(ii) Physician assistant services, as specified in section
1861(s)(2)(K)(i) of the Act.
(iii) Nurse practitioners and clinical nurse specialist services,
as specified in section 1861(s)(2)(K)(ii) of the Act.
(iv) Certified nurse midwife services, as specified in section
1861(gg) of the Act.
(v) Qualified psychologist services, as specified in section
1861(ii) of the Act.
(vi) Services of a certified registered nurse anesthetist, as
specified in section 1861(bb) of the Act.
(2) CMS does not pay providers or suppliers other than inpatient
psychiatric facilities for services furnished to a Medicare beneficiary
who is an inpatient of the inpatient psychiatric facility, except for
services described in paragraphs (d)(1)(i) through (d)(1)(vi) of this
section.
(3) The inpatient psychiatric facility must furnish all necessary
covered services to the Medicare beneficiary who is an inpatient of the
inpatient psychiatric facility, either directly or under arrangements
(as specified in Sec. 409.3 of this chapter).
(e) Reporting and recordkeeping requirements. All inpatient
psychiatric facilities participating in the prospective payment system
under this subpart must meet the recordkeeping and cost reporting
requirements as specified in Sec. 412.27(c), Sec. 413.20, and Sec.
413.24 of this chapter.
Sec. 412.422 Basis of payment.
(a) Method of Payment. (1) Under the prospective payment system,
inpatient psychiatric facilities receive a predetermined per diem
payment amount for inpatient services furnished to Medicare Part A fee-
for-service beneficiaries.
(2) Payment under the prospective payment system is based on the
Federal per diem payment rate that includes adjustments as specified in
Sec. 412.424.
(3) During the transition period, payment is based on a blend of
the Federal per diem payment amount and the facility-specific payment
rate as specified in Sec. 412.426.
(b) Payment in full. (1) The payment made under this subpart
represents payment in full (subject to applicable deductibles and
coinsurance as specified in subpart G of part 409 of this chapter) for
inpatient operating and capital-related costs associated with
furnishing Medicare covered services in an inpatient psychiatric
facility, but not the cost of an approved medical education program as
specified in Sec. 413.85 and Sec. 413.86 of this chapter.
(2) In addition to the payments based on the prospective payment
rates, inpatient psychiatric facilities receive payment for bad debts
of Medicare beneficiaries, as specified in Sec. 413.80 of this
chapter.
Sec. 412.424 Methodology for calculating the Federal per diem payment
rates.
(a) Data sources. To calculate the Federal per diem payment rate
for inpatient psychiatric facilities, CMS uses the following data
sources:
(1) The best Medicare data available to estimate the average per
diem payment amount for inpatient operating and capital-related costs
made as specified in part 413 of this chapter.
(2) Patient and facility cost report data capturing routine and
ancillary costs.
(3) An appropriate wage index to adjust for wage differences.
(4) An increase factor to adjust for the most recent estimate of
increases in the prices of an appropriate market basket of goods and
services provided by inpatient psychiatric facilities.
(b) Determining the Federal per diem base amount. The Federal per
diem base rate is the product of the updated average per diem rate and
the budget-neutrality adjustment factor as described in paragraphs
(b)(1) and (b)(2) of this section.
(1) Determining the average per diem rate. CMS determines the
average inpatient operating and capital per diem cost for inpatient
psychiatric facilities by using the best available data as specified in
paragraph (a) of this section. CMS applies the increase factor
described in paragraph (a)(4) of this section to update the rate to the
midpoint of the first 15 months under the system.
(2) Budget-neutrality factor. (i) CMS adjusts the average per diem
amount to ensure that the aggregate payments under the prospective
payment system are estimated to equal the amount that would have been
made to inpatient psychiatric facilities if the prospective payment
system described in this subpart was not implemented.
(ii) CMS evaluates the accuracy of the budget-neutrality adjustment
within the first 5 years after implementation of the inpatient
prospective payment system. CMS may make a one-time prospective
adjustment to the Federal per diem base rate to account for significant
differences between the historical data on cost-based TEFRA payments
(the basis of the budget-neutrality adjustment at the time of
implementation) and estimates of TEFRA payments based on actual data
from the first year of the prospective payment system.
(c) Determining the Federal per diem amount. The Federal per diem
payment amount is the product of the Federal per diem base rate, the
facility-level adjustments applicable to the inpatient psychiatric
facility, and the patient-level characteristics applicable to the case
as described in paragraphs (c)(1) and (c)(2) of this section.
(1) Facility-level adjustments. (i) Adjustment for wages. The labor
portion of the Federal per diem base rate is adjusted to account for
geographic differences in the area wage levels using an appropriate
wage index. The application of the wage index is made on the basis of
the location of the inpatient psychiatric facility in an urban or rural
area as specified in Sec. 412.402.
(ii) Location in rural areas. CMS adjusts the Federal per diem base
rate by a factor for facilities located in rural areas as specified in
Sec. 412.62(f)(1)(iii).
(iii) Teaching status. CMS adjusts the Federal per diem base rate
by a factor to account for a facility's teaching status based on the
ratio of the number of interns and residents assigned to the facility
divided by the facility's average daily census.
(2) Patient-level adjustments. (i) Age. CMS adjusts the Federal per
diem base rate by a factor for patients age 65 and older.
(ii) Principal diagnosis. The inpatient psychiatric facility must
identify a psychiatric diagnosis for each patient. CMS adjusts the
wage-adjusted Federal per diem base rate by a factor to account for the
diagnosis-related group assignment associated with the principal
diagnosis, as specified by CMS.
(iii) Comorbidities. CMS adjusts the Federal per diem base rate by
a factor to account for certain comorbidities as specified by CMS.
[[Page 66954]]
(iv) Variable per diem adjustments. CMS adjusts the Federal per
diem base rate by declining factors for day 1, days 2 through 4, and
days 5 through 8 of the inpatient stay. The variable per diem
adjustment does not apply after day 8.
(v) Adjustment for high-cost cases. CMS provides for an additional
payment if the estimated total cost for a case exceeds a fixed dollar
loss threshold plus the total per diem payment amount for the case.
(A) The fixed dollar loss threshold is adjusted for area wage
levels, teaching status, and rural location.
(B) The additional payment equals 80 percent of the difference
between the estimated cost of the case and the per diem payment amount
for days 1 through 8, 60 percent for days 9 and beyond.
(C) Additional payments made under this section would be subject to
the adjustments at Sec. 412.84(i), except that the national urban and
rural medians would be used instead of statewide averages, and at Sec.
412.84(m) of this part.
(d) Special payment provision for interrupted stays. If a patient
is discharged from an inpatient psychiatric facility and returns to the
same facility before midnight of the 5th consecutive day, the case is
considered to be continuous for purposes:
(1) Determining the appropriate variable per diem adjustment, as
specified in paragraph (c)(2)(iv) of this section, applicable to the
case.
(2) Determining whether the total cost for a case exceeds the fixed
dollar loss threshold and qualifies for outlier payments as specified
in paragraph (c)(2)(v) of this section.
Sec. 412.426 Transition period.
(a) Duration of transition period and proportion of the blended
transition rate. Except as provided in paragraph (c) of this section,
for cost reporting periods beginning on or after April 1, 2004 through
June 30, 2007, an inpatient psychiatric facility receives a payment
comprised of a blend of the Federal per diem payment amount, as
specified in Sec. 412.424(c) and a facility-specific payment as
specified under paragraph (b) of this section.
(1) For cost reporting periods beginning on or after April 1, 2004
and before June 30, 2005, payment is based on 75 percent of the
facility-specific payment and 25 percent of the Federal per diem
payment amount.
(2) For cost reporting periods beginning on or after July 1, 2005
and before June 30, 2006, payment is based on 50 percent of the
facility-specific payment and 50 percent of the Federal per diem
payment amount.
(3) For cost reporting periods beginning on or after July 1, 2006
and before June 30, 2007, payment is based on 25 percent of the
facility-specific payment and 75 percent of the Federal per diem
payment amount.
(4) For cost reporting periods beginning on or after July 1, 2007,
payment is based entirely on the Federal per diem payment amount.
(b) Calculation of the facility-specific payment. The facility-
specific payment is equal to the payment for each cost reporting period
in the transition period that would have been made without regard to
this subpart. The facility's Medicare fiscal intermediary calculates
the facility-specific payment for inpatient operating costs and capital
costs in accordance with part 413 of this chapter.
(c) Treatment of new inpatient psychiatric facilities.
New inpatient psychiatric facilities, that is, facilities that
under present or previous ownership or both have their first cost
reporting period as an IPF beginning on or after April 1, 2004, are
paid based entirely on the Federal per diem payment system.
Sec. 412.428 Publication of the Federal per diem payment rates.
CMS will publish annually in the Federal Register information
pertaining to the inpatient psychiatric facility prospective payment
system. This information includes the Federal per diem payment rates,
the area wage index, and a description of the methodology and data used
to calculate the payment rates.
Sec. 412.432 Method of payment under the inpatient psychiatric
facility prospective payment system.
(a) General rule. Subject to the exceptions in paragraphs (b) and
(c) of this section, an inpatient psychiatric facility receives payment
under this subpart for inpatient operating cost and capital-related
costs for each inpatient stay following submission of a bill.
(b) Periodic interim payments (PIP). (1) Criteria for receiving
PIP.
(i) An inpatient psychiatric facility receiving payment under this
subpart may receive PIP for Part A services under the PIP method
subject to the provisions of Sec. 413.64(h) of this chapter.
(ii) To be approved for PIP, the inpatient psychiatric facility
must meet the qualifying requirements in Sec. 413.64(h)(3) of this
chapter.
(iii) Payments to a psychiatric unit are made under the same method
of payment as the hospital of which it is a part as specified in Sec.
412.116.
(iv) As provided in Sec. 413.64(h)(5) of this chapter,
intermediary approval is conditioned upon the intermediary's best
judgment as to whether payment can be made under the PIP method without
undue risk of resulting in an overpayment to the provider.
(2) Frequency of payment. For facilities approved for PIP, the
intermediary estimates the annual inpatient psychiatric facility's
Federal per diem prospective payments, net of estimated beneficiary
deductibles and coinsurance, and makes biweekly payments equal to \1/
26\ of the total estimated amount of payment for the year. If the
inpatient psychiatric facility has payment experience under the
prospective payment system, the intermediary estimates PIP based on
that payment experience, adjusted for projected changes supported by
substantiated information for the current year. Each payment is made 2
weeks after the end of a biweekly period of service as specified in
Sec. 413.64(h)(6) of this chapter. The interim payments are reviewed
at least twice during the reporting period and adjusted if necessary.
Fewer reviews may be necessary if an inpatient psychiatric facility
receives interim payments for less than a full reporting period. These
payments are subject to final settlement.
(3) Termination of PIP. (i) Request by the inpatient psychiatric
facility. Subject to the provisions of paragraph (b)(1)(iii) of this
section, an inpatient psychiatric facility receiving PIP may convert to
receiving prospective payments on a non-PIP basis at any time.
(ii) Removal by the intermediary. An intermediary terminates PIP if
the inpatient psychiatric facility no longer meets the requirements of
Sec. 413.64(h) of this chapter.
(c) Interim payments for Medicare bad debts and for costs of an
approved education program and other costs paid outside the prospective
payment system. The intermediary determines the interim payments by
estimating the reimbursable amount for the year based on the previous
year's experience, adjusted for projected changes supported by
substantiated information for the current year, and makes biweekly
payments equal to \1/26\ of the total estimated amount. Each payment is
made 2 weeks after the end of the biweekly period of service as
specified in Sec. 413.64(h)(6) of this chapter. The interim payments
are reviewed at least twice during the reporting period and adjusted if
necessary. Fewer reviews may be necessary if an inpatient psychiatric
facility receives interim payments for less than a full reporting
period. These payments are subject to final cost settlement.
[[Page 66955]]
(d) Outlier payments. Additional payments for outliers are not made
on an interim basis. The outlier payments are made based on the
submission of a discharge bill and represent final payment.
(e) Accelerated payments. (1) General rule. Upon request, an
accelerated payment may be made to an inpatient psychiatric facility
that is receiving payment under this subpart and is not receiving PIP
under paragraph (b) of this section if the inpatient psychiatric
facility is experiencing financial difficulties because of the
following:
(i) There is a delay by the intermediary in making payment to the
inpatient psychiatric facility.
(ii) Due to an exceptional situation, there is a temporary delay in
the inpatient psychiatric facility's preparation and submittal of bills
to the intermediary beyond the normal billing cycle.
(2) Approval of payment. An inpatient psychiatric facility's
request for an accelerated payment must be approved by the intermediary
and CMS.
(3) Amount of payment. The amount of the accelerated payment is
computed as a percent of the net payment for unbilled or unpaid covered
services.
(4) Recovery of payment. Recovery of the accelerated payment is
made by recoupment as inpatient psychiatric facility bills are
processed or by direct payment by the inpatient psychiatric facility.
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERICES; PROSPECTIVELY DETERMINED PAYMENT
FOR SKILLED NURSING FACILITIES
1. The authority citation for part 413 is revised to read as
follows:
Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and
(n), 1861 (v), 1871, 1881, 1883, and 1886 of the Social Security Act
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n),
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww).
2. Section 413.1 is amended as follows:
a. Revising paragraph (d)(2)(ii).
b. Redesignating paragraphs (d)(2)(iv),(d)(2)(v), (d)(2)(vi), and
(d)(2)(vii) as paragraphs (d)(2)(vi), (d)(2)(vii), (d)(2)(viii), and
(d)(2)(ix).
(c) Adding new paragraphs (d)(2)(iv) and (d)(2)(v).
The revision and additions read as follows:
Sec. 413.1 Introduction.
* * * * *
(d) * * *
(2) * * *
(ii) Payment to children's hospitals that are excluded from the
prospective payment systems under subpart B of part 412 of this
chapter, and hospitals outside the 50 States and the District of
Columbia is on a reasonable cost basis, subject to the provisions of
Sec. 413.40.
* * * * *
(iv) For cost reporting periods beginning before April 1, 2004,
payment to psychiatric hospitals (as well as separate psychiatric units
(distinct parts) of short-term general hospitals) that are excluded
under subpart B of part 412 of this chapter from the prospective
payment system is on a reasonable cost basis, subject to the provisions
of Sec. 413.40.
(v) For cost reporting periods beginning on or after April 1, 2004,
payment to psychiatric hospitals (as well as separate psychiatric units
(distinct parts) of short-term general hospitals) that meet the
conditions of Sec. 412.404 of this chapter is based on prospectively
determined rates under subpart N of part 412 of this chapter.
* * * * *
3. Section 413.40 is amended as follows:
a. Redesignating paragraphs (a)(2)(i)(C) and (a)(2)(i)(D) as
paragraphs (a)(2)(i)(D) and (a)(2)(i)(E).
b. Adding a new paragraph (a)(2)(i)(C).
c. Republishing paragraphs (a)(2)(ii) introductory text.
d. Revising paragraph (a)(2)(ii)(B).
e. Redesignating paragraphs (a)(2)(iii) and (a)(2)(iv) as
paragraphs (a)(2)(iv) and (a)(2)(v).
f. Adding a new paragraph (a)(2)(iii).
The revision and additions read as follows:
Sec. 413.40 Ceiling on the rate of increase in hospital inpatient
costs.
(a) * * *
(2) * * *
(i) * * *
(C) Psychiatric hospitals and psychiatric units that are paid under
the prospective payment system for hospital inpatient services under
subpart N of part 412 of this chapter for cost reporting periods
beginning on or after April 1, 2004.
* * * * *
(ii) For cost reporting periods beginning on or after October 1,
1983 through March 31, 2004, this section applies to--
* * * * *
(B) Psychiatric and rehabilitation units excluded from the
prospective payment systems, as specified in Sec. 412.1(a)(1) of this
chapter and in accordance with Sec. 412.25 through Sec. 412.30 of
this chapter, except as limited by paragraphs (a)(2)(iii) and
(a)(2)(iv) of this section with respect to psychiatric and
rehabilitation hospitals and psychiatric and rehabilitation units as
specified in Sec. 412.22, Sec. 412.23, Sec. 412.25, Sec. 412.27,
Sec. 412.29 and Sec. 412.30 of this chapter.
* * * * *
(iii) For cost reporting periods beginning on or after April 1,
2004 this section applies to psychiatric hospitals and psychiatric
units that are excluded from the prospective payment systems as
specified in Sec. 412.1(a)(1) of this chapter and paid under the
prospective payment system as specified in Sec. 412.1(a)(2) of this
chapter.
* * * * *
4. Section 413.64 is amended by revising paragraph (h)(2)(i) to
read as follows:
Sec. 413.64 Payment to providers: Specific rules.
* * * * *
(h) * * *
(2) * * *
(i) Part A inpatient services furnished in hospitals that are
excluded from the prospective payment systems, as specified in Sec.
412.1(a)(1) of this chapter, and are paid under the prospective payment
system as specified in subpart N of part 412 of this chapter.
* * * * *
PART 424--CONDITIONS OF MEDICARE PAYMENT
1. The authority citation for part 424 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. Section 424.14 is amended as follows:
a. Adding paragraph (c)(3).
b. Revising paragraph (d)(2).
The addition and revision read as follows:
Sec. 424.14 Requirements for inpatient services of psychiatric
hospitals.
* * * * *
(c) * * *
(3) The patient continues to need, on a daily basis, inpatient
psychiatric care (furnished directly by or requiring the supervision of
inpatient psychiatric facility personnel) or other professional
services that, as a practical matter can only be provided on an
inpatient basis.
(d) * * *
(2) The first recertification is required as of the 10th day of
hospitalization. Subsequent recertifications are required
[[Page 66956]]
at intervals established by the UR committee (on a case-by-case basis
if it so chooses), but no less frequently than every 30 days.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: April 17, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: April 29, 2003.
Tommy G. Thompson,
Secretary.
Editorial Note: This document was received at the Office of the
Federal Register on November 18, 2003.
[The following addenda will not appear in the Code of Federal
Regulations.]
Addendum A--Proposed Psychiatric Prospective Payment Adjustment
Rate and Adjustment Factors
Proposed Rate and Adjustment Factors
------------------------------------------------------------------------
------------------------------------------------------------------------
Proposed Per Diem Rate
------------------------------------------------------------------------
Proposed Per Diem Rate..................................... $530
Labor-Share................................................ $386
Non-Labor-Share............................................ $144
------------------------------------------------------------
Proposed Facility Adjustments
------------------------------------------------------------------------
Rural Location............................................. 1.16
Wage Area Adjustment....................................... (1)
Teaching Adjustment........................................ (2)
------------------------------------------------------------
Proposed Variable Per Diem Adjustments
------------------------------------------------------------------------
Day 1...................................................... 1.26
Days 2 through 4........................................... 1.12
Days 5 through 8........................................... 1.05
------------------------------------------------------------
Proposed Age Adjustments
------------------------------------------------------------------------
65 Years of Age and Over................................... 1.13
------------------------------------------------------------
Proposed DRG Adjustments
------------------------------------------------------------------------
DRG 12..................................................... 1.07
DRG 23..................................................... 1.10
DRG 424.................................................... 1.22
DRG 425.................................................... 1.08
DRG 426.................................................... 1.00
DRG 427.................................................... 1.01
DRG 428.................................................... 1.03
DRG 429.................................................... 1.02
DRG 430.................................................... 1.00
DRG 431.................................................... 1.02
DRG 432.................................................... 0.96
DRG 433.................................................... 0.88
DRG 521.................................................... 1.02
DRG 522.................................................... 0.97
DRG 523.................................................... 0.88
------------------------------------------------------------
Proposed Comorbidity Adjustments
------------------------------------------------------------------------
HIV........................................................ 1.06
Coagulation Factor Deficits................................ 1.11
Tracheotomy................................................ 1.14
Eating and Conduct Disorders............................... 1.03
Infectious Diseases........................................ 1.08
Renal Failure, Acute....................................... 1.08
Rental Failure, Chronic.................................... 1.14
Malignant Neoplasm's....................................... 1.10
Uncontrolled Diabetes Mellitus with or without 1.10
complications.............................................
Sever Protein Calorie Malnutrition......................... 1.12
Drug and Alcohol Induce Mental Disorders................... 1.03
Cardiac Conditions......................................... 1.13
Arteriosclerosis of the Extremity with Gangrene............ 1.17
Chronic Obstructed Pulmonary Disease....................... 1.12
Artificial Openings-Digestive and Urinary.................. 1.09
Severe Musculoskeletal and Connective Tissue Diseases...... 1.12
Poisoning.................................................. 1.14
------------------------------------------------------------------------
\1\ See Addendum B.
\2\ See section III.B.2.b.
Addendum B1.--Proposed Pre-Reclassified Wage Index for Urban Areas
------------------------------------------------------------------------
Urban area (constituent counties or
MSA county equivalents) Wage index
------------------------------------------------------------------------
0040............. Abilene, TX.......................... 0.7792
Taylor, TX
0060............. Aguadilla, PR........................ 0.4587
Aguada, PR
Aguadilla, PR
Moca, PR
0080............. Akron, OH............................ 0.9600
Portage, OH
Summit, OH
0120............. Albany, GA........................... 1.0594
Dougherty, GA
Lee, GA
0160............. Albany-Schenectady-Troy, NY.......... 0.8384
Albany, NY
Montgomery, NY
Rensselaer, NY
Saratoga, NY
Schenectady, NY
Schoharie, NY
0200............. Albuquerque, NM...................... 0.9315
Bernalillo, NM
Sandoval, NM
Valencia, NM
0220............. Alexandria, LA....................... 0.7859
Rapides, LA
0240............. Allentown-Bethlehem-Easton, PA....... 0.9735
Carbon, PA
Lehigh, PA
Northampton, PA
0280............. Altoona, PA.......................... 0.9225
Blair, PA
0320............. Amarillo, TX......................... 0.9034
Potter, TX
[[Page 66957]]
Randall, TX
0380............. Anchorage, AK........................ 1.2358
Anchorage, AK
0440............. Ann Arbor, MI........................ 1.1103
Lenawee, MI
Livingston, MI
Washtenaw, MI
0450............. Anniston,AL.......................... 0.8044
Calhoun, AL
0460............. Appleton-Oshkosh-Neenah, WI.......... 0.8997
Calumet, WI
Outagamie, WI
Winnebago, WI
0470............. Arecibo, PR.......................... 0.4337
Arecibo, PR
Camuy, PR
Hatillo, PR
0480............. Asheville, NC........................ 0.9876
Buncombe, NC
Madison, NC
0500............. Athens, GA........................... 1.0211
Clarke, GA
Madison, GA
Oconee, GA
0520............. Atlanta, GA.......................... 0.9991
Barrow, GA
Bartow, GA
Carroll, GA
Cherokee, GA
Clayton, GA
Cobb, GA
Coweta, GA
De Kalb, GA
Douglas, GA
Fayette, GA
Forsyth, GA
Fulton, GA
Gwinnett, GA
Henry, GA
Newton, GA
Paulding, GA
Pickens, GA
Rockdale, GA
Spalding, GA
Walton, GA
0560............. Atlantic City-Cape May, NJ........... 1.1017
Atlantic City, NJ
Cape May, NJ
0580............. Auburn-Opelika, AL................... 0.8325
Lee, AL
0600............. Augusta-Aiken, GA-SC................. 1.0264
Columbia, GA
McDuffie, GA
Richmond, GA
Aiken, SC
Edgefield, SC
0640............. Austin-San Marcos, TX................ 0.9637
Bastrop, TX
Caldwell, TX
Hays, TX
Travis, TX
Williamson, TX
0680............. Bakersfield, CA...................... 0.9899
Kern, CA
0720............. Baltimore, MD........................ 0.9929
Anne Arundel, MD
Baltimore, MD
Baltimore City, MD
Carroll, MD
Harford, MD
Howard, MD
Queen Annes, MD
[[Page 66958]]
0733............. Bangor, ME........................... 0.9664
Penobscot, ME
0743............. Barnstable-Yarmouth, MA.............. 1.3202
Barnstable, MA
0760............. Baton Rouge, LA...................... 0.8294
Ascension, LA
East Baton Rouge
Livingston, LA
West Baton Rouge, LA
0840............. Beaumont-Port Arthur, TX............. 0.8324
Hardin, TX
Jefferson, TX
Orange, TX
0860............. Bellingham, WA....................... 1.2282
Whatcom, WA
0870............. Benton Harbor, MI.................... 0.9042
Berrien, MI
0875............. Bergen-Passaic, NJ................... 1.2150
Bergen, NJ
Passaic, NJ
0880............. Billings, MT......................... 0.9022
Yellowstone, MT
0920............. Biloxi-Gulfport-Pascagoula, MS....... 0.8757
Hancock, MS
Harrison, MS
Jackson, MS
0960............. Binghamton, NY....................... 0.8341
Broome, NY
Tioga, NY
1000............. Birmingham, AL....................... 0.9222
Blount, AL
Jefferson, AL
St. Clair, AL
Shelby, AL
1010............. Bismarck, ND......................... 0.7972
Burleigh, ND
Morton, ND
1020............. Bloomington, IN...................... 0.8907
Monroe, IN
1040............. Bloomington-Normal, IL............... 0.9109
McLean, IL
1080............. Boise City, ID....................... 0.9310
Ada, ID
Canyon, ID
1123............. Boston-Worcester-Lawrence-Lowell- 1.1235
Brockton, MA-NH.
Bristol, MA
Essex, MA
Middlesex, MA
Norfolk, MA
Plymouth, MA
Suffolk, MA
Worcester, MA
Hillsborough, NH
Merrimack, NH
Rockingham, NH
Strafford, NH
1125............. Boulder-Longmont, CO................. 0.9689
Boulder, CO
1145............. Brazoria, TX......................... 0.8535
Brazoria, TX
1150............. Bremerton, WA........................ 1.0944
Kitsap, WA
1240............. Brownsville-Harlingen-San Benito, TX. 0.8880
Cameron, TX
1260............. Bryan-College Station, TX............ 0.8821
Brazos, TX
1280............. Buffalo-Niagara Falls, NY............ 0.9365
Erie, NY
Niagara, NY
1303............. Burlington, VT....................... 1.0052
Chittenden, VT
Franklin, VT
[[Page 66959]]
Grand Isle, VT
1310............. Caguas, PR........................... 0.4371
Caguas, PR
Cayey, PR
Cidra, PR
Gurabo, PR
San Lorenzo, PR
1320............. Canton-Massillon, OH................. 0.8932
Carroll, OH
Stark, OH
1350............. Casper, WY........................... 0.9690
Natrona, WY
1360............. Cedar Rapids, IA..................... 0.9056
Linn, IA
1400............. Champaign-Urbana, IL................. 1.0635
Champaign, IL
1440............. Charleston-North Charleston, SC...... 0.9235
Berkeley, SC
Charleston, SC
Dorchester, SC
1480............. Charleston, WV....................... 0.8898
Kanawha, WV
Putnam, WV
1520............. Charlotte-Gastonia-Rock Hill, NC-SC.. 0.9850
Cabarrus, NC
Gaston, NC
Lincoln, NC
Mecklenburg, NC
Rowan, NC
Stanly, NC
Union, NC
York, SC
1540............. Charlottesville, VA.................. 1.0438
Albemarle, VA
Charlottesville City, VA
Fluvanna, VA
Greene, VA
1560............. Chattanooga, TN-GA................... 0.8976
Catoosa, GA
Dade, GA
Walker, GA
Hamilton, TN
Marion, TN
1580............. Cheyenne, WY......................... 0.8628
Laramie, WY
1600............. Chicago, IL.......................... 1.1044
Cook, IL
De Kalb, IL
Du Page, IL
Grundy, IL
Kane, IL
Kendall, IL
Lake, IL
McHenry, IL
Will, IL
1620............. Chico-Paradise, CA................... 0.9745
Butte, CA
1640............. Cincinnati, OH-KY-IN................. 0.9381
Dearborn, IN
Ohio, IN
Boone, KY
Campbell, KY
Gallatin, KY
Grant, KY
Kenton, KY
Pendleton, KY
Brown, OH
Clermont, OH
Hamilton, OH
Warren, OH
1660............. Clarksville-Hopkinsville, TN-KY...... 0.8406
Christian, KY
[[Page 66960]]
Montgomery, TN
1680............. Cleveland-Lorain-Elyria, OH.......... 0.9670
Ashtabula, OH
Geauga, OH
Cuyahoga, OH
Lake, OH
Lorain, OH
Medina, OH
1720............. Colorado Springs, CO................. 0.9916
El Paso, CO
1740............. Columbia MO.......................... 0.8496
Boone, MO
1760............. Columbia, SC......................... 0.9307
Lexington, SC
Richland, SC
1800............. Columbus, GA-AL...................... 0.8374
Russell, AL
Chattahoochee, GA
Harris, GA
Muscogee, GA
1840............. Columbus, OH......................... 0.9751
Delaware, OH
Fairfield, OH
Franklin, OH
Licking, OH
Madison, OH
Pickaway, OH
1880............. Corpus Christi, TX................... 0.8729
Nueces, TX
San Patricio, TX
1890............. Corvallis, OR........................ 1.1453
Benton, OR
1900............. Cumberland, MD-WV.................... 0.7847
Allegany, MD
Mineral, WV
1920............. Dallas, TX........................... 0.9998
Collin, TX
Dallas, TX
Denton, TX
Ellis, TX
Henderson, TX
Hunt, TX
Kaufman, TX
Rockwall, TX
1950............. Danville, VA......................... 0.8859
Danville City, VA
Pittsylvania, VA
1960............. Davenport-Moline-Rock Island, IA-IL.. 0.8835
Scott, IA
Henry, IL
Rock Island, IL
2000............. Dayton-Springfield, OH............... 0.9282
Clark, OH
Greene, OH
Miami, OH
Montgomery, OH
2020............. Daytona Beach, FL.................... 0.9062
Flagler, FL
Volusia, FL
2030............. Decatur, AL.......................... 0.8973
Lawrence, AL
Morgan, AL
2040............. Decatur, IL.......................... 0.8055
Macon, IL
2080............. Denver, CO........................... 1.0601
Adams, CO
Arapahoe, CO
Broomfield, CO
Denver, CO
Douglas, CO
Jefferson, CO
2120............. Des Moines, IA....................... 0.8791
[[Page 66961]]
Dallas, IA
Polk, IA
Warren, IA
2160............. Detroit, MI.......................... 1.0448
Lapeer, MI
Macomb, MI
Monroe, MI
Oakland, MI
St. Clair, MI
Wayne, MI
2180............. Dothan, AL........................... 0.8137
Dale, AL
Houston, AL
2190............. Dover, DE............................ 0.9356
Kent, DE
2200............. Dubuque, IA.......................... 0.8795
Dubuque, IA
2240............. Duluth-Superior, MN-WI............... 1.0368
St. Louis, MN
Douglas, WI
2281............. Dutchess County, NY.................. 1.0684
Dutchess, NY
2290............. Eau Claire, WI....................... 0.8952
Chippewa, WI
Eau Clair, WI
2320............. El Paso, TX.......................... 0.9265
El Paso, TX
2330............. Elkhart-Goshen, IN................... 0.9722
Elkhart, IN
2335............. Elmira, NY........................... 0.8416
Chemung, NY
2340............. Enid, OK............................. 0.8376
Garfield, OK
2360............. Erie, PA............................. 0.8925
Erie, PA
2400............. Eugene-Springfield, OR............... 1.0944
Lane, OR
2440............. Evansville-Henderson, IN-KY.......... 0.8177
Posey, IN
Vanderburgh, IN
Warrick, IN
Henderson, KY
2520............. Fargo-Moorhead, ND-MN................ 0.9684
Clay, MN
Cass, ND
2560............. Fayetteville, NC..................... 0.8889
Cumberland, NC
2580............. Fayettevile-Springdale-Rogers, AR.... 0.8100
Benton, AR
Washington, AR
2620............. Flagstaff, AZ-UT..................... 1.0682
Coconino, AZ
Kane, UT
2640............. Flint, MI............................ 1.1135
Genesee, MI
2650............. Florence, AL......................... 0.7792
Colbert, AL
Lauderdale, AL
2655............. Florence, SC......................... 0.8780
Florence, SC
2670............. Fort Collins-Loveland, CO............ 1.0066
Larimer, CO
2680............. Ft. Lauderdale, FL................... 1.0297
Broward, FL
2700............. Fort Myers-Cape Coral, FL............ 0.9680
Lee, FL
2710............. Fort Pierce-Port St. Lucie, FL....... 0.9823
Martin, FL
St. Lucie, FL
2720............. Fort Smith, AR-OK.................... 0.7895
Crawford, AR
Sebastian, AR
[[Page 66962]]
Sequoyah, OK
2750............. Fort Walton Beach, FL................ 0.9693
Okaloosa, FL
2760............. Fort Wayne, IN....................... 0.9457
Adams, IN
Allen, IN
De Kalb, IN
Huntington, IN
Wells, IN
Whitley, IN
2800............. Fort Worth-Arlington, TX............. 0.9446
Hood, TX
Johnson, TX
Parker, TX
Tarrant, TX
2840............. Fresno, CA........................... 1.0216
Fresno, CA
Madera, CA
2880............. Gadsden AL........................... 0.8505
Etowah, AL
2900............. Gainesville, FL...................... 0.9871
Alachua, FL
2920............. Galveston-Texas City, TX............. 0.9465
Galveston, TX
2960............. Gary, IN............................. 0.9584
Lake, IN
Porter, IN
2975............. Glens Falls, NY...................... 0.8281
Warren, NY
Washington, NY
2980............. Goldsboro, NC........................ 0.8892
Wayne, NC
2985............. Grand Forks, ND-MN................... 0.8897
Polk, MN
Grand Forks, ND
2995............. Grand Junction, CO................... 0.9456
Mesa, CO
3000............. Grand Rapids-Muskegon-Holland, MI.... 0.9525
Allegan, MI
Kent, MI
Muskegon, MI
Ottawa, MI
3040............. Great Falls, MT...................... 0.8950
Cascade, MT
3060............. Greeley, CO.......................... 0.9237
Weld, CO
3080............. Green Bay, WI........................ 0.9502
Brown, WI
3120............. Greensboro-Winston-Salem-High Point, 0.9282
NC.
Alamance, NC
Davidson, NC
Davie, NC
Forsyth, NC
Guilford, NC
Randolph, NC
Stokes, NC
Yadkin, NC
3150............. Greenville, NC....................... 0.9100
Pitt, NC
3160............. Greenville-Spartanburg-Anderson, SC.. 0.9122
Anderson, SC
Cherokee, SC
Greenville, SC
Pickens, SC
Spartanburg, SC
3180............. Hagerstown, MD....................... 0.9268
Washington, MD
3200............. Hamilton-Middletown, OH.............. 0.9418
Butler, OH
3240............. Harrisburg-Lebanon-Carlisle, PA...... 0.9223
Cumberland, PA
Dauphin, PA
[[Page 66963]]
Lebanon, PA
Perry, PA
3283............. Hartford, CT......................... 1.1549
Hartford, CT
Litchfield, CT
Middlesex, CT
Tolland, CT
3285............. Hattiesburg, MS...................... 0.7659
Forrest, MS
Lamar, MS
3290............. Hickory-Morganton-Lenoir, NC......... 0.9028
Alexander, NC
Burke, NC
Caldwell, NC
Catawba, NC
3320............. Honolulu, HI......................... 1.1457
Honolulu, HI
3350............. Houma, LA............................ 0.8385
Lafourche, LA
Terrebonne, LA
3360............. Houston, TX.......................... 0.9892
Chambers, TX
Fort Bend, TX
Harris, TX
Liberty, TX
Montgomery, TX
Waller, TX
3400............. Huntington-Ashland, WV-KY-OH......... 0.9636
Boyd, KY
Carter, KY
Greenup, KY
Lawrence, OH
Cabell, WV
Wayne, WV
3440............. Huntsville, AL....................... 0.8903
Limestone, AL
Madison, AL
3480............. Indianapolis, IN..................... 0.9717
Boone, IN
Hamilton, IN
Hancock, IN
Hendricks, IN
Johnson, IN
Madison, IN
Marion, IN
Morgan, IN
Shelby, IN
3500............. Iowa City, IA........................ 0.9587
Johnson, IA
3520............. Jackson, MI.......................... 0.9532
Jackson, MI
3560............. Jackson, MS.......................... 0.8607
Hinds, MS
Madison, MS
Rankin, MS
3580............. Jackson, TN.......................... 0.9275
Chester, TN
Madison, TN
3600............. Jacksonville, FL..................... 0.9281
Clay, FL
Duval, FL
Nassau, FL
St. Johns, FL
3605............. Jacksonville, NC..................... 0.8239
Onslow, NC
3610............. Jamestown, NY........................ 0.7976
Chautaqua, NY
3620............. Janesville-Beloit, WI................ 0.9849
Rock, WI
3640............. Jersey City, NJ...................... 1.1190
Hudson, NJ
3660............. Johnson City-Kingsport-Bristol, TN-VA 0.8268
[[Page 66964]]
Carter, TN
Hawkins, TN
Sullivan, TN
Unicoi, TN
Washington, TN
Bristol City, VA
Scott, VA
Washington, VA
3680............. Johnstown, PA........................ 0.8329
Cambria, PA
Somerset, PA
3700............. Jonesboro, AR........................ 0.7749
Craighead, AR
3710............. Joplin, MO........................... 0.8613
Jasper, MO
Newton, MO
3720............. Kalamazoo-Battlecreek, MI............ 1.0595
Calhoun, MI
Kalamazoo, MI
Van Buren, MI
3740............. Kankakee, IL......................... 1.0790
Kankakee, IL
3760............. Kansas City, KS-MO................... 0.9736
Johnson, KS
Leavenworth, KS
Miami, KS
Wyandotte, KS
Cass, MO
Clay, MO
Clinton, MO
Jackson, MO
Lafayette, MO
Platte, MO
Ray, MO
3800............. Kenosha, WI.......................... 0.9686
Kenosha, WI
3810............. Killeen-Temple, TX................... 1.0399
Bell, TX
Coryell, TX
3840............. Knoxville, TN........................ 0.8970
Anderson, TN
Blount, TN
Knox, TN
Loudon, TN
Sevier, TN
Union, TN
3850............. Kokomo, IN........................... 0.8971
Howard, IN
Tipton, IN
3870............. La Crosse, WI-MN..................... 0.9400
Houston, MN
La Crosse, WI
3880............. Lafayette, LA........................ 0.8475
Acadia, LA
Lafayette, LA
St. Landry, LA
St. Martin, LA
3920............. Lafayette, IN........................ 0.9278
Clinton, IN
Tippecanoe, IN
3960............. Lake Charles, LA..................... 0.7965
Calcasieu, LA
3980............. Lakeland-Winter Haven, FL............ 0.9357
Polk, FL
4000............. Lancaster, PA........................ 0.9078
Lancaster, PA
4040............. Lansing-East Lansing, MI............. 0.9726
Clinton, MI
Eaton, MI
Ingham, MI
4080............. Laredo, TX........................... 0.8472
Webb, TX
[[Page 66965]]
4100............. Las Cruces, NM....................... 0.8745
Dona Ana, NM
4120............. Las Vegas, NV-AZ..................... 1.1521
Mohave, AZ
Clark, NV
Nye, NV
4150............. Lawrence, KS......................... 0.7923
Douglas, KS
4200............. Lawton, OK........................... 0.8315
Comanche, OK
4243............. Lewiston-Auburn, ME.................. 0.9179
Androscoggin, ME
4280............. Lexington, KY........................ 0.8581
Bourbon, KY
Clark, KY
Fayette, KY
Jessamine, KY
Madison, KY
Scott, KY
Woodford, KY
4320............. Lima, OH............................. 0.9483
Allen, OH
Auglaize, OH
4360............. Lincoln, NE.......................... 0.9892
Lancaster, NE
4400............. Little Rock-North Little, AR......... 0.9097
Faulkner, AR
Lonoke, AR
Pulaski, AR
Saline, AR
4420............. Longview-Marshall, TX................ 0.8629
Gregg, TX
Harrison, TX
Upshur, TX
4480............. Los Angeles-Long Beach, CA........... 1.2001
Los Angeles, CA
4520............. Louisville, KY-IN.................... 0.9276
Clark, IN
Floyd, IN
Harrison, IN
Scott, IN
Bullitt, KY
Jefferson, KY
Oldham, KY
4600............. Lubbock, TX.......................... 0.9646
Lubbock, TX
4640............. Lynchburg, VA........................ 0.9219
Amherst, VA
Bedford City, VA
Bedford, VA
Campbell, VA
Lynchburg City, VA
4680............. Macon, GA............................ 0.9204
Bibb, GA
Houston, GA
Jones, GA
Peach, GA
Twiggs, GA
4720............. Madison, WI.......................... 1.0467
Dane, WI
4800............. Mansfield, OH........................ 0.8900
Crawford, OH
Richland, OH
4840............. Mayaguez, PR......................... 0.4914
Anasco, PR
Cabo Rojo, PR
Hormigueros, PR
Mayaguez, PR
Sabana Grande, PR
San German, PR
4880............. McAllen-Edinburg-Mission, TX......... 0.8428
Hidalgo, TX
[[Page 66966]]
4890............. Medford-Ashland, OR.................. 1.0498
Jackson, OR
4900............. Melbourne-Titusville-Palm Bay, FL.... 1.0253
Brevard, FL
4920............. Memphis, TN-AR-MS.................... 0.8920
Crittenden, AR
De Soto, MS
Fayette, TN
Shelby, TN
Tipton, TN
4940............. Merced, CA........................... 0.9837
Merced, CA
5000............. Miami, FL............................ 0.9802
Dade, FL
5015............. Middlesex-Somerset-Hunterdon, NJ..... 1.2313
Hunterdon, NJ
Middlesex, NJ
Somerset, NJ
5080............. Milwaukee-Waukesha, WI............... 0.9893
Milwaukee, WI
Ozaukee, WI
Washington, WI
Waukesha, WI
5120............. Minneapolis-St. Paul, MN-WI.......... 1.0903
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
5140............. Missoula, MT......................... 0.9157
Missoula, MT
5160............. Mobile, AL........................... 0.8108
Baldwin, AL
Mobile, AL
5170............. Modesto, CA.......................... 1.0498
Stanislaus, CA
5190............. Monmouth-Ocean, NJ................... 1.0674
Monmouth, NJ
Ocean, NJ
5200............. Monroe, LA........................... 0.8137
Ouachita, LA
5240............. Montgomery, AL....................... 0.7734
Autauga, AL
Elmore, AL
Montgomery, AL
5280............. Muncie, IN........................... 0.9284
Delaware, IN
5330............. Myrtle Beach, SC..................... 0.8976
Horry, SC
5345............. Naples, FL........................... 0.9754
Collier, FL
5360............. Nashville, TN........................ 0.9578
Cheatham, TN
Davidson, TN
Dickson, TN
Robertson, TN
Rutherford, TN
Sumner, TN
Williamson, TN
Wilson, TN
5380............. Nassau-Suffolk, NY................... 1.3357
Nassau, NY
Suffolk, NY
5483............. New Haven-Bridgeport-Stamford- 1.2408
Waterbury-Danbury, CT.
[[Page 66967]]
Fairfield, CT
New Haven, CT
5523............. New London-Norwich, CT............... 1.1767
New London, CT
5560............. New Orleans, LA...................... 0.9046
Jefferson, LA
Orleans, LA
Plaquemines, LA
St. Bernard, LA
St. Charles, LA
St. James, LA
St. John The Baptist, LA
St. Tammany, LA
5600............. New York, NY......................... 1.4414
Bronx, NY
Kings, NY
New York, NY
Putnam, NY
Queens, NY
Richmond, NY
Rockland, NY
Westchester, NY
5640............. Newark, NJ........................... 1.1381
Essex, NJ
Morris, NJ
Sussex, NJ
Union, NJ
Warren, NJ
5660............. Newburgh, NY-PA...................... 1.1387
Orange, NY
Pike, PA
5720............. Norfolk-Virginia Beach-Newport News, 0.8574
VA-NC.
Currituck, NC
Chesapeake City, VA
Gloucester, VA
Hampton City, VA
Isle of Wight, VA
James City, VA
Mathews, VA
Newport News City, VA
Norfolk City, VA
Poquoson City, VA
Portsmouth City, VA
Suffolk City, VA
Virginia Beach City, VA
Williamsburg City, VA
York, VA
5775............. Oakland, CA.......................... 1.5072
Alameda, CA
Contra Costa, CA
5790............. Ocala, FL............................ 0.9402
Marion, FL
5800............. Odessa-Midland, TX................... 0.9397
Ector, TX
Midland, TX
5800............. Oklahoma City, OK.................... 0.8900
Canadian, OK
Cleveland, OK
Logan, OK
McClain, OK
Oklahoma, OK
Pottawatomie, OK
5910............. Olympia, WA.......................... 1.0960
Thurston, WA
5920............. Omaha, NE-IA......................... 0.9978
Pottawattamie, IA
Cass, NE
Douglas, NE
Sarpy, NE
Washington, NE
5945............. Orange County, CA.................... 1.1474
Orange, CA
[[Page 66968]]
5960............. Orlando, FL.......................... 0.9640
Lake, FL
Orange, FL
Osceola, FL
Seminole, FL
5990............. Owensboro, KY........................ 0.8344
Daviess, KY
6015............. Panama City, FL...................... 0.8865
Bay, FL
6020............. Parkersburg-Marietta, WV-OH.......... 0.8127
Washington, OH
Wood, WV
6080............. Pensacola, FL........................ 0.8645
Escambia, FL
Santa Rosa, FL
6120............. Peoria-Pekin, IL..................... 0.8739
Peoria, IL
Tazewell, IL
Woodford, IL
6160............. Philadelphia, PA-NJ.................. 1.0713
Burlington, NJ
Camden, NJ
Gloucester, NJ
Salem, NJ
Bucks, PA
Chester, PA
Delaware, PA
Montgomery, PA
Philadelphia, PA
6200............. Phoenix-Mesa, AZ..................... 0.9820
Maricopa, AZ
Pinal, AZ
6240............. Pine Bluff, AR....................... 0.7962
Jefferson, AR
6280............. Pittsburgh, PA....................... 0.9365
Allegheny, PA
Beaver, PA
Butler, PA
Fayette, PA
Washington, PA
Westmoreland, PA
6323............. Pittsfield, MA....................... 1.0235
Berkshire, MA
6340............. Pocatello, ID........................ 0.9372
Bannock, ID
6360............. Ponce, PR............................ 0.5169
Guayanilla, PR
Juana Diaz, PR
Penuelas, PR
Ponce, PR
Villalba, PR
Yauco, PR
6403............. Portland, ME......................... 0.9794
Cumberland, ME
Sagadahoc, ME
York, ME
6440............. Portland-Vancouver, OR-WA............ 1.0667
Clackamas, OR
Columbia, OR
Multnomah, OR
Washington, OR
Yamhill, OR
Clark, WA
6483............. Providence-Warwick-Pawtucket, RI..... 1.0854
Bristol, RI
Kent, RI
Newport, RI
Providence, RI
Washington, RI
6520............. Provo-Orem, UT....................... 0.9984
Utah, UT
6560............. Pueblo, CO........................... 0.8820
[[Page 66969]]
Pueblo, CO
6580............. Punta Gorda, FL...................... 0.9218
Charlotte, FL
6600............. Racine, WI........................... 0.9334
Racine, WI
6640............. Raleigh-Durham-Chapel Hill, NC....... 0.9990
Chatham, NC
Durham, NC
Franklin, NC
Johnston, NC
Orange, NC
Wake, NC
6660............. Rapid City, SD....................... 0.8846
Pennington, SD
6680............. Reading, PA.......................... 0.9295
Berks, PA
6690............. Redding, CA.......................... 1.1135
Shasta, CA
6720............. Reno, NV............................. 1.0648
Washoe. NV
6740............. Richland-Kennewick-Pasco, WA......... 1.1491
Benton, WA
Franklin, WA
6760............. Richmond-Petersburg, VA.............. 0.9477
Charles City County, VA
Chesterfield, VA
Colonial Heights City, VA
Dinwiddie, VA
Goochland, VA
Hanover, VA
Henrico, VA
Hopewell City, VA
New Kent, VA
Petersburg City, VA
Powhatan, VA
Prince George, VA
Richmond City, VA
6780............. Riverside-San Bernardino, CA......... 1.1365
Riverside, CA
San Bernardino, CA
6800............. Roanoke, VA.......................... 0.8614
Botetourt, VA
Roanoke, VA
Roanoke City, VA
Salem City, VA
6820............. Rochester, MN........................ 1.2139
Olmsted, MN
6840............. Rochester, NY........................ 0.9194
Genesee, NY
Livingston, NY
Monroe, NY
Ontario, NY
Orleans, NY
Wayne, NY
6880............. Rockford, IL......................... 0.9625
Boone, IL
Ogle, IL
Winnebago, IL
6895............. Rocky Mount, NC...................... 0.9228
Edgecombe, NC
Nash, NC
6920............. Sacramento, CA....................... 1.1500
El Dorado, CA
Placer, CA
Sacramento, CA
6960............. Saginaw-Bay City-Midland, MI......... 0.9650
Bay, MI
Midland, MI
Saginaw, MI
6980............. St. Cloud, MN........................ 0.9700
Benton, MN
Stearns, MN
[[Page 66970]]
7000............. St. Joseph, MO....................... 0.8021
Andrews, MO
Buchanan, MO
7040............. St. Louis, MO-IL..................... 0.8855
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
Sullivan City, MO
7080............. Salem, OR............................ 1.0367
Marion, OR
Polk, OR
7120............. Salinas, CA.......................... 1.4623
Monterey, CA
7160............. Salt Lake City-Ogden, UT............. 0.9945
Davis, UT
Salt Lake, UT
Weber, UT
7200............. San Angelo, TX....................... 0.8374
Tom Green, TX
7240............. San Antonio, TX...................... 0.8753
Bexar, TX
Comal, TX
Guadalupe, TX
Wilson, TX
7320............. San Diego, CA........................ 1.1131
San Diego, CA
7360............. San Francisco, CA.................... 1.4142
Marin, CA
San Francisco, CA
San Mateo, CA
7400............. San Jose, CA......................... 1.4145
Santa Clara, CA
7440............. San Juan-Bayamon, PR................. 0.4741
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
[[Page 66971]]
7460............. San Luis Obispo-Atascadero-Paso 1.1271
Robles, CA.
San Luis Obispo, CA
7480............. Santa Barbara-Santa Maria-Lompoc, CA. 1.0481
Santa Barbara, CA
7485............. Santa Cruz-Watsonville, CA........... 1.3646
Santa Cruz, CA
7490............. Santa Fe, NM......................... 1.0712
Los Alamos, NM
Santa Fe, NM
7500............. Santa Rosa, CA....................... 1.3046
Sonoma, CA
7510............. Sarasota-Bradenton, FL............... 0.9425
Manatee, FL
Sarasota, FL
7520............. Savannah, GA......................... 0.9376
Bryan, GA
Chatham, GA
Effingham, GA
7560............. Scranton-Wilkes-Barre-Hazleton, PA... 0.8599
Columbia, PA
Lackawanna, PA
Luzerne, PA
Wyoming, PA
7600............. Seattle-Bellevue-Everett, WA......... 1.1474
Island, WA
King, WA
Snohomish, WA
7610............. Sharon, PA........................... 0.7869
Mercer, PA
7620............. Sheboygan, WI........................ 0.8697
Sheboygan, WI
7640............. Sherman-Denison, TX.................. 0.9255
Grayson, TX
7680............. Shreveport-Bossier City, LA.......... 0.8987
Bossier, LA
Caddo, LA
Webster, LA
7720............. Sioux City, IA-NE.................... 0.9046
Woodbury, IA
Dakota, NE
7760............. Sioux Falls, SD...................... 0.9257
Lincoln, SD
Minnehaha, SD
7800............. South Bend, IN....................... 0.9802
St. Joseph, IN
7840............. Spokane, WA.......................... 1.0852
Spokane, WA
7880............. Springfield, IL...................... 0.8659
Menard, IL
Sangamon, IL
7920............. Springfield, MO...................... 0.8424
Christian, MO
Greene, MO
Webster, MO
8003............. Springfield, MA...................... 1.0927
Hampden, MA
Hampshire, MA
8050............. State College, PA.................... 0.8941
Centre, PA
8080............. Steubenville-Weirton, OH-WV.......... 0.8804
Jefferson, OH
Brooke, WV
Hancock, WV
8120............. Stockton-Lodi, CA.................... 1.0506
San Joaquin, CA
8140............. Sumter, SC........................... 0.8273
Sumter, SC
8160............. Syracuse, NY......................... 0.9714
Cayuga, NY
Madison, NY
Onondaga, NY
Oswego, NY
[[Page 66972]]
8200............. Tacoma, WA........................... 1.0940
Pierce, WA
8240............. Tallahassee, FL...................... 0.8504
Gadsden, FL
Leon, FL
8280............. Tampa-St. Petersburg-Clearwater, FL.. 0.9065
Hernando, FL
Hillsborough, FL
Pasco, FL
Pinellas, FL
8320............. Terre Haute, IN...................... 0.8599
Clay, IN
Vermillion, IN
Vigo, IN
8360............. Texarkana, AR-Texarkana, TX.......... 0.8088
Miller, AR
Bowie, TX
8400............. Toledo, OH........................... 0.9810
Fulton, OH
Lucas, OH
Wood, OH
8440............. Topeka, KS........................... 0.9199
Shawnee, KS
8480............. Trenton, NJ.......................... 1.0432
Mercer, NJ
8520............. Tucson, AZ........................... .8911
Pima, AZ
8560............. Tulsa, OK............................ 0.8332
Creek, OK
Osage, OK
Rogers, OK
Tulsa, OK
Wagoner, OK
8600............. Tuscaloosa, AL....................... 0.8130
Tuscaloosa, AL
8640............. Tyler, TX............................ 0.9521
Smith, TX
8680............. Utica-Rome, NY....................... 0.8465
Herkimer, NY
Oneida, NY
8720............. Vallejo-Fairfield-Napa, CA........... 1.3354
Napa, CA
Solano, CA
8735............. Ventura, CA.......................... 1.1096
Ventura, CA
8750............. Victoria, TX......................... 0.8756
Victoria, TX
8760............. Vineland-Millville-Bridgeton, NJ..... 1.0031
Cumberland, NJ
8780............. Visalia-Tulare-Porterville, CA....... 0.9429
Tulare, CA
8800............. Waco, TX............................. 0.8073
McLennan, TX
8840............. Washington, DC-MD-VA-WV.............. 1.0851
District of Columbia, DC
Calvert, MD
Charles, MD
Frederick, MD
Montgomery, MD
Prince Georges, MD
Alexandria City, VA
Arlington, VA
Clarke, VA
Culpepper, VA
Fairfax, VA
Fairfax City, VA
Falls Church City, VA
Fauquier, VA
Fredericksburg City, VA
King George, VA
Loudoun, VA
Manassas City, VA
[[Page 66973]]
Manassas Park City, VA
Prince William, VA
Spotsylvania, VA
Stafford, VA
Warren, VA
Berkeley, WV
Jefferson, WV
8920............. Waterloo-Cedar Falls, IA............. 0.8069
Black Hawk, IA
8940............. Wausau, WI........................... 0.9782
Marathon, WI
8960............. West Palm Beach-Boca Raton, FL....... 0.9939
Palm Beach, FL
9000............. Wheeling, OH-WV...................... 0.7670
Belmont, OH
Marshall, WV
Ohio, WV
9040............. Wichita, KS.......................... 0.9520
Butler, KS
Harvey, KS
Sedgwick, KS
9080............. Wichita Falls, TX.................... 0.8498
Archer, TX
Wichita, TX
9140............. Williamsport, PA..................... 0.8544
Lycoming, PA
9160............. Wilmington-Newark, DE-MD............. 1.1173
New Castle, DE
Cecil, MD
9200............. Wilmington, NC....................... 0.9640
New Hanover, NC
Brunswick, NC
9260............. Yakima, WA........................... 1.0569
Yakima, WA
9270............. Yolo, CA............................. 0.9434
Yolo, CA
9280............. York, PA............................. 0.9026
York, PA
9320............. Youngstown-Warren, OH................ 0.9358
Columbiana, OH
Mahoning, OH
Trumbull, OH
9340............. Yuba City, CA........................ 1.0276
Sutter, CA
Yuba, CA
9360............. Yuma, AZ............................. 0.8589
Yuma, AZ
------------------------------------------------------------------------
Addendum B2.--Wage Index for Rural Areas
------------------------------------------------------------------------
Nonurban area Wage index
------------------------------------------------------------------------
Alabama.................................................... 0.7660
Alaska..................................................... 1.2293
Arizona.................................................... 0.8493
Arkansas................................................... 0.7666
California................................................. 0.9840
Colorado................................................... 0.9015
Connecticut................................................ 1.2394
Delaware................................................... 0.9128
Florida.................................................... 0.8814
Georgia.................................................... 0.8230
Guam....................................................... 0.9611
Hawaii..................................................... 1.0255
Idaho...................................................... 0.8747
Illinois................................................... 0.8204
Indiana.................................................... 0.8755
Iowa....................................................... 0.8315
Kansas..................................................... 0.7923
Kentucky................................................... 0.8079
Louisiana.................................................. 0.7567
Maine...................................................... 0.8874
Maryland................................................... 0.8946
Massachusetts.............................................. 1.1288
Michigan................................................... 0.9000
Minnesota.................................................. 0.9151
Mississippi................................................ 0.7680
Missouri................................................... 0.8021
Montana.................................................... 0.8481
Nebraska................................................... 0.8204
Nevada..................................................... 0.9577
New Hampshire.............................................. 0.9796
New Jersey \1\............................................. ...........
New Mexico................................................. 0.8872
New York................................................... 0.8542
North Carolina............................................. 0.8666
North Dakota............................................... 0.7788
Ohio....................................................... 0.8613
Oklahoma................................................... 0.7590
Oregon..................................................... 1.0303
Pennsylvania............................................... 0.8462
Puerto Rico................................................ 0.4356
Rhode Island \1\........................................... ...........
South Carolina............................................. 0.8607
South Dakota............................................... 0.7815
Tennessee.................................................. 0.7877
Texas...................................................... 0.7821
Utah....................................................... 0.9312
Vermont.................................................... 0.9345
Virginia................................................... 0.8504
Virgin Islands............................................. 0.7845
Washington................................................. 1.0179
West Virginia.............................................. 0.7975
Wisconsin.................................................. 0.9162
[[Page 66974]]
Wyoming.................................................... 0.9007
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.
BILLING CODE 4120-01-P
[[Page 66975]]
[GRAPHIC] [TIFF OMITTED] TP28NO03.000
[[Page 66976]]
[GRAPHIC] [TIFF OMITTED] TP28NO03.001
[[Page 66977]]
[GRAPHIC] [TIFF OMITTED] TP28NO03.002
[[Page 66978]]
[GRAPHIC] [TIFF OMITTED] TP28NO03.003
[FR Doc. 03-29137 Filed 11-19-03; 8:45 am]
BILLING CODE 4120-01-C