FR Doc 04-10039

[Federal Register: May 7, 2004 (Volume 69, Number 89)]
[Rules and Regulations]
[Page 25673-25749]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07my04-9]

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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 Part 412

Medicare Program; Prospective Payment System for Long-Term Care
Hospitals: Annual Payment Rate Updates and Policy Changes; Final Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1263-F]
RIN 0938-AM84

Medicare Program; Prospective Payment System for Long-Term Care
Hospitals: Annual Payment Rate Updates and Policy Changes

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule updates the annual payment rates for the
Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs). The payment
amounts and factors used to determine the updated Federal rates that
are described in this final rule have been determined based on the LTCH
PPS rate year. The annual update of the long-term care diagnosis-
related group (LTC-DRG) classifications and relative weights remains
linked to the annual adjustments of the acute care hospital inpatient
diagnosis-related group system, and will continue to be effective each
October 1. The outlier threshold for July 1, 2004 through June 30, 2005
is also derived from the LTCH PPS rate year calculations. In this final
rule, we also are making clarifications to the existing policy
regarding the designation of a satellite of a LTCH as an independent
LTCH. In addition, we are expanding the existing interrupted stay
policy and changing the procedure for counting days in the average
length of stay calculation for Medicare patients for hospitals
qualifying as LTCHs.

DATES: This final rule is effective July 1, 2004.

FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487 (General information).
Judy Richter, (410) 786-2590 (General information, transition
payments, payment adjustments, and onsite discharges and readmissions,
interrupted stays, co-located providers, and short-stay outliers).
Michele Hudson, (410) 786-5490 (Calculation of the payment rates,
relative weights and case-mix index, market basket update, and payment
adjustments).
Ann Fagan, (410) 786-5662 (Patient classification system).
Miechal Lefkowitz, (410) 786-5316 (High-cost outliers and budget
neutrality).
Linda McKenna, (410) 786-4537 (Payment adjustments, interrupted
stay, and transition period).
Kathryn McCann, (410) 786-7623 (Medigap).
Robert Nakielny, (410) 786-4466 (Medicaid).

SUPPLEMENTARY INFORMATION:

Availability of Copies and Electronic Access

Copies: To order copies of the Federal Register containing this
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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
preamble, we are providing the following table of contents.

Table of Contents

I. Background
A. Legislative and Regulatory Authority
B. Criteria for Classification as a LTCH
1. Classification as a LTCH
2. Hospitals Excluded from the LTCH PPS
C. Transition Period for Implementation of the LTCH PPS
D. Limitation on Charges to Beneficiaries
E. Health Insurance Portability and Accountability Act
Compliance
II. Publication of Proposed Rulemaking
III. Summary of the Major Contents of This Final Rule
IV. Long-Term Care Diagnosis-Related Group (LTC-DRG) Classifications
and Relative Weights
A. Background
B. Patient Classifications into DRGs
C. Organization of DRGs
D. Update of LTC-DRGs
E. ICD-9-CM Coding System
1. Uniform Hospital Discharge Data Set (UHDDS) Definitions
2. Maintenance of the ICD-9-CM Coding System
3. Coding Rules and Use of ICD-9-CM Codes in LTCHs
F. Method for Updating the LTC-DRG Relative Weights
V. Changes to the LTCH PPS Rates and Changes in Policy for the 2005
LTCH PPS Rate Year
A. Overview of the Development of the Payment Rates
B. Update to the Standard Federal Rate for the 2005 LTCH PPS
Rate Year
1. Standard Federal Rate Update
a. Description of the Market Basket for the 2005 LTCH PPS Rate
Year
b. LTCH Market Basket Increase for the 2005 LTCH PPS Rate Year
2. Standard Federal Rate for the 2005 LTCH PPS Rate year
C. Calculation of LTCH Prospective Payments for the 2005 LTCH
PPS Rate Year
1. Adjustment for Area Wage Levels
a. Background
b. Wage Index Data
c. Labor-Related Share
2. Adjustment for Cost-of-Living in Alaska and Hawaii
3. Adjustment for High-Cost Outliers
a. Background
b. Establishment of the Fixed-Loss Amount
c. Reconciliation of Outlier Payments Upon Cost Report
Settlement
d. Application of Outlier Policy to Short-Stay Outlier Cases
4. Adjustments for Special Cases
a. General
b. Adjustment for Short-Stay Outlier Cases
c. Extension of the Interrupted Stay Policy
d. Onsite Discharges and Readmittances
5. Other Payment Adjustments
6. Budget Neutrality Offset to Account for the Transition
Methodology
7. Changes in the Procedure for Counting Days in the Average
Length of Stay Calculation
8. Clarification of the Requirements for a Satellite Facility or
a Remote Location to Qualify as a LTCH and Changes to the
Requirements for Certain Satellite Facilities and Remote Locations
VI. Computing the Adjusted Federal Prospective Payments for the 2005
LTCH PPS Rate Year
VII. Transition Period
VIII. Payments to New LTCHs
IX. Method of Payment
X. Monitoring
XI. Collection of Information Requirements
XII. Regulatory Impact Analysis
A. Introduction
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Impact on Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Anticipated Effects of Payment Rate Changes
1. Budgetary Impact
2. Impact on Providers
3. Calculation of Prospective Payments
4. Results
5. Effect on the Medicare Program
6. Effect on Medicare Beneficiaries
C. Impact of Policy Changes
1. Requirements for Satellite Facilities and Remote Locations of
Hospitals to Qualify as Long-Term Care Hospitals
2. Change in Policy on Interruption of a Stay in a LTCH

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3. Change in Procedure for Counting Covered and Noncovered Days
in a Stay that Crosses Two Consecutive Cost Reporting Periods
D. Executive Order 12866
Regulations Text
Addendum--Tables

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
COPS Medicare conditions of participation
DRGs Diagnosis-related groups
FY Federal fiscal year
HCRIS Hospital Cost Report Information System
HHA Home health agency
HIPAA Health Insurance Portability and Accountability Act, Pub. L.
104-191
IPPS Acute Care Hospital Inpatient Prospective Payment System
IRF Inpatient rehabilitation facility
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare provider analysis and review file
OSCAR Online Survey Certification and Reporting (System)
PPS Prospective Payment System
QIO Quality Improvement Organization (formerly Peer Review
organization (PRO))
SNF Skilled nursing facility
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248

I. Background

A. Legislative and Regulatory Authority

The Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA)
(Public Law 106-113) and the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA) (Public Law 106-554)
provide for payment for both the operating and capital-related costs of
hospital inpatient stays in long-term care hospitals (LTCHs) under
Medicare Part A based on prospectively set rates. The Medicare
prospective payment system (PPS) for LTCHs applies to hospitals
described in section 1886(d)(1)(B)(iv) of the Social Security Act (the
Act), effective for cost reporting periods beginning on or after
October 1, 2002.
Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ``a
hospital which has an average inpatient length of stay (as determined
by the Secretary) of greater than 25 days.'' Section
1886(d)(1)(B)(iv)(II) of the Act also provides an alternative
definition of LTCHs: specifically, a hospital that first received
payment under section 1886(d) of the Act in 1986 and has an average
inpatient length of stay (as determined by the Secretary) of greater
than 20 days and has 80 percent or more of its annual Medicare
inpatient discharges with a principal diagnosis that reflects a finding
of neoplastic disease in the 12-month cost reporting period ending in
FY 1997.
Section 123 of Public Law 106-113 requires the PPS for LTCHs to be
a per discharge system with a diagnosis-related group (DRG) based
patient classification system that reflects the differences in patient
resources and costs in LTCHs while maintaining budget neutrality.
Section 307(b)(1) of Public Law 106-554, among other things,
mandates that the Secretary shall examine, and may provide for,
adjustments to payments under the LTCH PPS, including adjustments to
DRG weights, area wage adjustments, geographic reclassification,
outliers, updates, and a disproportionate share adjustment.
In a Federal Register document issued on August 30, 2002 (67 FR
55954), we implemented the LTCH PPS authorized under Public Law 106-113
and Public Law 106-554. This system uses information from LTCH patient
records to classify patients into distinct long-term care diagnosis-
related groups (LTC-DRGs) based on clinical characteristics and
expected resource needs. Payments are calculated for each LTC-DRG and
provisions are made for appropriate payment adjustments. Payment rates
under the LTCH PPS are updated annually and published in the Federal
Register.
The LTCH PPS replaced the reasonable cost-based payment system
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),
Public Law 97-248, for payments for inpatient services provided by a
LTCH with a cost reporting period beginning on or after October 1,
2002. (The regulations implementing the TEFRA (reasonable cost-based)
payment provisions are located at 42 CFR part 413.) With the
implementation of the prospective payment system for acute care
hospitals authorized by the Social Security Amendments of 1983 (Public
Law 98-21), which added section 1886(d) to the Act, certain hospitals,
including LTCHs, were excluded from the PPS for acute care hospitals
and were paid their reasonable costs for inpatient services subject to
a per discharge limitation or target amount under the TEFRA system. For
each cost reporting period, a hospital-specific ceiling on payments was
determined by multiplying the hospital's updated target amount by the
number of total current year Medicare discharges. The August 30, 2002
final rule further details payment policy under the TEFRA system (67 FR
55954).
In the August 30, 2002 final rule, we presented an in-depth
discussion of the LTCH PPS, including the patient classification
system, relative weights, payment rates, additional payments, and the
budget neutrality requirements mandated by section 123 of Public Law
106-113. The same final rule that established regulations for the LTCH
PPS under 42 CFR part 412, subpart O, also contained provisions related
to covered inpatient services, limitation on charges to beneficiaries,
medical review requirements, furnishing of inpatient hospital services
directly or under arrangement, and reporting and recordkeeping
requirements.
We refer readers to the August 30, 2002 final (67 FR 55954) rule
for a comprehensive discussion of the research and data that supported
the establishment of the LTCH PPS.
On June 6, 2003, we published a final rule in the Federal Register
(68 FR 34122) that set forth the 2004 annual update of the payment
rates for the Medicare PPS for inpatient hospital services furnished by
LTCHs. It also changed the annual period for which the payment rates
are effective. The annual updated rates are now effective from July 1
to June 30 instead of from October 1 through September 30. We refer to
this time period as a ``long-term care hospital rate year'' (LTCH PPS
rate year). In addition, we changed the publication schedule for these
updates to allow for an effective date of July 1. The payment amounts
and factors used to determine the annual update of the Federal rates
are based on a LTCH PPS rate year. The annual update of the LTC-DRG
classifications and relative weights are linked to the annual
adjustments of the acute care hospital inpatient diagnosis-related
groups and are effective each October 1.

B. Criteria for Classification as a LTCH

1. Classification as a LTCH
Under the existing regulations at Sec. 412.23(e)(1) and (e)(2)(i),
which

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implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to be
paid under the LTCH PPS, a hospital must have a provider agreement with
Medicare and must have an average Medicare inpatient length of stay of
greater than 25 days. Alternatively, for cost reporting periods
beginning on or after August 5, 1997, a hospital that was first
excluded from the PPS in 1986, and can demonstrate that at least 80
percent of its annual Medicare inpatient discharges in the 12-month
cost reporting period ending in FY 1997 have a principal diagnosis that
reflects a finding of neoplastic disease must have an average inpatient
length of stay for all patients, including both Medicare and non-
Medicare inpatients, of greater than 20 days (Sec. 412.23(e)(2)(ii)).
Existing Sec. 412.23(e)(3) provides that the average Medicare
inpatient length of stay is determined based on all covered and
noncovered days of stay of Medicare patients as calculated by dividing
the total number of covered and noncovered days of stay of Medicare
inpatients (less leave or pass days) by the number of total Medicare
discharges for the hospital's most recent complete cost reporting
period. Fiscal intermediaries verify that LTCHs meet the average length
of stay requirements. We note that the inpatient days of a patient who
is admitted to a LTCH without any remaining Medicare days of coverage,
regardless of the fact that the patient is a Medicare beneficiary, will
not be included in the above calculation. Because Medicare would not be
paying for any of the patient's treatment, the patient is not a
``Medicare inpatient'' and data on the patient's stay would not be
included in the Medicare claims processing systems. In order for both
covered and noncovered days of a LTCH hospitalization to be included,
for purposes of the average length of stay calculation, a patient
admitted to the LTCH must have at least one remaining benefit day as
described in Sec. 409.61.
The fiscal intermediary's determination of whether or not a
hospital qualifies as an LTCH is based on the hospital's discharge data
from its most recent cost reporting period and is effective at the
start of the hospital's next cost reporting period (Sec. 412.22(d)).
If a hospital does not meet the length of stay requirement, the
hospital may provide the intermediary with data indicating a change in
the hospital's average length of stay by the same method for the period
of at least 5 months of the immediately preceding 6-month period (Sec.
412.23(e)(3)(ii)). (See 68 FR 45464, August 1, 2003.) Requirements for
hospitals seeking classification as LTCHs that have undergone a change
in ownership, as described in Sec. 489.18, are set forth in Sec.
412.23(e)(3)(iii).
LTCHs that exist as hospitals-within-hospitals or satellite
facilities of LTCHs must also meet the criteria set forth in Sec.
412.22(e) or Sec. 412.22(h), respectively, for the LTCH to be excluded
from the acute care hospital inpatient prospective payment system
(IPPS) and paid under the LTCH PPS.
2. Hospitals Excluded From the LTCH PPS
The following hospitals are paid under special payment provisions,
as described in Sec. 412.22(c) and, therefore, are not subject to the
LTCH PPS rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR Part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of Public Law
90-248 (42 U.S.C. 1395b-1) or section 222(a) of Public Law 92-603 (42
U.S.C. 1395b-1 (note)) (statewide all-payer systems, subject to the
rate-of-increase test at section 1814(b) of the Act).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.

C. Transition Period for Implementation of the LTCH PPS

In the August 30, 2002 final rule, we provided for a 5-year
transition period from reasonable cost-based reimbursement to fully
Federal prospective payment for LTCHs (67 FR 56038). During the 5-year
period, two payment percentages are to be used to determine a LTCH's
total payment under the PPS. The blend percentages are as follows:

------------------------------------------------------------------------
Reasonable
Prospective cost-based
Cost reporting periods beginning on or payment reimbursement
after federal rate rate
percentage percentage
------------------------------------------------------------------------
October 1, 2002......................... 20 80
October 1, 2003......................... 40 60
October 1, 2004......................... 60 40
October 1, 2005......................... 80 20
October 1, 2006......................... 100 0
------------------------------------------------------------------------

D. Limitation on Charges to Beneficiaries

In the August 30, 2002 final rule, we presented an in-depth
discussion of beneficiary liability under the LTCH prospective payment
system (67 FR 55974-55975). Under Sec. 412.507, as consistent with
other established hospital prospective payment systems, a LTCH may not
bill a Medicare beneficiary for more than the deductible and
coinsurance amounts as specified under Sec. Sec. 409.82, 409.83, and
409.87 and for items and services as specified under Sec. 489.30(a),
if the Medicare payment to the LTCH is the full LTC-DRG payment amount.
However, under the LTCH PPS, Medicare will only pay for days for which
the beneficiary has coverage until the short-stay outlier threshold is
exceeded. (See section V.C.4.b. of this preamble.) Therefore, if the
Medicare payment was for a short-stay outlier case (Sec. 412.529) that
was less than the full LTC-DRG payment amount because the beneficiary
had insufficient remaining Medicare days, the LTCH could also charge
the beneficiary for services delivered on those uncovered days (Sec.
412.507).
Since the origin of the Medicare system, the intent of our
regulations has been to set limits on beneficiary liability and to
clearly establish the circumstances under which the beneficiary would
be required to assume responsibility for payment, that is, upon
exhausting benefits described in 42 CFR part 409, subpart F. The
discussion in the August 30, 2002 final rule was not meant to establish
rates or payments for, or define, Medicare-eligible expenses. While we
regulate beneficiary liability for coinsurance and deductibles for
hospital stays that are covered by Medicare, payments from Medigap
insurers to providers for inpatient hospital coverage after Medicare
benefits are exhausted are not regulated by us. Furthermore,
regulations

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beginning at Sec. 403.200 and the 1991 National Association of
Insurance Commissioners (NAIC) Model Regulation for Medicare
Supplemental Insurance, which was incorporated by reference into
section 1882 of the Act, govern the relationship between Medigap
insurers and beneficiaries.

E. Health Insurance Portability and Accountability Act Compliance

We note that as of October 16, 2002, a LTCH that was required to
comply with the Administrative Simplification Standards under the
Health Insurance Portability and Accountability Act (HIPAA) (Pub. L.
104-191) and that had not obtained an extension in compliance with the
Administrative Compliance Act (Pub. L. 107-105) is obligated to comply
with the standards for submitting claim forms to the LTCH's Medicare
fiscal intermediary (45 CFR 162.1002 and 45 CFR 162.1102). Beginning
October 16, 2003, LTCHs that obtained an extension and that are
required to comply with the HIPAA Administrative Simplification
Standards must start submitting electronic claims in compliance with
the HIPAA regulations cited above, among others.

II. Publication of Proposed Rulemaking

On January 30, 2004, we published a proposed rule in the Federal
Register (69 FR 4754-4817) that set forth the proposed annual update of
the payment rates for the Medicare prospective payment system (PPS) for
inpatient hospital services provided by long-term care hospitals
(LTCHs) for the 2005 LTCH PPS rate year. (The annual update of the LTC-
DRG classifications and relative weights for FY 2005 remains linked to
the annual adjustments of the acute care hospital inpatient DRG system,
which will be published by August 1, and will be effective October 1,
2004.)
In the January 2004 LTCH PPS proposed rule, we discussed and
clarified existing policies regarding the classification of a satellite
facility, or a remote location, of a LTCH as an independent LTCH and
proposed new policies for certain satellite facilities and remote
locations. (See section V.C.8. of this preamble.) We also proposed to
revise the existing interrupted stay policy applicable under the LTCH
PPS. (See section V.C.4.c. of this preamble.)
We also proposed a threshold amount for outlier payments for the
2005 LTCH PPS rate year as discussed in section V.C.3.b. of this
preamble. We also proposed a change in the procedure for counting the
days in the inpatient average length of stay for hospitals to qualify
as LTCHs, as discussed in section V.C.7. of this preamble.
We received a total of 14 timely items of correspondence containing
multiple comments on the proposed rule. The major issues addressed by
the commenters included: Clarification of our policy regarding
satellite facilities and remote locations becoming independent LTCHS,
determining average length of stay based on the number of days of care
for only the patients that were discharged during the hospital's fiscal
year, and expanding the existing interrupted stay policy to include any
discharges up to and including 3 days and requiring the LTCH to pay for
services ``under arrangement'' during the interrupted stay.
Summaries of the public comments received and our responses to
those comments are described below under the appropriate subject
heading.

III. Summary of the Major Contents of This Final Rule

In this final rule, we set forth the annual update to the payment
rates for the Medicare 2005 LTCH PPS rate year and make other policy
changes. The following is a summary of the major areas that we are
addressing in this final rule:

A. Update Changes

In section IV. of this preamble, we discuss the annual
update of the LTC-DRG classifications and relative weights and specify
that they remain linked to the annual adjustments of the acute care
hospital inpatient DRG system, which are based on the annual revisions
to the International Classification of Diseases, Ninth Revision,
Clinical Modification (ICD-9-CM) codes effective each October 1.
In sections VI. through IX. of this preamble, we specify
the factors and adjustments used to determine the LTCH PPS rates that
are applicable to the 2005 LTCH PPS rate year, including revisions to
the wage index, the excluded hospital with capital market basket that
will be applied to the current standard Federal rate to determine the
prospective payment rates, the applicable adjustments to payments, the
outlier threshold, the short-stay outlier policy for certain LTCHs, the
transition period, and the budget neutrality factor.

B. Policy Changes

In section V.C.4.c. of this preamble, we discuss our
extension of the definition of an interruption of a stay to include an
interruption in which the patient is discharged from the LTCH, and
returns to the LTCH within 3 days of the original discharge.
Under section V.C.7. of the preamble to this final rule,
we specify the procedure for calculating a hospital's inpatient average
length of stay for purposes of classification as a LTCH when covered
and noncovered days of the stay involve admission in one cost reporting
period and discharge in another cost reporting period.
In section V.C.8. of this preamble, we discuss our
clarification of the procedures under which a satellite facility or a
remote location of a hospital must meet the statutory and regulatory
requirements to qualify as a distinct LTCH. We also provide for a
clarification of the regulation text that incorporates procedures that
are already established. That is, in our discussion, we are putting
forth a reminder that even though the regulations governing provider-
based entities did not specifically address LTCHs at the time, these
regulations have always been applicable to these providers.

C. Monitoring

In section X. of this preamble, we discuss our continuing
monitoring efforts to evaluate the LTCH PPS.

D. Impact

In section XII. of this preamble, we set forth an analysis of the
impact of the policy and payment rate changes in this final rule on
Medicare expenditures and on Medicare-participating LTCHs and Medicare
beneficiaries.

IV. Long-Term Care Diagnosis-Related Group (LTC-DRG) Classifications
and Relative Weights

A. Background

Section 123 of Public Law 106-113 specifically requires that the
PPS for LTCHs be a per discharge system with a DRG-based patient
classification system reflecting the differences in patient resources
and costs in LTCHs while maintaining budget neutrality. Section
307(b)(1) of Public Law 106-554 modified the requirements of section
123 of Public Law 106-113 by specifically requiring that the Secretary
examine ``the feasibility and the impact of basing payment under such a
system [the LTCH PPS] on the use of existing (or refined) hospital DRGs
that have been modified to account for different resource use of LTCH
patients as well as the use of the most recently available hospital
discharge data.''
In accordance with section 307(b)(1) of Public Law 106-554 and
Sec. 412.515 of our existing regulations, the LTCH PPS uses
information from LTCH patient

[[Page 25678]]

records to classify patient cases into distinct LTC-DRGs based on
clinical characteristics and expected resource needs. The LTC-DRGs used
as the patient classification component of the LTCH PPS correspond to
the hospital inpatient DRGs in the IPPS. We apply weights to the
existing hospital inpatient DRGs to account for the difference in
resource use by patients exhibiting the case complexity and multiple
medical problems characteristic of LTCHs.
In a departure from the IPPS, we use low volume LTC-DRGs (less than
25 LTCH cases) in determining the LTC-DRG weights, since LTCHs do not
typically treat the full range of diagnoses as do acute care hospitals.
In order to deal with the large number of low volume DRGs (all DRGs
with fewer than 25 cases), we group low volume DRGs into 5 quintiles
based on average charge per discharge. (A listing of the composition of
low volume quintiles appears in the August 30, 2002 LTCH PPS final rule
at 67 FR 55986.) We also take into account adjustments to payments for
cases in which the stay at the LTCH is five-sixths of the geometric
average length of stay and classify these cases as short-stay outlier
cases. (A detailed discussion of the application of the Lewin Group
model that was used to develop the LTC-DRGs appears in the August 30,
2002 LTCH PPS final rule at 67 FR 55978.)

B. Patient Classifications Into DRGs

Generally, under the LTCH PPS, Medicare payment is made at a
predetermined specific rate for each discharge; that payment varies by
the LTC-DRG to which a beneficiary's stay is assigned. Cases are
classified into LTC-DRGs for payment based on the following six data
elements:

(1) Principal diagnosis.
(2) Up to eight additional diagnoses.
(3) Up to six procedures performed.
(4) Age.
(5) Sex.
(6) Discharge status of the patient.

Upon the discharge of the patient from a LTCH, the LTCH must assign
appropriate diagnosis and procedure codes from the International
Classification of Diseases, Ninth Revision, Clinical Modification (ICD-
9-CM). As of October 16, 2002, a LTCH that was required to comply with
the HIPAA Administrative Simplification Standards and that had not
obtained an extension in compliance with the Administrative Compliance
Act (Pub. L. 107-105) is obligated to comply with the standards at 45
CFR 162.1002 and 45 CFR 162.1102. Completed claim forms are to be
submitted to the LTCH's Medicare fiscal intermediary.
Medicare fiscal intermediaries enter the clinical and demographic
information into their claims processing systems and subject this
information to a series of automated screening processes called the
Medicare Code Editor (MCE). These screens are designed to identify
cases that require further review before assignment into a DRG can be
made. During this process, the following types of cases are selected
for further development:
Cases that are improperly coded. (For example, diagnoses
are shown that are inappropriate, given the sex of the patient. Code
68.6, Radical abdominal hysterectomy, would be an inappropriate code
for a male.)
Cases including surgical procedures not covered under
Medicare. (For example, organ transplant in a nonapproved transplant
center.)
Cases requiring more information. (For example, ICD-9-CM
codes are required to be entered at their highest level of specificity.
There are valid 3-digit, 4-digit, and 5-digit codes. That is, code
136.3, Pneumocystosis, contains all appropriate digits, but if it is
reported with either fewer or more than 4 digits, the claim will be
rejected by the MCE as invalid.)
Cases with principal diagnoses that do not usually justify
admission to the hospital. (For example, code 437.9, Unspecified
cerebrovascular disease. While this code is valid according to the ICD-
9-CM coding scheme, a more precise code should be used for the
principal diagnosis.)
After screening through the MCE, each claim will be classified into
the appropriate LTC-DRG by the Medicare LTCH GROUPER. The LTCH GROUPER
is specialized computer software based on the same GROUPER used by the
IPPS. The GROUPER software was developed as a means of classifying each
case into a DRG on the basis of diagnosis and procedure codes and other
demographic information (age, sex, and discharge status). Following the
LTC-DRG assignment, the Medicare fiscal intermediary determines the
prospective payment by using the Medicare PRICER program, which
accounts for hospital-specific adjustments. As provided for under the
IPPS, we provide an opportunity for the LTCH to review the LTC-DRG
assignments made by the fiscal intermediary and to submit additional
information within a specified timeframe (Sec. 412.513(c)).
The GROUPER is used both to classify past cases in order to measure
relative hospital resource consumption to establish the DRG weights and
to classify current cases for purposes of determining payment. The
records for all Medicare hospital inpatient discharges are maintained
in the MedPAR file. The data in this file are used to evaluate possible
DRG classification changes and to recalibrate the DRG weights during
our annual update. DRG weights are based on data for the population of
LTCH discharges, reflecting the fact that LTCH patients represent a
different patient-mix than patients in short-term acute care hospitals.

C. Organization of DRGs

The DRGs are organized into 25 Major Diagnostic Categories (MDCs),
most of which are based on a particular organ system of the body; the
remainder involve multiple organ systems (such as MDC 22, Burns).
Accordingly, the principal diagnosis determines MDC assignment. Within
most MDCs, cases are then divided into surgical DRGs and medical DRGs.
Surgical DRGs are assigned based on a surgical hierarchy that orders
operating room (O.R.) procedures or groups of O.R. procedures by
resource intensity. The GROUPER does not recognize all ICD-9-CM
procedure codes as procedures that affect DRG assignment, that is,
procedures which are not surgical (for example, EKG), or minor surgical
procedures (for example, 86.11, Biopsy of skin and subcutaneous
tissue).
The medical DRGs are generally differentiated on the basis of
diagnosis. Both medical and surgical DRGs may be further differentiated
based on age, sex, discharge status, and presence or absence of
complications or comorbidities (CC). We note that CCs are defined by
certain secondary diagnoses not related to, or not inherently a part
of, the disease process identified by the principal diagnosis. (For
example, the GROUPER would not recognize a code from the 800.0x series,
Skull fracture, as a CC when combined with principal diagnosis 850.4,
Concussion with prolonged loss of consciousness, without return to
preexisting conscious level.) In addition, we note that the presence of
additional diagnoses does not automatically generate a CC, as not all
DRGs recognize a comorbid or complicating condition in their
definition. (For example, DRG 466, Aftercare without History of
Malignancy as Secondary Diagnosis, is based solely on the principal
diagnosis, without consideration of additional diagnoses for DRG
determination.)
In its June 2000 Report to Congress, MedPAC recommended that the

[[Page 25679]]

Secretary ``* * * improve the hospital inpatient prospective payment
system by adopting, as soon as practicable, diagnosis-related group
refinements that more fully capture differences in severity of illness
among patients.'' (Recommendation 3A, p. 63). We have determined it is
not practical at this time to develop a refinement to inpatient
hospital DRGs based on severity due to time and resource requirements.
However, this does not preclude us from development of a severity-
adjusted DRG refinement in the future. That is, a refinement to the
list of comorbidities and complications could be incorporated into the
existing DRG structure. It is also possible a more comprehensive
severity adjusted structure may be created if a new code set is
adopted. That is, if ICD-9-CM is replaced by ICD-10-CM (for diagnostic
coding) and ICD-10-PCS (for procedure coding) or by other code sets, a
severity concept may be built into the resulting DRG assignments. Of
course any change to the code set would be adopted through the process
established in the HIPAA Administrative Simplification Standards
provisions.

D. Update of LTC-DRGs

For FY 2004, the LTC-DRG patient classification system was based on
LTCH data from the FY 2002 MedPAR file, which contained hospital bills
data from the December 2002 update. The patient classification system
consisted of 518 DRGs that formed the basis of the FY 2004 LTCH PPS
GROUPER. The 518 LTC-DRGs included two ``error DRGs.'' As in the IPPS,
we included two error DRGs in which cases that cannot be assigned to
valid DRGs will be grouped. These two error DRGs are DRG 469 (Principal
Diagnosis Invalid as a Discharge Diagnosis) and DRG 470 (Ungroupable).
(See the August 1, 2001, Medicare Program final rule, Changes to the
Hospital Inpatient Prospective Payment Systems and Rates and Costs of
Graduate Medical Education; Fiscal Year 2002 Rates (66 FR 40062).) The
other 516 LTC-DRGs are the same DRGs used in the IPPS GROUPER for FY
2004 (Version 21.0).
In the health care industry, annual changes to the ICD-9-CM codes
are effective for discharges occurring on or after October 1 each year.
Thus, the manual and electronic versions of the GROUPER software, which
are based on the ICD-9-CM codes, are also revised annually and
effective for discharges occurring on or after October 1 each year. As
discussed earlier, the patient classification system for the LTCH PPS
(LTC-DRGs) is based on the IPPS patient classification system (CMS-
DRGs), which is updated annually and effective for discharges occurring
on or after October 1 through September 30 each year. The updated DRGs
and GROUPER software are based on the latest revision to the ICD-9-CM
codes, which are published annually in the IPPS proposed rule and final
rule. The new or revised ICD-9-CM codes are not used by the industry
for either the IPPS or the LTCH PPS until the beginning of the next
Federal fiscal year (effective for discharges occurring on or after
October 1 through September 30). (The use of the ICD-9-CM codes in this
manner is consistent with current usage and the HIPAA regulations.)
October 1 is also when the changes to the CMS-DRGs and the next version
of the GROUPER software becomes effective.
As indicated in the June 6, 2003 LTCH PPS and the August 1, 2003
IPPS final rules (68 FR 34122 and 68 FR 45376, respectively), we make
the annual update to the LTCH PPS effective from July 1 through June 30
each year. As a result, the LTCH PPS uses two GROUPERS during the
course of a 12-month period: One GROUPER for 3 months (from July 1
through September 30); and an updated GROUPER for 9 months (from
October 1 through June 30). The need to use two GROUPERs is based upon
the October 1 effective date of the updated ICD-9-CM coding system. As
previously discussed, new ICD-9-CM codes may result in changes to the
structure of the DRGs. In order for the industry to be on the same
schedule (for both the IPPS and the LTCH PPS) for the use of the most
current ICD-9-CM codes, it is necessary for us to apply two GROUPER
programs to the LTCH PPS. LTCHs will continue to code diagnosis and
procedures using the most current version of the ICD-9-CM coding
system.
Currently, for Federal FY 2004, we are using Version 21.0 of the
GROUPER software for both the IPPS and the LTCH PPS. Discharges
beginning on October 1, 2003 and before October 1, 2004 (Federal FY
2004) are using Version 21.0 of the GROUPER software for both the IPPS
and the LTCH PPS. Thus, changes to the CMS-DRGs (the DRGs on which the
LTC-DRGs are based) and their relative weights, as well as the LTC-DRGs
and their relative weights, that will be effective for October 1, 2004
through September 30, 2005, will be presented in the FY 2005 IPPS
proposed rule that will be published in the Federal Register in the
spring of 2004 and finalized in a final rule to be published by August
1, 2004. Accordingly, we will notify LTCHs of any revised LTC-DRG
relative weights based on the final DRGs and the applicable GROUPER
version for the IPPS that will be effective October 1, 2004.

E. ICD-9-CM Coding System

1. Uniform Hospital Discharge Data Set (UHDDS) Definitions
Because the assignment of a case to a particular LTC-DRG will help
determine the amount that will be paid for the case, it is important
that the coding is accurate. Classifications and terminology used in
the LTCH PPS are consistent with the ICD-9-CM and the UHDDS, as
recommended to the Secretary by the National Committee on Vital and
Health Statistics (``Uniform Hospital Discharge Data: Minimum Data Set,
National Center for Health Statistics, April 1980'') and as revised in
1984 by the Health Information Policy Council (HIPC) of the U.S.
Department of Health and Human Services.
We point out that the ICD-9-CM coding terminology and the
definitions of principal and other diagnoses of the UHDDS are
consistent with the requirements of the HIPAA Administrative
Simplification Act of 1996 (45 CFR part 162). Furthermore, the UHDDS
has been used as a standard for the development of policies and
programs related to hospital discharge statistics by both governmental
and nongovernmental sectors for over 30 years. In addition, the
following definitions (as described in the 1984 Revision of the UHDDS,
approved by the Secretary of Health and Human Services for use starting
January 1986) are requirements of the ICD-9-CM coding system, and have
been used as a standard for the development of the CMS-DRGs:
Diagnoses include all diagnoses that affect the current
hospital stay.
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.
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 that have no bearing on the current
hospital stay are excluded.
All procedures performed will be reported. This includes
those that are surgical in nature, carry a procedural risk, carry an
anesthetic risk, or require specialized training.
We provide LTCHs with a 60-day window after the date of the notice
of

[[Page 25680]]

the initial LTC-DRG assignment to request review of that assignment.
Additional information may be provided by the LTCH to the fiscal
intermediary as part of that review.
2. Maintenance of the ICD-9-CM Coding System
The ICD-9-CM Coordination and Maintenance (C&M) Committee is a
Federal interdepartmental committee, co-chaired by the National Center
for Health Statistics (NCHS) and CMS, that is charged with maintaining
and updating the ICD-9-CM system. The C&M Committee is jointly
responsible for approving coding changes, and developing errata,
addenda, and other modifications to the ICD-9-CM to reflect newly
developed procedures and technologies and newly identified diseases.
The C&M Committee is also responsible for promoting the use of Federal
and non-Federal educational programs and other communication techniques
with a view toward standardizing coding applications and upgrading the
quality of the classification system.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
CMS has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The C&M Committee encourages participation by health-related
organizations in the above process and holds public meetings for
discussion of educational issues and proposed coding changes twice a
year at the CMS Central Office located in Baltimore, Maryland. The
agenda and dates of the meetings can be accessed on the CMS Web site
at: http://www.cms.gov/paymentsystems/icd9.

Section 503(a) of Public Law 108-173 includes a requirement for
updating ICD-9-CM codes twice a year instead of the current process of
annual updates on October 1 of each year. These requirements are
included as part of the amendments to the Act relating to recognition
of new medical technology under the IPPS. Section 503(a) amended
section 1886(d)(5)(K) of the Act by adding a new clause (vii) which
states that ``Under the mechanism under this subparagraph, the
Secretary shall provide for the addition of new diagnosis and procedure
codes in April 1 of each year, but the addition of such codes shall not
require the Secretary to adjust the payment (or diagnosis-related group
classification) * * * until the fiscal year that begins after such
date.'' Because this new statutory requirement would have a significant
impact on health care providers, coding staff, publishers, system
maintainers, software systems, among others, we are soliciting comments
on our proposed provisions. The description of these proposed
provisions will be published in the Federal Register in the FY 2005
IPPS proposed rule.
All changes to the ICD-9-CM coding system affecting DRG assignment
are addressed annually in the IPPS proposed and final rules. Because
the DRG-based patient classification system for the LTCH PPS is based
on the IPPS DRGs, these changes also affect the LTCH PPS LTC-DRG
patient classification system.
As discussed above, the ICD-9-CM coding changes that have been
adopted by the C&M Committee become effective at the beginning of each
Federal fiscal year, October 1. Regardless of the annual update of the
LTCH PPS on July 1 of each year, coders will use the most current
updated ICD-9-CM coding book, which is effective from October 1 through
September 30 of each year. This means that coders and LTCHs that use
the updated ICD-9-CM coding system will be on the same schedule
(effective October 1) as the rest of the health care industry. The
newest version of ICD-9-CM is not available for use until October 1 of
each year, which is 5 months after the date that we publish the LTCH
annual payment rate update final rule. The new codes on which the LTC-
DRGs are based will go into effect and be available for use for
discharges occurring on or after October 1 through September 30 of each
year. This annual schedule of the revision to the ICD-9-CM coding
system and the change of the ICD-9-CM coding books or electronic coding
programs has been in effect since the adoption of Revision 9 of the ICD
in 1979.
Of particular note to LTCHs are the invalid diagnosis codes (Table
6C) and the invalid procedure codes (Table 6D) located in the annual
proposed and final rules for the IPPS. Claims with invalid codes are
not processed by the Medicare claims processing system.
3. Coding Rules and Use of ICD-9-CM Codes in LTCHs
We emphasize the need for proper coding by LTCHs. Inappropriate
coding of cases can adversely affect the uniformity of cases in each
LTC-DRG and produce inappropriate weighting factors at recalibration.
We continue to urge LTCHs to focus on improved coding practices.
Because of concerns raised by LTCHs concerning correct coding, we have
asked the American Hospital Association (AHA) to provide additional
clarification or instruction on proper coding in the LTCH setting. The
AHA will provide this instruction via their established process of
addressing questions through their publication ``Coding Clinic for ICD-
9-CM.'' Written questions or requests for clarification may be
addressed to the Central Office on ICD-9-CM, American Hospital
Association, One North Franklin, Chicago, IL 60606. A form for the
question(s) is available to be downloaded and mailed on AHA's Web site
at: http://www.ahacentraloffice.org. In addition, current coding guidelines

are available at the National Center for Health Statistics (NCHS) Web
site: http://www.cdc.gov/nchs.icd9.htm.

In conjunction with the cooperating parties (AHA, the American
Health Information Management Association (AHIMA), and NCHS), we
reviewed actual medical records and are concerned about the quality of
the documentation under the LTCH PPS, as was the case at the beginning
of the IPPS. We fully believe that, with experience, the quality of the
documentation and coding will improve, just as it did for the IPPS. As
noted above, the cooperating parties have plans to assist their members
with improvement in documentation and coding issues for the LTCHs
through specific questions and coding guidelines. The importance of
good documentation is emphasized in the revised ICD-9-CM Official
Guidelines for Coding and Reporting (October 1, 2002): ``A joint effort
between the attending physician and coder is essential to achieve
complete and accurate documentation, code assignment, and reporting of
diagnoses and procedures. The importance of consistent, complete
documentation in the medical record cannot be overemphasized. Without
such documentation, the application of all coding guidelines is a
difficult, if not impossible, task.'' (Coding Clinic for ICD-9-CM,
Fourth Quarter 2002, page 115)
To improve medical record documentation, LTCHs should be aware that
if the patient is being admitted for continuation of treatment of an
acute or chronic condition, guidelines at Section I.B.10 of the Coding
Clinic for ICD-9-CM, Fourth Quarter 2002 (page 129) are applicable
concerning selection of principal diagnosis. To clarify coding advice
issued in the August 30, 2002 final rule (67 FR 55979-55981), we would
like to point out that at Guideline I.B.12, Late Effects, a late effect
is considered to be the residual effect (condition produced) after the
acute phase of an illness or injury has

[[Page 25681]]

terminated (Coding Clinic for ICD-9-CM, Fourth Quarter 2002, page 129).
Regarding whether a LTCH should report the ICD-9-CM code(s) for an
unresolved acute condition instead of the code(s) for late effect of
rehabilitation, we emphasize that each case must be evaluated on its
unique circumstances and coded appropriately. Depending on the
documentation in the medical record, either a code reflecting the acute
condition or rehabilitation could be appropriate in a LTCH.
Since implementation of the LTCH PPS, our Medicare fiscal
intermediaries have been conducting training and providing assistance
to LTCHs in correct coding. We have also issued manuals containing
procedures as well as coding instructions to LTCHs and fiscal
intermediaries. We will continue to conduct such training and provide
guidance on an as-needed basis. We also refer readers to the detailed
discussion on correct coding practices in the August 30, 2002 LTCH PPS
final rule (67 FR 55979-55981). Additional coding instructions and
examples will be published in Coding Clinic for ICD-9-CM.

F. Method for Updating the LTC-DRG Relative Weights

As discussed in the June 6, 2003 LTCH PPS final rule (68 FR 34131),
under the LTCH PPS, each LTCH will receive a payment that represents an
appropriate amount for the efficient delivery of care to Medicare
patients. The system must be able to account adequately for each LTCH's
case-mix in order to ensure both fair distribution of Medicare payments
and access to adequate care for those Medicare patients whose care is
more costly. Therefore, in accordance with Sec. 412.523(c), we adjust
the standard Federal PPS rate by the LTC-DRG relative weights in
determining payment to LTCHs for each case.
Under this payment system, relative weights for each LTC-DRG are a
primary element used to account for the variations in cost per
discharge and resource utilization among the payment groups (Sec.
412.515). To ensure that Medicare patients who are classified to each
LTC-DRG have access to an appropriate level of services and to
encourage efficiency, we calculate a relative weight for each LTC-DRG
that represents the resources needed by an average inpatient LTCH case
in that LTC-DRG. For example, cases in a LTC-DRG with a relative weight
of 2 will, on average, cost twice as much as cases in a LTC-DRG with a
weight of 1.
As we discussed in the August 1, 2003 IPPS final rule (68 FR 45374-
45384), the LTC-DRG relative weights effective under the LTCH PPS for
Federal FY 2004 were calculated using the December 2002 update of FY
2002 MedPAR data and Version 21.0 of the CMS GROUPER software. We use
total days and total charges in the calculation of the LTC-DRG relative
weights.
By nature, LTCHs often specialize in certain areas, such as
ventilator-dependent patients and rehabilitation and wound care. Some
case types (DRGs) may be treated, to a large extent, in hospitals that
have, from a perspective of charges, relatively high (or low) charges.
Such distribution of cases with relatively high (or low) charges in
specific LTC-DRGs has the potential to inappropriately distort the
measure of average charges. To account for the fact that cases may not
be randomly distributed across LTCHs, we use a hospital-specific
relative value method to calculate relative weights. We believe this
method removes this hospital-specific source of bias in measuring
average charges. Specifically, we reduce the impact of the variation in
charges across providers on any particular LTC-DRG relative weight by
converting each LTCH's charge for a case to a relative value based on
that LTCH's average charge. (See the August 1, 2003 IPPS final rule (68
FR 45376) for further information on the hospital-specific relative
value methodology.)
In order to account for LTC-DRGs with low volume (that is, with
fewer than 25 LTCH cases), we grouped those low volume LTC-DRGs into
one of five categories (quintiles) based on average charges, for the
purposes of determining relative weights. For FY 2004 based on the FY
2002 MedPAR data, we identified 173 LTC-DRGs that contained between 1
and 24 cases. This list of low volume LTC-DRGs was then divided into
one of the five low volume quintiles, each containing a minimum of 34
LTC-DRGs (173/5 = 34 with 1 LTC-DRG as a remainder). Each of the low
volume LTC-DRGs grouped to a specific quintile received the same
relative weight and average length of stay using the formula applied to
the regular LTC-DRGs (25 or more cases), as described below. (See the
August 1, 2003 final rule (68 FR 45376-45380) for further explanation
of the development and composition of each of the five low volume
quintiles for FY 2004.)
After grouping the cases in the appropriate LTC-DRG, we calculated
the relative weights by first removing statistical outliers and cases
with a length of stay of 7 days or less. Next, we adjusted the number
of cases in each LTC-DRG for the effect of short-stay outlier cases
under Sec. 412.529. The short-stay adjusted discharges and
corresponding charges were used to calculate ``relative adjusted
weights'' in each LTC-DRG using the hospital-specific relative value
method described above. (See the August 1, 2003 final rule (68 FR
45376-45385) for further details on the steps for calculating the LTC-
DRG relative weights.)
We also adjusted the LTC-DRG relative weights to account for
nonmonotonically increasing relative weights. That is, we made an
adjustment if cases classified to the LTC-DRG ``with comorbidities
(CCs)'' of a ``with CC''/``without CC'' pair had a lower average charge
than the corresponding LTC-DRG ``without CCs'' by assigning the same
weight to both LTC-DRGs in the ``with CC''/``without CC'' pair. (See
August 1, 2003 final rule, 68 FR 45381-45382.) In addition, of the 518
LTC-DRGs in the LTCH PPS for FY 2004, based on the FY 2002 MedPAR data,
we identified 167 LTC-DRGs for which there were no LTCH cases in the
database. That is, no patients who would have been classified to those
DRGs were treated in LTCHs during FY 2002 and, therefore, no charge
data were reported for those DRGs. Thus, in the process of determining
the relative weights of LTC-DRGs, we were unable to determine weights
for these 167 LTC-DRGs using the method described above. However, since
patients with a number of the diagnoses under these LTC-DRGs may be
treated at LTCHs beginning in FY 2004, we assigned relative weights to
each of the 167 ``no volume'' LTC-DRGs based on clinical similarity and
relative costliness to one of the remaining 351 (518-167 = 351) LTC-
DRGs for which we were able to determine relative weights, based on the
FY 2002 claims data. (A list of the no-volume LTC-DRGs and further
explanation of their relative weight assignment can be found in the
August 1, 2003 IPPS final rule (68 FR 45374-45385).)
Furthermore, for FY 2004, we established LTC-DRG relative weights
of 0.0000 for heart, kidney, liver, lung, pancreas, and simultaneous
pancreas/kidney transplants (LTC-DRGs 103, 302, 480, 495, 512 and 513,
respectively) because Medicare will only cover these procedures if they
are performed at a hospital that has been certified for the specific
procedures by Medicare and presently no LTCH has been so certified. If
in the future, however, a LTCH applies for certification as a Medicare-
approved transplant center, we believe that the application and
approval procedure would allow sufficient time for us to propose
appropriate weights for the LTC-DRGs affected. At the

[[Page 25682]]

present time, though, we included these six transplant LTC-DRGs in the
GROUPER program for administrative purposes. As the LTCH PPS uses the
same GROUPER program for LTCHs as is used under the IPPS, removing
these DRGs would be administratively burdensome.
As we stated in the August 1, 2003 IPPS final rule, we will
continue to use the same LTC-DRGs and relative weights for FY 2004
until October 1, 2004. Accordingly, Table 3 in the Addendum to this
final rule lists the LTC-DRGs and their respective relative weights and
arithmetic mean length of stay that we will continue to use for the
period of July 1, 2004 through September 30, 2004. (This table is the
same as Table 3 of the Addendum to the August 1, 2003 IPPS final rule
(68 FR 45650-45658), except that it includes the five-sixth of the
average length of stay for short-stay outliers under Sec. 412.529.) As
we noted earlier, the final DRGs and GROUPER for FY 2005 that will be
used for the IPPS and the LTCH PPS, effective October 1, 2004, will be
presented in the IPPS FY 2005 proposed and final rule in the Federal
Register.
Accordingly, we will notify LTCHs of the revised LTC-DRG relative
weights for use in determining payments for discharges occurring
between October 1, 2004 and September 30, 2005, based on the final DRGs
and the applicable GROUPER version that will be published in the IPPS
rule by August 1, 2004.

V. Changes to the LTCH PPS Rates and Changes in Policy for the 2005
LTCH PPS Rate Year

A. Overview of the Development of the Payment Rates

The LTCH PPS was effective for a LTCH's first cost reporting period
beginning on or after October 1, 2002. Effective with that cost
reporting period, LTCHs are paid, during a 5-year transition period, on
the basis of an increasing proportion of the LTCH PPS Federal rate and
a decreasing proportion of a hospital's payment under reasonable cost-
based payment system, unless the hospital makes a one-time election to
receive payment based on 100 percent of the Federal rate (see Sec.
412.533). New LTCHs (as defined at Sec. 412.23(e)(4)) are paid based
on 100 percent of the Federal rate, with no phase-in transition
payments.
The basic methodology for determining LTCH PPS Federal prospective
payment rates is set forth in the regulations at Sec. Sec. 412.515
through 412.532. Below we discuss the factors used to update the LTCH
PPS standard Federal rate for the 2005 LTCH PPS rate year that will be
effective for LTCHs discharges occurring on or after July 1, 2004
through June 30, 2005.
When we implemented the LTCH PPS in the August 30, 2002 final rule
(67 FR 56029-56031), we computed the LTCH PPS standard Federal payment
rate for FY 2003 by updating the best available (FY 1998 or FY 1999)
Medicare inpatient operating and capital costs per case data, using the
excluded hospital market basket.
Section 123(a)(1) of Public Law 106-113 requires that the PPS
developed for LTCHs be budget neutral. Therefore, in calculating the
standard Federal rate under Sec. 412.523(d)(2), we set total estimated
LTCH PPS payments equal to estimated payments that would have been made
under the reasonable cost-based payment methodology had the PPS for
LTCHs not been implemented. Section 307(a) of Public Law 106-554
specified that the increases to the hospital-specific target amounts
and cap on the target amounts for LTCHs for FY 2002 provided for by
section 307(a)(1) of Public Law 106-554 shall not be taken into account
in the development and implementation of the LTCH PPS. Furthermore, as
specified at Sec. 412.523(d)(1), the standard Federal rate is reduced
by an adjustment factor to account for the estimated proportion of
outlier payments under the LTCH PPS to total LTCH PPS payments (8
percent). For further details on the development of the FY 2003
standard Federal rate, see the August 30, 2002 final rule (67 FR 56027-
56037) and for the 2004 LTCH PPS rate year rate, see the June 6, 2003
final rule (68 FR 34122-34190). Under the existing regulations at Sec.
412.523(c)(3)(ii), we update the standard Federal rate annually to
adjust for the most recent estimate of the projected increases in
prices for LTCH inpatient hospital services.

B. Update to the Standard Federal Rate for the 2005 LTCH PPS Rate Year

As established in the June 6, 2003 final rule (68 FR 34122), based
on the most recent estimate of the excluded hospital with capital
market basket, adjusted to account for the change in the LTCH PPS rate
year update cycle, the LTCH PPS standard Federal rate effective from
July 1, 2003 through June 30, 2004 (the 2004 LTCH PPS rate year) is
$35,726.18.
In the discussion that follows, we explain how we developed the
standard Federal rate for the 2005 LTCH PPS rate year. The standard
Federal rate for the 2005 LTCH PPS rate year is calculated based on the
update factor of 1.031. Thus, the standard Federal rate for the 2005
LTCH PPS rate year will increase 3.1 percent compared to the 2004 LTCH
PPS rate year standard Federal rate.
1. Standard Federal Rate Update
Under Sec. 412.523, the annual update to the LTCH PPS standard
Federal rate must be equal to the percentage change in the excluded
hospital with capital market basket (described in further detail
below). As we discussed in the August 30, 2002 final rule (67 FR
56087), in the future we may propose to develop a framework to update
payments to LTCHs that would account for other appropriate factors that
affect the efficient delivery of services and care provided to Medicare
patients. As we discussed in the January 30, 2004 proposed rule (69 FR
4762), because the LTCH PPS has only been implemented for less than 2
years (that is, for cost reporting periods beginning on or after
October 1, 2002), we have not yet collected sufficient data to allow
for the analysis and development of an update framework under the LTCH
PPS. Therefore, we are not addressing an update framework for the 2005
LTCH PPS rate year in this final rule. However, we noted that a
conceptual basis for the proposal of developing an update framework in
the future can be found in Appendix B of the August 30, 2002 final rule
(67 FR 56086-56090).
a. Description of the market basket for LTCHs for the 2005 LTCH PPS
rate year. A market basket has historically been used in the Medicare
program to account for price increases of the services furnished by
providers. The market basket used for the LTCH PPS includes both
operating and capital-related costs of LTCHs because the LTCH PPS uses
a single payment rate for both operating and capital-related costs. The
development of the LTCH PPS standard Federal rate is discussed in
further detail in the August 30, 2002 final rule (67 FR 56027-56037).
Under the reasonable cost-based payment system, the excluded
hospital market basket was used to update the hospital-specific limits
on payment for operating costs of LTCHs. Currently, the excluded
hospital market basket is based on operating costs from cost report
data from FY 1997 and includes data from Medicare-participating long-
term care, rehabilitation, psychiatric, cancer, and children's
hospitals. Since LTCHs' costs are included in the excluded hospital
market basket, this market basket index, in part, also reflects the
costs of LTCHs. However, in order to capture the total costs (operating
and capital-related) of LTCHs, we added a capital component

[[Page 25683]]

to the excluded hospital market basket for use under the LTCH PPS. We
refer to this index as the excluded hospital with capital market
basket.
As we discussed in the August 30, 2002 final rule (67 FR 56016 and
56086), beginning with the implementation of the LTCH PPS in FY 2003,
the excluded hospital with capital market basket, based on FY 1992
Medicare cost report data, has been used for updating payments to
LTCHs. In the June 6, 2003 final rule (68 FR 34137), we revised and
rebased the excluded hospital with capital market basket, using more
recent data, that is, using FY 1997 base year data beginning with the
2004 LTCH PPS rate year. (For further details on the development of the
FY 1997-based LTCH PPS market basket, see the June 6, 2003 final rule
(68 FR 34134-34137)).
In the August 30, 2002 LTCH PPS final rule (67 FR 56016 and 56085-
56086), we discussed why we believe the excluded hospital with capital
market basket provides a reasonable measure of the price changes facing
LTCHs. However, as we discussed in the June 6, 2003 final rule (68 FR
34137), we have been researching the feasibility of developing a market
basket specific to LTCH services. This research has included 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 LTCHs. Based on this research, we did not
develop a market basket specific to LTCH services.
As we also discussed in the June 6, 2003 final rule (68 FR 34137),
our analysis of the Medicare cost reports indicates that the
distribution of costs among major cost report categories (wages,
pharmaceuticals, capital) for LTCHs is not substantially different from
the 1997-based excluded hospital with capital market basket. Data on
other major cost categories (benefits, blood, contract labor) that we
would like to analyze were excluded by many LTCHs in their Medicare
cost reports. An analysis based on only the data available to us for
these cost categories presented a potential problem since no other
major cost category weight would be based on LTCH data.
Furthermore, as we also discussed in that same final rule (68 FR
34137), we conducted a sensitivity analysis of annual percent changes
in the market basket when the weights for wages, pharmaceuticals, and
capital in LTCHs were substituted into the excluded hospital with
capital market basket. Other cost categories were recalibrated using
ratios available from the IPPS market basket. On average between FY
1995 and FY 2002, the excluded hospital with capital market basket
shows increases at nearly the same average annual rate (2.9 percent) as
the market basket with LTCH weights for wages, pharmaceuticals, and
capital (2.8 percent). This difference is less than the 0.25 percentage
point criterion that determines whether a forecast error adjustment is
warranted under the IPPS update framework.
As we discussed in the January 30, 2004 proposed rule (69 FR 4763),
we continue to believe that an excluded hospital with capital market
basket adequately reflects the price changes facing LTCHs. We continue
to solicit comments about issues particular to LTCHs that should be
considered in relation to the FY 1997-based excluded hospital with
capital market basket and to encourage suggestions for additional data
sources that may be available. We received no comments on the proposed
market basket for determining the LTCH PPS standard Federal rate for
the 2005 LTCH PPS rate year. Accordingly, in this final rule, we are
using the FY 1997-based excluded hospital with capital market basket as
the LTCH PPS market basket for determining the update to the LTCH PPS
standard Federal rate for the 2005 LTCH PPS rate year.
b. LTCH market basket increase for the 2005 LTCH rate year. As we
discussed in the June 6, 2003 final rule (68 FR 34137), for LTCHs paid
under the LTCH PPS, we stated that the 2004 rate year update applies to
discharges occurring from July 1, 2003 through June 30, 2004. Because
we changed the timeframe of the LTCH PPS standard Federal rate annual
update from October 1 to July 1, as we explained in that same final
rule, we calculated an update factor that reflected that change in the
update cycle. For the update to the 2004 LTCH PPS rate year, we
calculated the estimated increase between FY 2003 and the 2004 LTCH PPS
rate year (July 1, 2003 through June 30, 2004). Accordingly, based on
Global Insight's forecast of the revised and rebased FY 1997-based
excluded hospital with capital market basket using data from the fourth
quarter of 2002, we used a market basket update of 2.5 percent for the
2004 LTCH PPS rate year (68 FR 34138).
Consistent with our historical practice of estimating market basket
increases based on Global Insight's forecast of the FY 1997-based
excluded hospital with capital market basket using more recent data
from the fourth quarter of 2003, in this final rule, we are using a 3.1
percent update to the Federal rate for the 2005 LTCH PPS rate year. In
accordance with Sec. 412.523, this update represents the most recent
estimate of the increase in the excluded hospital with capital market
basket for the 2005 LTCH PPS rate year.
2. Standard Federal Rate for the 2005 LTCH PPS Rate Year
In the June 6, 2003 final rule (68 FR 34140), we established a
standard Federal rate of $35,726.18 for the 2004 LTCH PPS rate year
based on the best available data and policies established in that final
rule. In the January 30, 2004 proposed rule (69 FR 4763), for the 2005
LTCH PPS rate year, we proposed a standard Federal rate of $36,762.24
based on the proposed update of 2.9 percent. Since the proposed 2005
LTCH PPS rate year standard Federal rate was already adjusted for
differences in case-mix, wages, cost-of-living, and high-cost outlier
payments, we did not propose to make any additional adjustments in the
standard Federal rate for these factors.
In this final rule, in accordance with Sec. 412.523, we are
establishing a standard Federal rate of $36,833.69 based on the most
recent estimate of the LTCH PPS market basket of 3.1 percent. Since the
standard Federal rate for the 2005 LTCH PPS rate year has already been
adjusted for differences in case-mix, wages, cost-of-living, and high-
cost outlier payments, we did not make any additional adjustments in
the standard Federal rate for these factors.

C. Calculation of LTCH Prospective Payments for the 2005 LTCH PPS Rate
Year

The basic methodology for determining prospective payment rates for
LTCH inpatient operating and capital-related costs is set forth in
Sec. 412.515 through Sec. 412.532. In accordance with Sec. 412.515,
we assign appropriate weighting factors to each LTC-DRG to reflect the
estimated relative cost of hospital resources used for discharges
within that group as compared to discharges classified within other
groups. The amount of the prospective payment is based on the standard
Federal rate, established under Sec. 412.523, and adjusted for the
LTC-DRG relative weights, differences in area wage levels, cost-of-
living in Alaska and Hawaii, high-cost outliers, and other special
payment provisions (short-stay outliers under Sec. 412.529 and
interrupted stays under Sec. 412.531).
In accordance with Sec. 412.533, during the 5-year transition
period, payment is based on the applicable transition blend percentage
of the adjusted Federal rate and the reasonable cost-based payment rate
unless the LTCH makes a one-time

[[Page 25684]]

election to receive payment based on 100 percent of the Federal rate. A
LTCH defined as ``new'' under Sec. 412.23(e)(4) is paid based on 100
percent of the Federal rate with no blended transition payments (Sec.
412.533(d)). As discussed in the August 30, 2002 final rule (67 FR
56038), and in accordance with Sec. 412.533(a), the applicable
transition blends are as follows:

------------------------------------------------------------------------
Reasonable
Cost reporting periods beginning on or Federal rate cost-based
after percentage payment rate
percentage
------------------------------------------------------------------------
October 1, 2002......................... 20 80
October 1, 2003......................... 40 60
October 1, 2004......................... 60 40
October 1, 2005......................... 80 20
October 1, 2006......................... 100 0
------------------------------------------------------------------------

Accordingly, for cost reporting periods beginning during FY 2004
(that is, on or after October 1, 2003, and before September 30, 2004),
blended payments under the transition methodology are based on 60
percent of the LTCH's reasonable cost-based payment rate and 40 percent
of the adjusted LTCH PPS Federal rate. For cost reporting periods that
begin during FY 2005 (that is, on or after October 1, 2004 and before
September 30, 2005), blended payments under the transition methodology
will be based on 40 percent of the LTCH's reasonable cost-based payment
rate and 60 percent of the adjusted LTCH PPS Federal rate.
1. Adjustment for Area Wage Levels
a. Background. Under the authority of section 307(b) of Public Law
106-554, we established an adjustment to account for differences in
LTCH area wage levels under Sec. 412.525(c) using the labor-related
share estimated by the excluded hospital market basket with capital and
wage indices that were computed using wage data from inpatient acute
care hospitals without regard to reclassification under section
1886(d)(8) or section 1886(d)(10) of the Act. Furthermore, as we
discussed in the August 30, 2002 final rule (67 FR 56015-56019), we
established a 5-year transition to the full wage adjustment. The
applicable wage index phase-in percentages are based on the start of a
LTCH's cost reporting period as shown in the following table:

------------------------------------------------------------------------
Cost reporting periods beginning Phase-in percentage of the full wage
on or after index
------------------------------------------------------------------------
October 1, 2002................... 1/5th (20 percent)
October 1, 2003................... 2/5ths (40 percent)
October 1, 2004................... 3/5ths (60 percent)
October 1, 2005................... 4/5ths (80 percent)
October 1, 2006................... 5/5ths (100 percent)
------------------------------------------------------------------------

For example, for cost reporting periods beginning on or after
October 1, 2004 and before September 30, 2005 (FY 2005), the applicable
LTCH wage index value would be three-fifths of the applicable full wage
index value without taking into account geographic reclassification
under sections 1886(d)(8) and (d)(10) of the Act.
In that same final rule (67 FR 56018), we stated that we would
continue to reevaluate LTCH data as they become available and would
propose to adjust the phase-in if subsequent data support a change. As
we discussed in the June 6, 2003 final rule (68 FR 34140), because the
LTCH PPS has only been implemented for less than 2 years, sufficient
new data have not been generated that would enable us to conduct a
comprehensive reevaluation of the appropriateness of adjusting the
phase-in. However, in that same final rule, we explained that we had
reviewed the most recent data available at that time and did not find
any evidence to support a change in the 5-year phase-in of the wage
index.
In the January 30, 2004 proposed rule (69 FR 4764), we stated that
because of the recent implementation of the LTCH PPS and the lag time
in availability of cost report data, we still do not yet have
sufficient new data to allow us to conduct a comprehensive reevaluation
of the appropriateness of the phase-in of the wage index adjustment. As
we discussed in that same proposed rule, we reviewed the most recent
data available and did not find any evidence to support a change in the
5-year phase-in of the wage index. Accordingly, we did not propose a
change in the phase-in of the wage index data. We received no comments,
and therefore, at this time, we are not adjusting the phase-in of the
wage index adjustment in this final rule.
b. Wage Index Data. In the June 6, 2003 final rule (68 FR 34142),
for the 2004 LTCH PPS rate year, we established that we will use the
same data that was used to compute the FY 2003 acute care hospital
inpatient wage index without taking into account geographic
reclassifications under sections 1886(d)(8) and (d)(10) of the Act
because that was the best available data at that time. The acute care
hospital inpatient wage index data is also used in the inpatient
rehabilitation PPS (IRF PPS), the home health agency PPS (HHA PPS), and
the skilled nursing facility PPS (SNF PPS). As we discussed in the
August 30, 2002 final rule (67 FR 56019), since hospitals that are
excluded from the IPPS are not required to provide wage-related
information on the Medicare cost report and because we would need to
establish instructions for the collection of such LTCH data in order to
establish a geographic reclassification adjustment under the LTCH PPS,
the wage adjustment established under the LTCH PPS is based on a LTCH's
actual location without regard to the urban or rural designation of any
related or affiliated provider.
In the January 30, 2004 proposed rule (69 FR 4764), for the 2005
LTCH PPS rate year, we proposed to use the same data used to compute
the FY 2004 acute care hospital inpatient wage index without taking
into account geographic reclassifications under sections

[[Page 25685]]

1886(d)(8) and (d)(10) of the Act to determine the applicable wage
index values under the LTCH PPS, because these are the most recent
available complete data. These data are the same wage data that were
used to compute the FY 2004 wage indices currently used under the IPPS
and SNF PPS. (We note that in the January 30, 2004 proposed rule, we
mistakenly stated that these data are the same wage data that were used
to compute the FY 2003 wage indices currently used under the IPPS and
SNF PPS. We should have said that the proposed wage index values for
the 2005 LTCH PPS rate year were computed from the same data used to
calculate the FY 2004 wage indices currently used under the IPPS and
SNF PPS. Also, in the January 30, 2004 proposed rule, in the example of
how the proposed LTCH PPS wage index values for discharges occurring on
or after July 1, 2004 through June 30, 2005 would be applied for LTCHs'
cost reporting periods beginning during FY 2005, we mistakenly stated
that the applicable wage index value would be three-fifths of the full
FY 2005 acute care hospital inpatient wage index data, without taking
into account geographic reclassification under sections 1886(d)(8) and
(d)(10) of the Act. We should have said that the wage index values for
the 2005 LTCH PPS rate year for LTCHs' cost reporting periods during FY
2005 would be three-fifths of the full FY 2004 acute care hospital
inpatient wage index data, without taking into account geographic
reclassification under sections 1886(d)(8) and (d)(10) of the Act. The
proposed wage index values shown in Tables 1 and 2 in the Addendum of
the January 30, 2004 proposed rule (69 FR 4790-4808) were correct.
We received no comments on the proposed wage index for the 2005
LTCH PPS rate year. Accordingly, in this final rule, we are
establishing LTCH PPS wage index values for the 2005 LTCH PPS rate year
calculated from the same data used to compute the FY 2004 acute care
hospital inpatient wage index data without taking into account
geographic reclassification under sections 1886(d)(8) and (d)(10) of
the Act. The LTCH wage index values applicable for discharges occurring
on or after July 1, 2004 through June 30, 2005 are shown in Table 1
(for urban areas) and Table 2 (for rural areas) in the Addendum to this
final rule.
As noted above, the applicable wage index phase-in percentages are
based on the start of a LTCH's cost reporting period beginning on or
after October 1st of each year during the 5-year transition period. For
cost reporting periods beginning on or after October 1, 2003 and before
September 30, 2004 (FY 2004), the labor portion of the standard Federal
rate will be adjusted by two-fifths of the applicable LTCH wage index
value. Specifically, for a LTCH's cost reporting period beginning
during FY 2004, for discharges occurring on or after July 1, 2004
through June 30, 2005, the applicable wage index value will be two-
fifths of the full FY 2004 acute care hospital inpatient wage index
data, without taking into account geographic reclassifications under
sections 1886(d)(8) and (d)(10) of the Act as shown in Tables 1 and 2
in the Addendum to this final rule. Similarly, for cost reporting
periods beginning on or after October 1, 2004 and before October 1,
2005 (FY 2005), the labor portion of the standard Federal rate will be
adjusted by three-fifths of the applicable LTCH wage index value.
Specifically, for a LTCH's cost reporting period beginning during FY
2005, for discharges occurring on or after July 1, 2004 through June
30, 2005, the applicable wage index value will be three-fifths of the
full FY 2004 acute care hospital inpatient wage index data, without
taking into account geographic reclassification under sections
1886(d)(8) and (d)(10) of the Act as shown in Tables 1 and 2 in the
addendum to this final rule.
Because the phase-in of the wage index does not coincide with the
LTCH PPS rate year (July 1st through June 30th), most LTCHs will
experience a change in the wage index phase-in percentages during the
LTCH PPS rate year. For example, during the 2005 LTCH PPS rate year,
for a LTCH with a January 1st fiscal year, the two-fifths wage index
will be applicable for the first 6 months of the 2005 LTCH PPS rate
year (July 1, 2004 through December 31, 2004) and the three-fifths wage
index will be applicable for the second 6 months of the 2005 LTCH PPS
rate year (January 1, 2005 through June 30, 2005). We also note that
some providers will still be in the first year of the 5-year phase-in
of the LTCH wage index (that is, those LTCHs with cost reporting
periods that began during FY 2003 and are ending during the first 3
months of the 2005 LTCH PPS rate year (July 1, 2004 through September
30, 2004). For the remainder of those LTCHs' FY 2003 cost reporting
periods, for discharges occurring on or after July 1, 2004 through June
30, 2005, the applicable wage index value will be one-fifth of the full
FY 2004 acute care hospital inpatient wage index data, without taking
into account geographic reclassification under sections 1886(d)(8) and
(d)(10) of the Act as shown in Tables 1 and 2 in the Addendum to this
final rule. As noted above, we received no comments on the proposed
wage index values for the 2005 LTCH PPS rate year, and, therefore, we
have adopted them as final in this final rule.
c. Labor-related share. In the August 30, 2002 final rule (67 FR
56016), we established a labor-related share of 72.885 percent based on
the relative importance of the labor-related share of operating and
capital costs of the excluded hospital with capital market basket based
on FY 1992 data. In the June 6, 2003 final rule (68 FR 34142), in
conjunction with our revision and rebasing of the excluded hospital
with capital market basket from an FY 1992 to an FY 1997 base year, we
used a labor-related share that is determined based on the relative
importance of the labor-related share of operating costs (wages and
salaries, employee benefits, professional fees, postal services, and
all other labor-intensive services) and capital costs of the excluded
hospital with capital market basket based on FY 1997 data. While we
adopted the revised and rebased FY 1997-based LTCH PPS market basket as
the LTCH PPS update factor for the 2004 LTCH PPS rate year, we decided
not to update the labor-related share under the LTCH PPS pending
further analysis. Accordingly, the labor-share for the 2004 LTCH PPS
rate year was 72.885 percent.
In the August 1, 2002 IPPS final rule (67 FR 50041-50042), we did
not use a revised labor-related share for FY 2004 because we had not
yet completed our research into the appropriateness of this updated
measure. In that rule, we discussed two methods that we were reviewing
for establishing the labor-related share--(1) updating the regression
analysis that was done when the IPPS was originally developed and (2)
reevaluating the methodology we currently use for determining the
labor-related share using the hospital market basket. We also explained
that we would continue to explore all options for alternative data and
a methodology for determining the labor-related share, and would
propose to update the IPPS and excluded hospital labor-related shares,
if necessary, once our research is complete.
As we explained in the August 30, 2002 final rule, which
implemented the LTCH PPS, the June 6, 2003 LTCH PPS final rule, and the
June 9, 2003 high-cost outlier final rule, the LTCH PPS was modeled
after the IPPS for short-term, acute care hospitals. Specifically, the
LTCH PPS uses the same patient

[[Page 25686]]

classification system (CMS-DRGs) as the IPPS, and many of the case-
level and facility-level adjustments explored or adopted for the LTCH
PPS are payment adjustments under the IPPS (that is, wage index, high-
cost outliers, and the evaluation of adjustments for indirect teaching
costs and the treatment of a disproportionate share of low-income
patients).
Furthermore, as discussed in greater detail in the August 30, 2002
LTCH PPS final rule (67 FR 55960), LTCHs are certified as acute care
hospitals that meet the criteria set forth in section 1861(e) of the
Act to participate as a hospital in the Medicare program, and in
general, hospitals qualify for payment under the LTCH PPS instead of
the IPPS solely because their inpatient average length of stay is
greater than 25 days, in accordance with section 1886(d)(1)(B)(iv)(I)
of the Act, implemented in Sec. 412.23(e). In the June 6, 2003 LTCH
PPS final rule (68 FR 34144), we explained that prior to qualifying as
a LTCH under Sec. 412.23(e)(2)(i), hospitals generally are paid as
acute care hospitals under the IPPS during the period in which they
demonstrate that they have an average Medicare inpatient length of stay
of greater than 25 days.
The primary reason that we did not update the LTCH PPS labor-
related share for the 2004 LTCH PPS rate year was due to the same
reason that we explained for not updating the labor-related share under
the IPPS for FY 2004 in the August 1, 2003 IPPS (68 FR 27226) which are
equally applicable to the LTCH PPS. We did not revise the labor-related
share under the IPPS based on the revised and rebased FY 1997 hospital
market basket and the excluded hospital market basket because of data
and methodological concerns. We indicated that we would conduct further
analysis to determine the most appropriate methodology and data for
determining the labor-related share.
Section 403 of the Medicare Prescription Drug and Modernization Act
of 2003 (enacted December 8, 2003, Pub. L. 108-173) amends section
1886(d) of the Act to provide that for discharges occurring on or after
October 1, 2004, the labor-related share under the IPPS is reduced to
62 percent if such a change would result in higher total payments to
the hospital. While the statute provides the option to hospitals of
using an alternative to the current IPPS labor-related share (71
percent), the statute does not address updating the current IPPS labor-
related share. We intend to discuss the details of implementing this
provision in the IPPS proposed rule for FY 2005.
As we discussed in the January 30, 2004 proposed rule (69 FR 4765),
although section 403 of Public Law 108-173 provides for an alternative
labor share percentage, this alternative only applies to hospitals paid
under the IPPS and not to LTCHs. Consequently, since we have not yet
implemented a change in the labor-share methodology used under the
IPPS, and the alternative provided at section 403 does not apply to
LTCHs, we did not propose to change the LTCH PPS labor-share for the
2005 LTCH PPS rate year. We received no comments on our proposal to
retain the current labor-related share for the 2005 LTCH PPS rate year.
Accordingly, the labor-related share for the 2005 LTCH PPS rate
year will remain at 72.885 percent. As is the case under the IPPS, once
our research on the labor-related share is complete, any future
revisions to the LTCH PPS labor-related share will be proposed and
subject to public comment.
2. Adjustment for Cost-of-Living in Alaska and Hawaii
In the August 30, 2002 final rule (67 FR 56022), we established,
under Sec. 412.525(b), a cost-of-living adjustment (COLA) for LTCHs
located in Alaska and Hawaii to account for the higher costs incurred
in those States. (We note that the OFR inadvertently omitted Sec.
412.525(b) in the current version of the CFR (revised as of October 1,
2003). The OFR is aware of this error and will be making the necessary
correction in the near future.) In the January 30, 2004 proposed rule
(69 FR 4765), for the 2005 LTCH PPS rate year, we proposed to make a
COLA to payments for LTCHs located in Alaska and Hawaii by multiplying
the standard Federal payment rate by the appropriate factor listed in
Table I. below. These factors are obtained from the U.S. Office of
Personnel Management (OPM) and are currently used under the IPPS. In
addition, in that same proposed rule, we proposed that if OPM released
revised COLAS factors before March 1, 2004, we would use them for the
development of the payments and publish then in the LTCH PPS final
rule.
The OPM has not released revised COLA factors for Alaska and Hawaii
since the publication of the January 30, 2004 proposed rule. We
received no comments on the proposed COLA factors for Alaska and Hawaii
for the 2005 LTCH PPS rate year. Therefore, under Sec. 412.525(b), we
are finalizing the COLA factors for Alaska and Hawaii shown below in
Table I for the 2005 LTCH PPS rate year.

Table I.--Cost-of-Living Adjustment Factors for Alaska and Hawaii
Hospitals for the 2005 LTCH PPS Rate Year
------------------------------------------------------------------------

------------------------------------------------------------------------
Alaska:
All areas................................................ 1.25
Hawaii:
Honolulu County.......................................... 1.25
Hawaii County............................................ 1.165
Kauai County............................................. 1.2325
Maui County.............................................. 1.2375
Kalawao County........................................... 1.2375
------------------------------------------------------------------------

3. Adjustment for High-Cost Outliers
a. Background. Under Sec. 412.525(a), we make an adjustment for
additional payments for outlier cases that have extraordinarily high
costs relative to the costs of most discharges. Providing additional
payments for outliers strongly improves the accuracy of the LTCH PPS in
determining resource costs at the patient and hospital level. These
additional payments reduce the financial losses that would otherwise be
caused by treating patients who require more costly care and,
therefore, reduce the incentives to underserve these patients. We set
the outlier threshold before the beginning of the applicable rate year
so that total outlier payments are projected to equal 8 percent of
total payments under the LTCH PPS. Outlier payments under the LTCH PPS
are determined consistent with the IPPS outlier policy.
Under Sec. 412.525(a), we make outlier payments for any discharges
if the estimated cost of a case exceeds the adjusted LTCH PPS payment
for the LTC-DRG plus a fixed-loss amount. The fixed-loss amount is the
amount used to limit the loss that a hospital will incur under an
outlier policy. This results in Medicare and the LTCH sharing financial
risk in the treatment of extraordinarily costly cases. The LTCH's loss
is limited to the fixed-loss amount and the percentage of costs above
the marginal cost factor. We calculate the estimated cost of a case by
multiplying the overall hospital cost-to-charge ratio by the Medicare
allowable covered charge. In accordance with Sec. 412.525(a), we pay
outlier cases 80 percent of the difference between the estimated cost
of the patient case and the outlier threshold (the sum of the adjusted
Federal prospective payment for the LTC-DRG and the fixed-loss amount).
We determine a fixed-loss amount, that is, the maximum loss that a
LTCH can incur under the LTCH PPS for a case with unusually high costs
before the LTCH will receive any additional payments. We calculate the
fixed-loss amount by simulating aggregate

[[Page 25687]]

payments with and without an outlier policy. The fixed-loss amount
would result in estimated total outlier payments being projected to be
equal to 8 percent of projected total LTCH PPS payments.
Currently, under both the LTCH PPS and the IPPS, only a maximum
cost-to-charge ratio threshold (ceiling) is applied to a hospital's
cost-to-charge ratio and, as discussed in the June 9, 2003 high-cost
outlier final rule (68 FR 34506-34507) for discharges occurring on or
after August 8, 2003, a minimum cost-to-charge ratio threshold (floor)
is no longer applicable. Thus, if a LTCH's cost-to-charge ratio is
above the ceiling, the applicable statewide average cost-to-charge
ratio is assigned to the LTCH. In addition, for LTCHs for which we are
unable to compute a cost-to-charge ratio, we also assign the applicable
statewide average cost-to-charge ratio. Currently, MedPAR claims data
and cost-to-charge ratios based on the latest available cost report
data from Hospital Cost Report Information System (HCRIS) and
corresponding MedPAR claims data are used to establish a fixed-loss
threshold amount under the LTCH PPS.
In the June 9, 2003 high-cost outlier final rule (68 FR 34507),
consistent with the outlier policy changes for acute care hospitals
under the IPPS discussed in that same final rule, we no longer assign
the applicable statewide average cost-to-charge ratio when a LTCH's
cost-to-charge ratio falls below the minimum cost-to-charge ratio
threshold (floor). We made this policy change because, as is the case
for acute care hospitals, we believe LTCHs 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),
previously when a LTCH's actual cost-to-charge ratio fell below the
floor, the LTCH's cost-to-charge ratio was raised to the applicable
statewide average cost-to-charge ratio. This application of the
statewide average resulted in inappropriately high outlier payments.
Accordingly, for LTCH PPS discharges occurring on or after August 8,
2003, in making outlier payments under Sec. 412.525 (and short-stay
outlier payments under Sec. 412.529), we apply the LTCH's actual cost-
to-charge ratio to determine the cost of the case, even where the
LTCH's actual cost-to-charge ratio falls below the floor.
Also, in the June 9, 2003 high-cost outlier final rule (68 FR
34507), consistent with the policy change for acute care hospitals
under the IPPS, under Sec. 412.525(a)(4), by cross-referencing Sec.
412.84(i), we established that we will continue to apply the applicable
statewide average cost-to-charge ratio when a LTCH's cost-to-charge
ratio exceeds the maximum cost-to-charge ratio threshold (ceiling) by
adopting the policy at Sec. 412.84(i)(3)(ii). As we explained in that
same final rule, cost-to-charge ratios above this range are probably
due to faulty data reporting or entry. Therefore, these cost-to-charge
ratios should not be used to identify and make payments for outlier
cases because such data are clearly errors and should not be relied
upon. In addition, we made a similar change to the short-stay outlier
policy at Sec. 412.529. Since cost-to-charge ratios are also used in
determining short-stay outlier payments, the rationale for that change
mirrors that for high-cost outliers.
b. Establishment of the fixed-loss amount. In the June 6, 2003
final rule (68 FR 34144), for the 2004 LTCH PPS rate year, we used the
March 2002 update of the FY 2001 MedPAR claims data to determine a
fixed-loss threshold that would result in outlier payments projected to
be equal to 8 percent of total payments, based on the policies
described in that final rule, because these data were the best data
available. We calculated cost-to-charge ratios for determining the
fixed-loss amount based on the latest available cost report data in
HCRIS and corresponding MedPAR claims data from FYs 1998, 1999, and
2000.
In that same final rule, in determining the fixed-loss amount for
the 2004 LTCH PPS rate year (using the outlier policy under Sec.
412.525(a) in effect on July 1, 2003), we used the current combined
operating and capital cost-to-charge ratio floor and ceiling under the
IPPS of 0.206 and 1.421, respectively (as explained in the IPPS final
rule (67 FR 50125, August 1, 2002)). As we discussed in the June 9,
2003 high-cost outlier final rule (68 FR 34508), we concluded that it
was not necessary to recalculate a new fixed-loss amount once the
changes to the outlier policy discussed in that final rule became
effective because the difference between the fixed-loss amount
determined with or without the application of the floor would be
negligible.
If a LTCH's cost-to-charge ratio was below this floor or above this
ceiling, we assigned the applicable IPPS statewide average cost-to-
charge ratio. We also assigned the applicable statewide average for
LTCHs for which we are unable to compute a cost-to-charge ratio, such
as for new LTCHs. Therefore, based on the methodology and data
described above, in the June 6, 2003 final rule (68 FR 34144), for the
2004 LTCH PPS rate year, we established a fixed-loss amount of $19,590.
Thus, during the 2004 LTCH PPS rate year, we pay an outlier case 80
percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the adjusted Federal LTCH payment for
the LTC-DRG and the fixed-loss amount of $19,590).
Also, in the June 6, 2003 final rule (68 FR 34145), we established
that beginning with the 2004 LTCH PPS rate year, we will calculate a
single fixed-loss amount for each LTCH PPS rate year based on the
version of the GROUPER that is in effect as of the beginning of the
LTCH PPS rate year (that is, July 1, 2003 for the 2004 LTCH PPS rate
year). Therefore, for the 2004 LTCH PPS rate year, we established a
single fixed-loss amount based on the Version 20.0 of the GROUPER,
which was in effect at the start of the 2004 LTCH PPS rate year (July
1, 2003). As we noted above, the fixed-loss amount for the 2004 LTCH
PPS rate year is $19,590.
As we proposed in the January 30, 2004 proposed rule, in
calculating the fixed-loss amount for the 2005 LTCH PPS rate year, we
applied the current outlier policy under Sec. 412.525(a); that is, we
assigned the applicable statewide average cost-to-charge ratio only to
LTCHs whose cost-to-charge ratios exceeded the ceiling (and not when
they fell below the floor). Accordingly, we used the current IPPS
combined operating and capital cost-to-charge ratio ceiling of 1.366
(as explained in the IPPS final rule (68 FR 45478, August 1, 2003)). We
believed that using the current combined IPPS operating and capital
cost-to-charge ratio ceiling for LTCHs is appropriate for the same
reasons we stated above regarding the use of the current combined
operating and capital cost-to-charge ratio ceiling under the IPPS.
As stated in the January 30, 2004 proposed rule (69 FR 4766-4767),
for the 2005 LTCH PPS rate year, we used the December 2002 update of
the FY 2002 MedPAR claims data to determine a proposed fixed-loss
amount that would result in outlier payments projected to be equal to 8
percent of total payments, based on the policies described in that
proposed rule, because those data were the best LTCH data available at
that time. In that same proposed rule, we explained that we considered
using claims data from the September 2003 update of the FY 2003 MedPAR
to determine the proposed fixed-loss amount (and the proposed budget
neutrality offset discussed in section V.C.6. of this preamble) for the
2005 LTCH PPS rate year. However, initial analysis has shown that the
FY

[[Page 25688]]

2003 MedPAR data contain coding errors. As in the case with the FY 2002
MedPAR, we have learned that a large hospital chain of LTCHs had
continued to consistently code diagnoses inaccurately on the claims it
submitted, and these coding errors were reflected in the September 2003
update of the FY 2003 MedPAR data. Those coding inaccuracies in the
MedPAR claims data could have caused significant skewing of the fixed-
loss amount and would have impacted the determination of the budget
neutrality offset.
While we have corrected the coding inaccuracies in the FY 2002
MedPAR, we were unable to correct the coding errors in the FY 2003
MedPAR in time for publication of the January 30, 2004 proposed rule
since the correction process required extensive programming work.
Accordingly, we used the December 2002 update of the FY 2002 MedPAR
claims data to determine the proposed fixed-loss amount of $21,864 for
the 2005 LTCH PPS rate year. Thus, we proposed to pay an outlier case
80 percent of the difference between the estimated cost of the case and
the proposed outlier threshold (the sum of the proposed adjusted
Federal LTCH PPS payment for the LTC-DRG and the proposed fixed-loss
amount of $21,864). We also stated that we expected to be able to use
FY 2003 MedPAR data (corrected, if necessary) to calculate the fixed
loss amount for the 2005 LTCH PPS rate year in this final rule.
We have reviewed LTCH claims data from the December 2003 update of
the FY 2003 MedPAR data and it appears that the coding errors that were
found previously in the September 2003 update of the FY 2003 MedPAR
(discussed in the January 30, 2004 proposed rule (69 FR 4774)) have
been corrected. Specifically, upon discovering the coding errors, we
notified the large chain of LTCHs whose claims contained the coding
inaccuracies to request that they resubmit those claims with the
correct diagnoses codes by December 31, 2003 so that those corrected
claims would be contained in the December 2003 update of the FY 2003
MedPAR data. It appears that those claims were submitted timely with
the correct diagnoses codes, therefore, it was not necessary for us to
correct the FY 2003 MedPAR data for the development of the rates and
factors established in this final rule. Accordingly, we are using the
December 2003 update of the FY 2003 MedPAR data to determine the fixed-
loss amount for the 2005 LTCH PPS rate year established in the this
final rule, as it is the best available data at this time.
Comment: One commenter noted that CMS proposed a fixed-loss amount
of $21,864 for the 2005 LTCH PPS rate year based on FY 2002 MedPAR
claims data due to coding errors found in the FY 2003 MedPAR claims
data, and that CMS plans on using the corrected FY 2003 MedPAR claims
data to calculate the fixed-loss amount for the final rule. The
commenter believed that, as a result of the fact that a large hospital
chain of LTCHs continued to make coding errors, other LTCHs would be
deprived of the opportunity to make meaningful comments. The commenter
recommended that the revised fixed-loss amount should be published in
an interim final rule in order to allow for meaningful comments.
Response: As with all other Medicare prospective payment systems,
the data that we use both for the proposed and final rules, to
determine the rates, adjustments and other factors under the LTCH PPS,
including the fixed-loss amount, is always the best data available at
the time we are determining a rate. As we stated in the January 30,
2004 proposed rule, we expected to use the FY 2003 MedPAR data to
calculate the final fixed-loss amount for the 2005 LTCH PPS rate year
in this final rule. Thus, the commenters were given adequate notice for
meaningful comment on our proposal. In addition, we note that this data
became available to the public at the end of February 2004, which was
at least 3 weeks prior to the close of the 60-day public comment period
that ended on March 23, 2004. We believe that this data was
sufficiently available to those interested in accessing the data, and
to ensure that we correctly applied the methodology that we established
to compute the fixed-loss amount in the August 30, 2002 final rule when
we implemented the LTCH PPS using the FY 2003 MedPAR data. Thus,
because the methodology that we use to calculate the fixed-loss amount
in both the proposed rule and in this final rule continues to be the
same as the methodology established in the August 30, 2002 LTCH PPS
final rule (67 FR 56022-56027) when the LTCH PPS was implemented (that
is, we determine a fixed-loss amount that would result in outlier
payments projected to be equal to 8 percent of total payments under the
LTCH PPS), the public had the opportunity to use the most recently
available FY 2003 MedPAR data to calculate of the applicable fixed-loss
amount prior to the close of the comment period. To the extent that the
public disagreed with the outcome, they could have written to us during
the comment period, and we would have addressed their concerns.
However, we did not receive any comments.
Accordingly, we do not believe it is necessary or appropriate to
publish the final fixed-loss amount for the 2005 LTCH PPS rate year in
a separate notice. However, if LTCHs have concerns regarding the
calculation of the fixed-loss amount for the 2005 LTCH PPS rate year
established in this final rule based on the FY 2003 MedPAR claims data,
they may bring those concerns to our attention. Based on those
concerns, if we determine that our established methodology for
determining the fixed loss amount was applied incorrectly, we would
take the necessary steps to correct the fixed-loss amount prospectively
in accordance with the Administrative Procedure Act.
Furthermore, as noted above, we determined the fixed-loss amount
for the 2005 LTCH PPS rate year established in this final rule based on
the version of the GROUPER that will be in effect as of the beginning
of the 2005 LTCH PPS rate year (July 1, 2004), that is, Version 21.0 of
the LTCH PPS GROUPER (68 FR 45374-45385). Consistent with our
historical practice of using the most recent available data, we
computed cost-to-charge ratios for determining the fixed-loss amount
for the 2005 LTCH PPS rate year based on the latest available cost
report data in HCRIS and corresponding MedPAR claims data from FYs
1999, 2000, 2001 and 2002. (We note that FY 2002 data was not used to
compute cost-to-charge ratios in the proposed rule because it was not
available at the time of the development of the proposed rule. The
limited amount of FY 2002 data available to use to compute the cost-to-
charge ratios used for determining the fixed-loss amount established in
this final rule has resulted in very little change in the cost-to-
charge ratios used in the proposed rule compared to those used in this
final rule. Our methodology for calculating the cost-to-charge ratios
remains the same.) As we explained above, the current applicable IPPS
statewide average cost-to-charge ratios were applied when a LTCH's
cost-to-charge ratio exceeded the ceiling (1.366). In addition, we
assigned the applicable statewide average to LTCHs for which we were
unable to compute a cost-to-charge ratio. (Currently, the applicable
IPPS statewide averages can be found in Tables 8A and 8B of the August
1, 2003 IPPS final rule (68 FR 45637-45638).)
Based on the data and policies described in this final rule, we are
establishing a fixed-loss amount of $17,864 for the 2005 LTCH PPS rate

[[Page 25689]]

year. Thus, we will pay an outlier case 80 percent of the difference
between the estimated cost of the case and the outlier threshold (the
sum of the adjusted Federal LTCH payment for the LTC-DRG and the fixed-
loss amount of $17,864).
The final fixed-loss amount of $17,864 for the 2005 LTCH PPS rate
year is lower than the $21,864 fixed-loss amount we had proposed for
the 2005 LTCH PPS rate year and lower than the current fixed-loss
amount of $19,590 for the 2004 LTCH PPS rate year. Both the current
fixed-loss amount for the 2004 LTCH PPS rate year and the proposed
fixed-loss amount for the 2005 LTCH PPS rate year were computed using
the December 2002 update of the FY 2002 MedPAR data (as explained in
detail in the June 6, 2003 final rule (68 FR 34145) and the January 30,
2004 proposed rule (69 FR 4774), respectively). As discussed above, we
used the December 2003 update of the FY 2003 MedPAR data to determine
the final fixed-loss amount for the 2005 LTCH PPS rate year established
in this final rule because it is the best available data at this time.
Our methodology for calculating the fixed-loss amount remains the same.
c. Reconciliation of outlier payments upon cost report settlement.
In the June 9, 2003 high-cost outlier final rule (68 FR 34508-34512),
we made changes to the LTCH outlier policy consistent with those made
for acute care hospitals under the IPPS because, as we discussed in
that same final rule, we became aware that payment vulnerabilities
existed in the previous IPPS outlier policy. Because the LTCH PPS high-
cost outlier and short-stay policies are modeled after the outlier
policy in the IPPS, we believe they were susceptible to the same
payment vulnerabilities and, therefore, also merited revision.
Consistent with the change made for acute care hospitals under the IPPS
at Sec. 412.84(m), we established under Sec. 412.525(a)(4)(ii), by
cross-referencing Sec. 412.84(m), that effective for LTCH PPS
discharges occurring on or after August 8, 2003, any reconciliation of
outlier payments may be made upon cost report settlement to account for
differences between the actual cost-to-charge ratio and the estimated
cost-to-charge ratio for the period during which the discharge occurs.
As is the case with the changes made to the outlier policy for acute
care hospitals under the IPPS, the instructions for implementing these
regulations are discussed in further detail in Program Memorandum
Transmittal A-03-058. In addition, in that same final rule (68 FR
34513), we established a similar change to the short-stay outlier
policy at Sec. 412.529(c)(5)(ii).
We also discussed in the June 9, 2003 IPPS high-cost outlier final
rule (68 FR 34507-34512) that only using cost-to-charge ratios based on
the latest settled cost report does not reflect any dramatic increases
in charges during the payment year when making outlier payments.
Because a LTCH has the ability to increase its outlier payments through
a dramatic increase in charges and because of the lag time in the data
used to calculate cost-to-charge ratios, in that same final rule (68 FR
34494-34515), consistent with the policy change for acute care
hospitals under the IPPS at Sec. 412.84(i)(2), we established that,
for LTCH PPS discharges occurring on or after October 1, 2003, fiscal
intermediaries will use more recent data when determining a LTCH's
cost-to-charge ratio. Therefore, by cross-referencing Sec.
412.84(i)(2) under Sec. 412.525(a)(4)(iii), we established that fiscal
intermediaries will use either the most recent settled cost report or
the most recent tentative settled cost report, whichever is from the
later period. In addition, in that same final rule, we established a
similar change to the short-stay outlier policy at Sec.
412.529(c)(5)(iii).
d. Application of outlier policy to short-stay outlier cases. As we
discussed in the August 30, 2002 final rule (67 FR 56026), under some
rare circumstances, a LTCH discharge could qualify as a short-stay
outlier case (as defined under Sec. 412.529 and discussed in section
V.B.4. of this preamble) and also as a high-cost outlier case. In such
a scenario, a patient could be hospitalized for less than five-sixths
of the geometric average length of stay for the specific LTC-DRG, and
yet incur extraordinarily high treatment costs. If the costs exceeded
the outlier threshold (that is, the short-stay outlier payment plus the
fixed-loss amount), the discharge would be eligible for payment as a
high-cost outlier. Thus, for a short-stay outlier case in the 2005 LTCH
PPS rate year, the high-cost outlier payment will be 80 percent of the
difference between the estimated cost of the case and the outlier
threshold (the sum of the fixed-loss amount of $17,864 and the amount
paid under the short-stay outlier policy).
Based on a comparison of the LTCH claims from the FY 2002 MedPAR
data and the FY 2003 MedPAR data for the 266 LTCHs which had claims in
both data sets, we found that the average LTC-DRG relative weight
(based on the Version 21.0 GROUPER, as discussed above) assigned to
each case increased 2.7 percent from FY 2002 to FY 2003. In addition,
we found that the average covered charge per discharge (inflated to
2005 LTCH PPS rate year) increased 3.3 percent from FY 2002 to FY 2003
and total LTCH PPS payments per discharge (based on FY 2002 MedPAR
data) increased 7.3 percent compared to total LTCH PPS payments per
discharge estimated in this final rule (based on FY 2003 MedPAR data).
Our analysis indicates that this increase in LTCH PPS payments per
discharge between the LTCH claims in the FY 2002 MedPAR data and the
LTCH claims in the FY 2003 MedPAR data is largely attributable to the
increase in the average LTC-DRG relative weight per discharge and the
increase in the average covered charge per discharge. The increase in
the average LTC-DRG relative weight assigned to each case from FY 2002
MedPAR compared to FY 2003 MedPAR data indicates that, on average, LTCH
patients are being assigned to LTC-DRGs that have a higher relative
weight, and, therefore, generally receive a higher LTCH PPS payment.
This results in an increase in total LTCH PPS payments system-wide. In
accordance with Sec. 412.523(d)(1), we reduce the standard Federal
rate by 8 percent for the estimated proportion of LTCH PPS outlier
payments. Because the average payment per discharge has increased,
thereby increasing total LTCH PPS payment, the fixed-loss amount must
be lowered in order to maintain total outlier payments that are
projected to equal 8 percent of total payments under the LTCH PPS.
As we noted above, because the LTCH PPS has only been implemented
for less than 2 years, sufficient new data have not been generated that
would enable us to conduct a comprehensive analysis to determine the
factors contributing to the increase in the average LTC-DRG relative
weight assigned to each case. As discussed in section X. of this
preamble, we intend to monitor trends in the LTCHs' Medicare payments
and costs once sufficient data under the LTCH PPS has been generated.
For example, we may conduct medical record reviews of LTCH Medicare
patients to ensure that proper coding practices are being employed.
4. Adjustments for Special Cases
a. General. As discussed in the August 30, 2002 final rule (67 FR
55995), under section 123 of Public Law 106-113, the Secretary
generally has broad authority in developing the PPS for LTCHs,
including whether (and how) to provide for adjustments to reflect
variations in the necessary costs of treatment among LTCHs.

[[Page 25690]]

Generally, LTCHs, as described in section 1886(d)(1)(B)(iv) of the
Act, are distinguished from other inpatient hospital settings by
maintaining an average inpatient length of stay of greater than 25
days. However, LTCHs may have cases that have stays of considerably
less than the average length of stay and that receive significantly
less than the full course of treatment for a specific LTC-DRG. As we
explained in the August 30, 2002 final rule (67 FR 55954), these cases
would be paid inappropriately if the hospital were to receive the full
LTC-DRG payment. Below we discuss the payment methodology for these
special cases as implemented in the August 30, 2002 final rule (67 FR
56002-56010).
b. Adjustment for short-stay outlier cases. A short-stay outlier
case may occur when a beneficiary receives less than the full course of
treatment at the LTCH before being discharged. These patients may be
discharged to another site of care or they may be discharged and not
readmitted because they no longer require treatment. Furthermore,
patients may expire early in their LTCH stay.
Generally, LTCHs are defined by statute as having an average
inpatient length of stay of greater than 25 days. We believe that a
payment adjustment for short-stay outlier cases results in more
appropriate payments because these cases most likely would not receive
a full course of treatment in this short period of time and a full LTC-
DRG payment may not always be appropriate. Payment-to-cost ratios
simulated for LTCHs, for the cases described above, show that if LTCHs
receive a full LTC-DRG payment for those cases, they would be
significantly ``overpaid'' for the resources they have actually
expended.
Under Sec. 412.529, in general, we adjust the per discharge
payment to the least of 120 percent of the cost of the case, 120
percent of the LTC-DRG specific per diem amount multiplied by the
length of stay of that discharge, or the full LTC-DRG payment, for all
cases with a length of stay up to and including five-sixths of the
geometric average length of stay of the LTC-DRG.
As we noted in section V.C.3. of this preamble, in the June 9, 2003
high-cost outlier final rule (68 FR 34494-34515), we revised the
methodology for determining cost-to-charge ratios for acute care
hospitals under the IPPS because we became aware that payment
vulnerabilities existed in the previous IPPS outlier policy. As we also
explained in that same final rule, because the LTCH PPS high-cost
outlier and short-stay outlier policies are modeled after the outlier
policy in the IPPS, we believe they were susceptible to the same
payment vulnerabilities and, therefore, merited revision. Consistent
with the policy established for acute care hospitals under the IPPS at
Sec. 412.84(i) and (m) in the June 9, 2003 high-cost outlier final
rule (68 FR 34515), and similar to the policy change described above
for LTCH PPS high-cost outlier payments at Sec. 412.525(a)(4)(ii), we
established under Sec. 412.529(c)(5)(ii) that for discharges on or
after August 8, 2003, short-stay outlier payments are subject to the
provisions in the regulations at Sec. 412.84(i)(1), (i)(3) and (i)(4),
and (m). In addition, short-stay outlier payments are subject to the
provisions in the regulations at Sec. 412.84(i)(2) for discharges on
or after October 1, 2003 in accordance with Sec. 412.529(c)(5)(iii).
Therefore, in the June 9, 2003 high-cost outlier final rule (68 FR
34508-34513), under Sec. 412.529(c)(5)(ii), by cross-referencing Sec.
412.84(i)(2), we established that fiscal intermediaries will use either
the most recent settled cost report or the most recent tentative
settled cost report, whichever is from the later period, in determining
a LTCH's cost-to-charge ratio.
In addition, by cross-referencing Sec. 412.84(i), we established
that the applicable statewide average cost-to-charge ratio is only
applied when a LTCH's cost-to-charge ratio exceeds the ceiling. Thus,
the applicable statewide average cost-to-charge ratio is no longer
applied when a LTCH's cost-to-charge ratio falls below the floor.
Furthermore, by cross-referencing Sec. 412.84(i)(4), we established
that any reconciliation of payments for short-stay outliers may be made
upon cost report settlement to account for differences between the
estimated cost-to-charge ratio and the actual cost-to-charge ratio for
the period during which the discharge occurs. As noted in the
discussion of the high-cost outlier policy in section V.C.3. of this
preamble, the instructions for implementing these regulations are
discussed in further detail in Program Memorandum Transmittal A-03-058.
In the June 6, 2003 final rule (68 FR 34146-34148), for certain
hospitals that qualify as LTCHs under section 1886(d)(1)(B)(iv)(II) of
the Act (``subclause (II)'' LTCHs) as added by section 4417(b) of
Public Law 105-33, and implemented in Sec. 412.23(e)(2)(ii), we
established a temporary adjustment to the short-stay outlier policy
during the 5-year transition period. Under Sec. 412.529(c)(4),
effective for discharges from a ``subclause (II)'' LTCH occurring on or
after July 1, 2003, the short-stay outlier percentage is 195 percent
during the first year of the hospital's 5-year transition. For the
second cost reporting period, the short-stay outlier percentage is 193
percent; for the third cost reporting period, the percentage is 165
percent; for the fourth cost reporting period, the percentage is 136
percent; and for the final cost reporting period of the 5-year
transition (and future cost reporting periods), the short-stay outlier
percentage is 120 percent, that is, the same as it is for all other
LTCHs under the LTCH PPS.
As we discussed in the June 6, 2003 final rule (68 FR 34147), we
established this formula with the expectation that an adjustment to
short-stay outlier payments during the transition will result in
reducing the difference between payments and costs for a ``subclause
(II)'' LTCH for the period of July 1, 2003 through the end of the
transition period, when the LTCH PPS will be fully phased-in.
As we stated in that same final rule, we also expect that during
this 5-year period, ``subclause (II)'' LTCHs will make every attempt to
adopt the type of efficiency enhancing policies that generally result
from the implementation of prospective payment systems in other health
care settings. We did not propose any changes to the short-stay outlier
policy in the January 30, 2004 proposed rule (69 FR 4768). We received
no comments on the existing short-stay outlier policy at Sec. 412.529.
c. Extension of the interrupted stay policy. At existing Sec.
412.531(a), we define an ``interruption of a stay'' as a stay at a LTCH
during which a Medicare inpatient is transferred upon discharge to an
acute care hospital, an IRF, or a SNF for treatment or services that
are not available in the LTCH and returns to the same LTCH within
applicable fixed-day periods. (We also include transfers to swing beds
under this interrupted stay policy for LTCH payment policy
determinations, consistent with the SNF PPS payment policy. That is, a
readmission to a LTCH from post-hospital SNF care being provided in a
swing bed that is located either in the LTCH itself or in another
onsite Medicare provider has the same policy consequence as a
readmission to the LTCH from an onsite SNF (June 6, 2003, 68 FR
34149).)
As defined in the previous paragraph, an interrupted stay is
treated as one discharge from the LTCH. The day-count of the applicable
fixed-day period of an interrupted stay begins on the day of discharge
from the LTCH (which is also the day of admission to the other site of
care). For a discharge to an acute care hospital, the applicable fixed-
day

[[Page 25691]]

period is 9 days, for an IRF, 27 days, and for a SNF 45 days. The
counting of the days begins on the day of discharge from the LTCH and
ends on the 9th, 27th, or 45th day for an acute care hospital, an IRF,
or a SNF, respectively, after the discharge.
If the patient is readmitted to the LTCH within the fixed-day
threshold, return to the LTCH is considered part of the first admission
and only a single LTCH PPS payment will be made. For example, if a LTCH
patient is discharged to an acute hospital and is readmitted to the
LTCH on any day up to and including the 9th day following the original
day of discharge from the LTCH, one LTC-DRG payment will be made. If
the patient is readmitted to the LTCH from the acute care hospital on
the 10th day after the original discharge or later, Medicare will pay
for the second admission as a separate stay with an additional LTC-DRG
assignment. In implementing this policy, we provide that, in the event
a Medicare inpatient is discharged from a LTCH and is readmitted and
the stay qualifies as an interrupted stay, the provider must cancel the
claim generated by the original stay in the LTCH and submit one claim
for the entire stay. (For further details, see Medicare Program
Memorandum Transmittal A-02-093, September 2002.)
On the other hand, if the patient stay exceeds the total fixed-day
threshold outside of the LTCH at another facility before being
readmitted, two separate payments would be made. One would be based on
the principal diagnosis and length of stay for the first admission and
the other based on the principal diagnosis and length of stay for the
second admission. Depending upon their lengths of stay, both stays
could result in payments as a short-stay outlier (Sec. 412.529), a
full LTC-DRG, or even a high-cost outlier. Further, if the principal
diagnosis is the same for both admissions, the hospital could receive
two similar payments. It is also important to note that under the
existing interrupted stay policy, a separate Medicare payment is made
to the intervening provider under that provider's payment system.
When we introduced the interrupted stay policy for LTCHs in the
August 30, 2002 final rule (67 FR 56002-56006), we noted that we would
consider expanding or revising the policy based on information received
from the provider community or information gained from our ongoing
monitoring activities. During the first year of the LTCH PPS, it has
come to our attention, from both of these sources, that certain LTCHs
are discharging patients during the course of their treatment for the
sole purpose of receiving specific tests or procedures from another
facility (that should have been furnished under arrangements by the
LTCHs), and then readmitting the patient to the LTCH following the
administration of the test or procedure. In other words, these patients
do not stop receiving medical care that must be considered LTCH
inpatient services during the period between their discharge from and
readmission to the LTCH. On the contrary, they continue to receive
care, often of a highly specialized type, from the other facility
before being readmitted for further inpatient care at the LTCH. This
sequence of care suggests that the original discharge from the LTCH may
be motivated by financial considerations rather than by clinical
judgment and, therefore, would be inappropriate.
Existing regulations at Sec. 412.509(c) require a LTCH to furnish
all necessary covered services for a Medicare beneficiary who is an
inpatient of the hospital either directly or under arrangements (as
defined in Sec. 409.3). Under Sec. 409.3, when services are furnished
under arrangements, Medicare payments made to the provider that
arranged for the services discharges the liability of the beneficiary
or any other person to pay for those services. The ``under
arrangements'' policy set forth in Sec. 412.509 for LTCHs derives from
the regulations at Sec. 411.15(m), which implement section 1862(a)(14)
of the Act. Section 1862(a) of the Act specifies the services for which
no payment may be made under Medicare Part A and Part B and also
specifies the exception for certain services to be furnished ``under
arrangements'' by providers.
If a LTCH obtains, from another facility ``under arrangements,'' a
specific test or procedure for one of its inpatients that is not
available on the LTCH's premises, as contemplated by Sec. 412.509, a
discharge and a subsequent readmission would be unnecessary and
inappropriate. This is true even if it is necessary to transport the
patient to another facility to receive the arranged-for service.
Furthermore, no additional claim can be submitted to Medicare by the
other entity that actually furnished the test or procedure because,
under Sec. 412.509(c), the LTCH must furnish all necessary covered
services to the Medicare beneficiary who is an inpatient of the
hospital either directly or under arrangements. In this situation,
generally, the LTCH would include the medically necessary test or
procedure on its patient claim to Medicare (which could have an effect
on the assignment of the LTC-DRG and thus the Medicare payment to the
LTCH) and the LTCH would be responsible for paying the provider
directly for the test or procedure.
Patient discharges from the LTCH for tests or procedures that
should have been provided under arrangements, followed by LTCH
readmission, result in an inappropriate increase in Medicare costs in
three ways:
First, the Medicare payment associated with the LTC-DRG that would
be assigned to the patient's stay will typically already include the
costs of the test or procedure. (The August 30, 2002 LTCH PPS final
rule (67 FR 55977-55985), includes an in-depth description of the
derivation of LTC-DRGs from ICD-9-CM codes on Medicare claims and a
discussion of the development and calculation of LTC-DRG relative
weights.) Second, the intervening provider will bill Medicare
separately for the test or procedure. Thus, if services that should
have been furnished directly or under arrangements by the LTCH are
instead unbundled and billed separately, Medicare would pay the other
provider for the service that should have been paid for ``under
arrangements'' by the LTCH under Sec. 412.509.
Third, a discharge for outpatient services and a subsequent
readmission to the LTCH is not currently covered under the interrupted
stay policy at existing Sec. 412.531. Section 412.531(a) only includes
discharges from a LTCH to an acute care hospital, an IRF, and a SNF for
treatment or services not available in the LTCH and subsequent
readmission to the same LTCH. If a patient is discharged and readmitted
to the LTCH following an outpatient test or procedure, under current
policy, after making a LTCH PPS payment for the first discharge, there
would be a second Medicare payment to the LTCH when the patient is
finally discharged.
In the January 30, 2004 proposed rule (69 FR 4769-4770), in order
to address these concerns, we proposed to revise the definition of an
interruption of a stay under Sec. 412.531 to add situations in which a
patient is discharged from the LTCH and readmitted to the same LTCH
within 3 days of the discharge (revised Sec. 412.531(a)(1)). We
believe that if a patient is discharged from a LTCH for any reason to
an acute care hospital, IRF, SNF, or home, and is then readmitted
within 3 days, in general, the patient's original admitting diagnoses
would not change significantly during those 3 days. Therefore, a
readmission would not constitute a new episode of care. We questioned
whether a patient

[[Page 25692]]

who was discharged home and then returned to the same LTCH within 3
days should have been discharged in the first place. Since LTCHs are
designed to treat patients with a high level of acuity and
multicomorbidities, we believed that a 3-day period was a reasonable
window during which necessary offsite medical care might be delivered,
under arrangements, as contemplated under Sec. 412.509, without an
appreciable change in the original admitting diagnoses. Moreover, this
3-day period is consistent with the policy under the IRF PPS under
which the maximum period of time that a patient could be away from the
IRF is 3 days before a new patient assessment is required. Therefore,
under our proposal, if a patient were discharged on Monday to an acute
care hospital, IRF, SNF, or home, and readmitted either on that Monday
(the first day), Tuesday (the second day), or Wednesday (the third
day), the subsequent readmission would not be considered a new
admission and Medicare would pay the LTCH for only one discharge based
on the combined length of stay for the period prior to, during, and
after the absence from the LTCH. If a patient was readmitted to the
LTCH at any time after Wednesday, (the third day), the 3-day
interrupted stay policy would no longer be relevant and Medicare
payments would be governed by the existing interrupted stay policy.
Therefore, if following discharge from a LTCH, and treatment or
services as an inpatient at an acute care hospital, IRF, or SNF for
greater than 3-days, but less than the interrupted stay threshold for
that provider type (9 days for an acute care hospital, 27 days for an
IRF, 45 days for a SNF), when the patient is readmitted to the LTCH,
only one payment would be made to the LTCH, but the intervening
provider may also submit a Medicare claim for that patient. Moreover,
if the patient's stay at the intervening provider exceeds the
threshold, a readmission to the LTCH will be counted as a new stay for
each provider, as noted above, a readmission to the LTCH will be
counted as a new stay pursuant to Sec. 412.531(a)(1). We reiterate
that the provisions of the proposed 3-day or less interrupted stay
policy would be only applicable for patients who are discharged from a
LTCH to an acute care hospital, IRF, SNF, or home, and then are
readmitted to the LTCH within 1, 2, or 3 days. After that point, when
the interruption exceeds 3 days, but less than the fixed period
threshold in the original interrupted stay policy, a separate payment
will be made to the intervening facility under the appropriate PPS, but
one payment would be made to the LTCH for one episode of care. We will
hereafter refer to the original interruption of stay policy as ``the
greater than 3-day interruption of stay''. This clarified and renamed
policy, from day 4 forward, under revised Sec. 412.531(a)(2), and the
counting of days would begin on the first day of admission to the
intervening provider (but not at day 4) for purposes of determining
whether or not the episode is actually one LTCH stay with an
interruption within the 9, 27, or 45 day threshold, or two separate
LTCH stays that would be occasioned by a stay in excess of the
applicable thresholds.
An example of when the proposed 3-day or less interrupted stay
policy would govern is as follows: if a LTCH patient is discharged from
the LTCH to an acute care hospital, stays at the acute care hospital
for 3 days and then returns to the LTCH by midnight of the 3 days,
Medicare would pay one LTC-DRG payment to the LTCH and the LTCH would
be responsible for paying the acute care hospital for the costs of the
tests which should have been provided under arrangements by the LTCH.
In this case, the proposed payment policy was dictated by the
presumption that the discharge to the acute care hospital was not
warranted, but services should be provided to the LTCH patient under
arrangements if the patient needed to be readmitted to the LTCH within
3 days of being discharged.
An example of when the existing greater than 3-day interruption of
stay governs is as follows: A LTCH patient is discharged from the LTCH
and admitted directly to an IRF where the patient remains for 16 days
prior to being readmitted to the LTCH for further care. The interrupted
stay threshold for IRFs is 27 days and since the stay at the IRF is
within the 27 day threshold, both stays at the LTCH will be paid as one
discharge under the LTCH PPS and Medicare will pay the IRF for the
patient's treatment under the IRF PPS for days 1 through 16. In this
case, payment policy is dictated by the presumption that the
hospitalization at the intervening site was appropriate because the
patient required treatment at the IRF for a number of days
significantly in excess of 3 days, as specified in the less than 3-day
interruption of stay policy. But the patient's readmission to the LTCH
prior to reaching the 27 day threshold means that it is being paid as a
continuation of the original hospitalization.
An example of a situation not governed by either of the interrupted
stay policies is as follows: a LTCH patient is discharged to an acute
care hospital and remains under treatment for 12 days (the greater than
3-day interrupted stay threshold for acute care hospitals is 9 days)
prior to being readmitted to the LTCH. In this case, Medicare will pay
the acute care hospital under the IPPS and the patient's readmission to
the LTCH will be paid separately as a second bona fide admission. In
this case, treatment at the acute care hospital is being paid under the
IPPS and because the number of days away from the LTCH exceed the fixed
threshold of 9 days under the greater than 3-day interruption of stay
policy, the second admission is being seen as a separate episode of
care. (Sec. 412.531(b)(4))
Under the proposed revision of the interruption of stay policy for
LTCHs in the January 2004 proposed rule, we stated that any treatment
or medical services furnished to the individual during the 3-day (or
less) absence from the LTCH could not be billed separately to the
Medicare program or to the beneficiary, but would be paid as ``under
arrangements'' services to the LTCH. When we established the LTCH PPS
(67 FR 55954, August 30, 2002), we calculated payments under the LTCH
PPS using base year costs that include the numerous tests and
procedures typical of the complicated medical conditions that
characterize LTCH patients, including those furnished by other
providers in order to satisfy the statutory requirements under section
123 of Public Law 106-113, for budget neutrality. Therefore, we
believed that a readmission to the LTCH that triggers the 3-day or less
interrupted stay policy should be treated as a continuation of the
episode of care that occasioned the first admission. Further, we
believe that the readmission to the LTCH within 3 days establishes the
presumption that any treatment or services furnished during the
intervening 3 (or less) days should have been provided by the LTCH
``either directly or under arrangements'' (Sec. 412.509(b)). The
entire stay would generate one LTC-DRG payment under the LTCH PPS,
which would be ``payment in full for all inpatient hospital services,
as defined in Sec. 409.10.'' (Sec. 412.509(a)) Under Sec. 409.10(a)
inpatient hospital services means the following services furnished to
an inpatient of a qualified hospital: (1) Bed and board; (2) nursing
services and other related services; (3) use of hospital or CAH
facilities; (4) medical social services; (5) drugs, biologicals,
supplies, appliances, and equipment; (6) certain other diagnostic or
therapeutic services; (7) medical or surgical services provided by
certain interns or residents-

[[Page 25693]]

in-training; and (8) transportation services, including transport by
ambulance.
As explained above, we proposed that a readmittance to the LTCH
within 3 days after a discharge will result in one LTC-DRG payment for
the entire stay. Since we are treating both, the stay at the LTCH that
occurred before and after the discharge to the intervening provider,
parts of the stay as one episode of care, we proposed that treatment or
care provided during the ``interruption'' would be considered to have
occurred during that single episode of care and that payment for such
services are included in the LTC-DRG payment. We also proposed to
include the days of the 3-day or less interruption of stay in counting
LTCH days to determine the total length of stay of the patient at the
LTCH if medical treatment or care were provided during the 3 days or
less because these services would be considered to have been paid for
as part of the total LTCH stay (Sec. 412.531(b)(1)(iii)). Furthermore,
we proposed that if a patient is discharged home, and within a 3-day or
less period received no additional medical treatment or service, but is
readmitted to the LTCH, the days away from the LTCH would not be
included in the length of stay calculation.
We also proposed that this policy would be applicable to all
services or procedures provided to the patient either under Medicare
Part A, or Part B, except for the services which are expressly excluded
from bundling under section 1886(a)(1)(H)(i) of the Act and Sec.
411.15(m), such as services furnished by physicians under Sec.
415.102(a) and other specific health professionals. Failure to comply
with this bundling requirement could lead to sanctions such as
termination of the LTCH's Medicare provider agreement or civil money
penalties (under section 1866(a)(1)(H)(i) of the Act).
Although we understand that, in good faith, a patient could be
discharged from a LTCH, return home for a day or two, experience a
setback, and then be readmitted to the LTCH, we believe that this type
of a readmission to the LTCH must be considered an extension of the
original hospitalization and that Medicare will not pay for two claims
for what was, in effect, one episode of care. The 3-day or less
interrupted stay policy takes into account the profile of most LTCH
patients, as typically very sick individuals with multicomorbidities.
We believe that it is reasonable to presume that if this type of
patient is discharged and then readmitted to a LTCH within 3 days, the
readmission signifies a continuation of the original hospital stay and
not a new episode of care. Furthermore, we are concerned about reports
of LTCHs discharging and readmitting patients who are still undergoing
active treatment rather than obtaining services for these patients
``under arrangements'' in accordance with section 1862(a)(14) of the
Act and the regulations at Sec. 412.509.
In the January 2004 proposed rule, we indicated that we intend to
collect data on any Medicare claims for outpatient services as well as
inpatient services furnished during the time that the patients are away
from the LTCH under the 3-day or less interrupted stay policy. We would
review data to determine whether we will expand the 3-day time period
and we will consider proposing this change in a future rule. Further,
if it appears that additional patients are being discharged for the
purpose of receiving tests or procedures at other Medicare settings,
and then readmitted to the LTCH, in order for the LTCH to avoid paying
for the procedure ``under arrangements,'' we may find it appropriate
for our Quality Improvement Organizations (QIO) to evaluate the medical
basis for the original discharge. A patient discharge that is not
clinically justifiable could constitute potential violation of the
LTCH's conditions of participation in the Medicare program for
inadequate discharge planning or an inappropriate discharge from the
LTCH under Sec. 482.43. Moreover, as noted above, if a separate bill
is submitted by an entity other than the LTCH for services furnished
during this period, this could also be a violation of the LTCH's
provider agreement obligation regarding bundled services.
In proposing the policy in the January 2004 proposed rule, we did
not attempt to restrict a LTCH from pursuing necessary or more
appropriate clinical care from another facility. As we designed the PPS
for LTCHs, the original interrupted stay policy was created for
situations where sound clinical judgment could suggest a different
treatment setting for LTCH patients: A patient requiring emergency
surgery at an acute care hospital; a patient who would appear to
benefit from a specific therapy regimen at an IRF; or a patient who had
improved and, therefore, could be appropriately cared for at a SNF. The
policy accounted for a readmission to the LTCH after the emergency care
or in the event of a change in the patient's condition, that is, for
sound clinical reasons. Fundamentally, the original interrupted stay
policy resulted from our determination to allow considerable latitude
to medical personnel in this regard without untoward payment
consequences for the Medicare program.
We proposed a revision to the existing interrupted stay policy
because we believed that 3 days in most instances represents an
appropriate interval for establishing whether or not the reason for the
patient's readmission is directly connected to the original episode of
care and whether or not Medicare-covered services were obtained during
the interruption that should have otherwise been provided ``under
arrangements'' by the LTCH.
All inpatient services, under Medicare, fall within the purview of
the requirement of section 1862(a)(14) of the Act, and, therefore, what
we stated was not a departure from existing policy. Under section
1862(a)(14) of the Act, notwithstanding any other provision of this
title, ``no payment may be made under Part A or Part B for any expenses
incurred for items or services which are other than physicians'
services (as defined in regulations promulgated specifically for
purposes of this paragraph), services described by section
1861(s)(2)(K) of the Act (certified nurse-midwife services, qualified
psychologist services, and services of a certified registered nurse
anesthetist) and which are furnished to an individual who is a patient
of a hospital or critical access hospital by an entity other than the
hospital or critical access hospital unless the services are furnished
under arrangements (as defined in section 1861(w)(1) of the Act with
the entity made by the hospital or critical access hospital.'' Section
1861(w)(1) of the Act states that ``[t]he term ``arrangements'' is
limited to arrangements under which receipt of payment by the hospital,
critical access hospital, skilled nursing facility, home health agency,
or hospice program (whether in its own right or as agent), for services
for which an individual is entitled to have payment made under this
title, discharges the liability of such individual or any other person
to pay for the services.'' We believe the objective of these statutory
provisions, which were implemented for inpatient acute care hospitals
in regulations at Sec. 411.15(m) and subsequently at Sec. 412.509 for
LTCHs, was to discharge financial liability for inpatients who may have
received additional care off-premises and to assign payment
responsibility for the care to the hospital that is being paid for that
beneficiary's total care for that spell of illness. The total care
delivered by the hospital may be provided ``directly'' or ``under
arrangements'' with other facilities (Sec. 412.509(c)) and was
included in Medicare's payment to the hospital.

[[Page 25694]]

Over the years, we have often referred to this as the ``prohibition
against unbundling'' for purposes of emphasizing that if a Medicare
provider ``unbundles'' specific components of a beneficiary's total
inpatient care (provided either ``directly'' or ``under arrangements'')
and sends separate claims to Medicare for those tests or treatments,
the provider would be acting in violation of the statute and applicable
regulations. Since LTCHs treat patients with multicomorbidities who are
often in need of a wide range of diagnostic and treatment modalities
and lengthy hospitalizations, we believe that in this particular
setting, this statutory requirement is particularly vulnerable to
gaming. For that reason, we proposed to clarify the existing general
unbundling prohibition and to propose specific language on the
unbundling prohibition as it applies to the interrupted stay policy
under the LTCH PPS and proposed to codify it in regulations. As noted
above, we were concerned that LTCH patients, under active treatment,
are being inappropriately discharged to other treatment sites,
receiving tests or procedures related to one of the diagnoses the
patient being hospitalized and which otherwise should have been
provided at the LTCH either directly or under arrangements under Sec.
412.509 and then readmitted to the LTCH. Another claim is also being
submitted to Medicare by the other treatment site for those tests or
procedures. As stated earlier, under the LTCH PPS, payments associated
with specific LTC-DRGs include all costs associated with rendering care
to the type of patients treated in LTCHs and, therefore, additional
Medicare payments for such services would be inappropriate.
We noted in the proposed rule that we understand that during a
particular hospitalization, a typical LTCH patient, with
multicomorbidities, could suddenly require emergency care at an acute
care hospital. This would be the case, for example, if a patient who
was admitted to the LTCH with a principal diagnosis of chronic
obstructive pulmonary disease and respirator dependence, with secondary
diagnoses of hypertension, Type II diabetes mellitus, history of
coronary artery disease, and history of bladder cancer suddenly
exhibits symptoms consistent with a pneumothorax (lung collapse) and
requires treatment that is beyond the scope of the LTCH. Services
obtained at an acute care hospital, under the proposed 3-day or less
policy, would be considered related to the original diagnoses, and
submission of a separate claim by the acute hospital is considered a
violation of the unbundling requirement established by section
1862(a)(14) of the Act. Payment to the acute hospital for any services
delivered would be the responsibility of the LTCH since the critical
episode was directly related to the hospitalization at the LTCH.
Conversely, if the same patient had instead suddenly suffered a
myocardial infarction (heart attack) that requires a cardiac workup,
evaluation, and possible implantation of a cardiac stent, it may be
appropriate to discharge this patient for admission to an acute care
facility for appropriate evaluation and the invasive cardiac procedure.
Under these circumstances, the admission to the acute hospital was
totally unrelated to the patient's diagnoses in the LTCH and arguably
there may be no need to bundle the services. A discharge from the LTCH
and a readmission following the procedure at the acute hospital in
order to resume the treatment provided by the LTCH, for which the
patient was originally hospitalized, could be entirely appropriate.
(Notwithstanding the necessity of the discharge, under the 3-day or
less interrupted stay policy, there would be no additional separate
LTC-DRG payment generated to the LTCH if the patient returns to the
LTCH within the 3-day period.) We also noted in the proposed rule that
it could be argued that in this type of a subsequent admission to the
acute hospital, the acute care hospital should be able to submit a
claim to Medicare for the procedure. (This payment to the acute
hospital may be subject to the postacute care policy at Sec. 412.4,
depending upon the DRG to which it is assigned (68 FR 45404 and 45412,
August 1, 2003).)
We stated that we were aware that there could be exceptions, and
that in the example cited above, sound medical judgment could have
dictated that the patient who needed the cardiac stent should first be
discharged to the acute hospital and then readmitted to the LTCH within
3-days in order to continue necessary treatment at the LTCH. In such a
case, notwithstanding our 3-day interrupted stay policy, it would be
arguable that the implantation of the cardiac stent did not fall within
the category of services that should be paid for by the LTCH under
arrangements, and that the acute hospital should be able to submit a
claim to Medicare.
Accordingly, while arguably it may be appropriate to attempt to
limit the unbundling requirement that services be provided under
arrangement to those that are ``related'' to the admitting diagnoses of
the LTCH patient, we did not propose a methodology that would be both
administratively feasible and not subject to gaming, given the multiple
comorbidities typical of LTCH patients. The prospective payment system
for this particular setting was designed to capture all costs
associated with treating these highly complicated cases, and we
believed that it would be difficult to distinguish whether a particular
critical episode could be seen as arising from one of the patient's
many medical conditions for which the patient is presently at the LTCH.
Therefore, in the January 2004 proposed rule, we solicited comments and
suggestions that were consistent with the stated policy goals described
above and that would be administratively feasible. We understood that
any policy adopted would need to be issued with detailed instructions
to fiscal intermediaries on implementation procedures to ensure a
correct and consistent interpretation of our policy objectives.
Comment: We received a comment from a LTCH chain fully endorsing
the proposed 3-day interrupted stay policy.
Response: We thank the commenter for supporting the proposed
policy. In order to address the essential issues raised in the proposed
rule, while taking into account legitimate concerns raised by the LTCH
community in public comment, we are making certain modifications to the
final policy. Under this final rule, if a LTCH discharges a patient to
an acute care hospital, an IRF, SNF, or home for 3 days or less and the
patient returns to the same LTCH within 3 days, Medicare will make only
one LTC-DRG payment to the LTCH, as the stay is paid as a single
episode of care. In addition, we will make no separate payment to the
intervening acute care hospital, IRF, SNF, or in the case of a
beneficiary who is discharged home and who receives outpatient
treatment from an acute care hospital or an IRF for medical care or
services provided to the LTCH patient during the 3-day or less
interrupted stay. Payments for tests, treatments, or procedures
provided to the LTCH patient during the ``interruption'' at an
outpatient hospital setting or for treatment or care as an inpatient at
an acute hospital, IRF, or SNF would be the responsibility of the LTCH
as services provided ``under arrangements'(Sec. 412.509(b) and (c)).
Furthermore, this policy also governs if the LTCH patient receives care
or treatment at more than one of these intervening sites during the 3-
day or less period, that is, this policy applies if the patient is
discharged from the LTCH on Monday morning, and on Monday afternoon
receives an MRI at an outpatient department of an acute care

[[Page 25695]]

hospital then is admitted as an inpatient to the acute care hospital on
Monday evening and finally is discharged home on Tuesday morning and
readmitted to the LTCH on Wednesday. In response to several comments,
which we will discuss in detail below, we have decided to establish a
exception in this general 3-day or less rule for the 2005 LTCH PPS rate
year to the payment policy discussed above in the event that during an
up to 3-day interruption, a LTCH patient receives treatment in an acute
care hospital that results in the case being grouped to a surgical DRG.
For this limited instance we will allow the acute hospital to bill
separately for the discharge that is grouped to a surgical DRG. During
the 2005 LTCH PPS rate year, we will gather data on the impact of this
exception in order to evaluate, among other effects, the frequency of
this scenario during a 3-day interrupted stay at a LTCH, as well as
what surgical DRGs are actually represented. Depending upon what
information the data reveals, we may decide to propose to continue this
exception or to propose appropriate policy revisions.
Therefore, the policy that we are finalizing in this final rule
differs from our proposed policy. We had originally proposed that no
payment would be made to intervening providers during a 3-day or less
interruption in stay, but in this final rule, we are now providing a 1-
year exception in the event that inpatient care provided at an acute
care hospital is grouped to a surgical DRG. Under this finalized
policy, where the LTCH is required to pay for care during any days of
the 3-day or less interruption, all days of the 3-day or less
interruption that the patient is away from the LTCH will be included in
that patient's day count at the LTCH. If the LTCH patient goes home
during the interruption and receives no additional medical care prior
to being readmitted to the LTCH, the intervening days will not be
included in the day count because the LTCH did not deliver any services
to the patient during those days either directly or ``under
arrangement''.
In the proposed rule, we proposed that outpatient services provided
during the 3-day or less interruption of stay were considered to be
part of the LTCH episode of care and, thus, are considered to be
provided ``under arrangements.'' We believe that our reference to
outpatient services, tests, or procedures could have been clearer. So
we are taking this opportunity to clarify, to the extent it was not
already clear, that our policy applies to outpatient services provided
in acute care hospitals and IRFs (these two sites of care were cited in
our proposed rule). SNFs, which were also mentioned in the proposed
rule, do not provide outpatient care and, thus, are excluded from the
outpatient reference. We note that we are clarifying this at Sec.
412.531.
We have reviewed the proposed Sec. 412.531 and determined that it
can be simplified and clarified so that it is less cumbersome to
understand and more clearly describes the division of the original
interrupted stay policy into a ``3-days or less interruption of stay''
and a ``greater than 3-day interruption of stay.'' Thus, we have made
significant revisions to the regulations text in an effort to
accomplish this goal. Please note that the revised ``interruption of
stay'' regulations text is not substantively different than the
proposed interrupted stay regulations text, (except for the case of
where, after further review and consideration of public comment, we
have made an exception to our proposed policy for care grouped to a
surgical DRG under the IPPS for the 2005 LTCH rate. We are providing,
in this final rule, that under these unique circumstances, the
intervening acute care hospital gets a separate Medicare payment).
Consequently, we have replaced the general term ``interruption of
stay'' with two definitions that reflect the division of our original
policy into two specific concepts (3-days or less and greater than 3-
days), as well as make conforming terminology changes throughout the
section. Among other things, we have also more concisely outlined the
method for determining the length of stay of the patient at a LTCH if
the patient does not receive inpatient or outpatient medical care or
treatment provided by an acute care hospital or IRF, or SNF services,
during a 3-day or less interruption of stay. Moreover, we provided a
more clear breakdown of how a LTCH and an intervening provider will be
paid during a ``3-day or less'' or ``greater than 3-day'' interrupted
stay. In addition, the original term ``interruption of stay'' appears
throughout the existing regulation text at Sec. 412.525 and Sec.
412.532. We have made conforming changes to these regulations as well
to reflect the two components of the interrupted stay terminology.
These conforming terminology changes in Sec. 412.525 and Sec. 412.532
do not affect the substantive policy of these provisions.
Over the course of the first year of implementation of the revised
3-day or less interrupted stay policy, we will study relevant claims
data in order to evaluate whether further proposed refinements to this
policy would be warranted in next year's rule. Specifically, we will
(1) analyze new data to determine whether problems associated with LTCH
interrupted stays equally affected all settings to which LTCH patients
may have been discharged and subsequently readmitted; and, (2) we will
closely monitor patterns of discharges and readmissions under the first
year of this policy using relevant claims data as soon as they become
available to determine whether further proposed changes to the policy
are required to ensure that beneficiary access to medically necessary
services are not compromised by creating disincentives for other
providers to accept patients discharged from LTCHs.
Comment: Two commenters asserted that CMS had presented no
empirical evidence to support the position that the proposed expansion
of the interrupted stay policy would prevent inappropriate
``unbundling'' of treatment and services or prevent ``gaming'' the
system. The commenters noted that there are already processes in place
for CMS to address a compliance problem (that is, QIOs, OIG
investigations, fraud and abuse action). The commenters point out that
CMS should take into account the fact that some QIOs are adopting
medical necessity criteria and discharge standards. Furthermore, they
believed that CMS was wrong to pursue a regulatory scheme that would
penalize LTCHs for appropriate discharges to acute care hospitals in
lieu of actually enforcing existing regulations. One commenter
encouraged CMS to ``precisely target'' those LTCHs that are found to be
engaging in patient discharge and readmissions policies for financial
purposes rather than for clinical benefit.
Response: In the August 30, 2002 final rule that implemented the
LTCH PPS, we stated that we would consider expanding or revising the
interrupted stay policy based on information received from the provider
community or information gained from our ongoing monitoring sources.
The LTCH PPS was implemented for LTCHs beginning with the cost
reporting periods beginning on or after October 1, 2002. Therefore,
some LTCHs (for example, hospitals with cost reporting periods
beginning August 1, 2002) may have been subject to the LTCH PPS for
less than one year. Accordingly, we have only limited specific data on
the impact of behavioral changes brought about by the LTCH PPS
regarding patient treatment and movement among providers. However, we
relied on the best information available to us when proposing and
finalizing this policy. We relied on anecdotal information from the
LTCH

[[Page 25696]]

provider community, regional offices, and fiscal intermediaries, as
well as analyses of inpatient discharge records by the CMS Office of
Research, Development, and Information (ORDI). In addition, it has
always been our practice to rely on information from providers,
regional offices, and fiscal intermediaries in determining what
policies to propose, particularly when the issues we are concerned with
have an unnecessarily negative impact on Medicare program expenditures.
In addition, based on the data analysis of inpatient discharge
records performed by our ORDI, we believe that there is cause for
concern regarding the appropriateness of many of these stays at the
acute care hospital since they are of 3 or fewer days compared to the
average inpatient length of stay of approximately 5.9 days. If it
typically takes, on average, 5.9 days to resolve the condition chiefly
responsible for an admission to an acute care hospital, we question the
legitimacy of a patient discharge from a LTCH to an acute hospital for
1, 2, or at most 3 days, followed by a readmission to the LTCH. This
pattern suggests that the ``discharge'' may not be legitimate and that
the patient really did not need the level of care provided in an acute
care hospital as evidenced by the short stay at the acute care
hospital. If the ``discharge'' was ``legitimate'', we believe the
length of stay at the acute care hospital would have been more
reflective of a typical stay at an acute care hospital, that is, 5.9
days and not 1, 2, or 3 days. In other words, if it normally takes 5.9
days to stabilize and resolve the underlying condition requiring the
admission, then stays that are far shorter than this could reasonably
suggest that the patient's condition did not rise to the level of
acuity of a true acute care hospital patient and that the admission to
the acute care hospital was unnecessary. In this case, the LTCH should
not have discharged the patient in the first place, but rather sent the
patient to the acute care hospital for needed tests or procedures and
paid for them ``under arrangements''. Consequently, the 3-day
interrupted stay policy is a mechanism for ensuring that LTCHs do not
circumvent the required ``under arrangements'' policy by
``discharging'' patients rather than sending them for isolated services
or procedures. We are trying to make clear that ``discharges'' by a
LTCH followed by ``readmissions'' of the same patient to the same LTCH
within a 3 day or less window are not to be viewed as true discharges.
Instead, the care provided at the intervening facility is care that is
really an inherent part of the single episode of care at the LTCH and
should be paid for as such.
We are providing a limited exception to this policy for patients
who are discharged from LTCHs, admitted as inpatients to acute care
hospitals and readmitted to the same LTCHs within 3 days if the
treatment that they receive at the acute care hospital is grouped to a
surgical DRG during the 2005 LTCH PPS rate year. This exception is
discussed in greater detail in the following response.
In this final rule, therefore, we are finalizing the policy that
will disallow additional Medicare payments to an intervening provider
for an episode of care that we believe should have been delivered under
arrangements in conformity with existing regulations at Sec.
412.509(b)(c).
As more data become available, we may be able to formulate specific
hospital policies and rely on additional comprehensive data analysis.
As noted above, in response to the comment that we are pursuing a
new regulatory scheme that penalizes LTCHs for appropriately
discharging patients to other sites of care, we firmly believe that we
are not penalizing LTCHs for appropriate discharges. LTCHs remain free
to discharge patients to acute care hospitals, for example, for
necessary medical care. Our final policy does not prevent this.
Instead, our 3-day or less interrupted stay policy aims to prevent
LTCHs from inappropriately discharging patients only to readmit them in
a short time in order to circumvent the ``under arrangement'' policy.
As previously indicated, ``under arrangements'' regulations have
existed since the beginning of the Medicare program, and were certainly
in effect under the TEFRA payment system for hospitals excluded from
the IPPS, and continue to be in effect with the implementation of the
LTCH PPS in Sec. 412.509. Thus, providers are expected to be in
continual compliance with the requirements specified in Sec. 411.15(m)
and under the LTCH PPS, in Sec. 412.509. The finalized 3-day or less
interrupted stay policy, at revised Sec. 412.531, as described in the
previous response, is definitely not a new ``regulatory scheme'' as one
commenter asserts.
In response to the commenter's other assertion that there are
already processes in place for dealing with non-compliance issues on an
individual basis, we would agree and note that, prospectively, we also
have every intention of working with QIOs, the OIG, and if necessary,
pursuing fraud and abuse actions against individual LTCHs, if
appropriate. We do not agree that the existence of standards of medical
review are employed by QIOs, and the pursuit of legal remedies is an
alternative for establishing policies that disallow unnecessary and
inappropriate Medicare payments. We also want to note that while we are
aware that certain of our QIOs are engaged in designing medical
necessity criteria for LTCHs, we do not believe that this impacts on
our responsibility to assure that LTCHs comply with existing ``under
arrangement'' policies and to formulate regulations that protect the
Medicare program against unnecessary and inappropriate payments.
Moreover, we would also emphasize that the ``under arrangements''
policy deals with appropriate payment for services, not issues of
medical judgment. The policy that we are promulgating does not prohibit
a physician at a LTCH from ordering tests or procedures for a patient's
benefit that cannot be provided on site at the LTCH. The policy only
defines how those services will be paid for under Medicare.
Comment: Two commenters asserted that ``under arrangements'' refers
to what services or procedures the LTCH (primary hospital) arranges for
and controls and that if a LTCH patient is subsequently admitted to an
acute care hospital, the LTCH would have no control over care that the
patient may receive. A third commenter joined in the assertion that
under the proposed policy, LTCHs could be subject to unlimited,
uncontrolled costs during the acute care stay that would discourage
readmissions to the LTCH since, under the proposed policy, the LTCH
would be required to pay for the costs of services beyond those that
relate to the plan of care in place when the patient was discharged
from the LTCH.
Response: Our regulations at Sec. 412.509(c) specify that ``[t]he
long-term care hospital must furnish all necessary covered services to
the Medicare beneficiary who is an inpatient of the hospital either
directly or under arrangements * * *'' When a necessary covered service
is unavailable on site at the hospital, in order to comply with the
regulations as well as the statute they implement at section
1862(a)(14) of the Act, the hospital must procure the specific services
elsewhere. These services would be delivered at another site under
orders from the original hospital because they were deemed necessary by
physicians at that location, but unavailable at that site of care.
Although personnel from the original hospital would not be
administering the tests or treatments that were procured ``under
arrangements,'' the services would be related directly to the plan of
care for

[[Page 25697]]

that patient. Notwithstanding a sudden non-surgical medical emergency
occurring during the original test or procedure that could require
personnel at the secondary site to alter the original plan of care (and
which would still be delivered ``under arrangements''), we believe that
the very principle of ``under arrangements'' services implies that the
services have been ``arranged for'' precisely because physicians at the
primary hospital determined that those services were necessary. We
remained thoughtful of this principle when we examined public comments
and revisited the ``under arrangements'' component of the proposed 3-
day or less interrupted stay policy for the LTCH PPS. Under our
finalized policy, therefore, the readmission to the LTCH within 3-days
of a patient's discharge is a continuation of the original episode of
care for payment purposes. In order words, ``discharges'' by an LTCH
followed by a ``readmission'' to the LTCH within 3 days are not viewed
as a true ``discharge''. Furthermore, treatment that the patient
receives during that interruption as an inpatient or outpatient at an
acute care hospital or an IRF, or any services at a SNF, will be
understood as also arising from the hospitalization at the LTCH and
deemed to have been delivered ``under arrangements'' as governed by
Sec. 412.509(c). After considering several of the comments we
received, however, we are providing for a limited exception to the
above policy that addressed a LTCH's responsibility to pay for all
covered services delivered during the interruption. Specifically, we
are providing that if inpatient care provided at an acute care hospital
is grouped to a surgical DRG for the 2005 LTCH PPS rate year, this case
will be separately reimbursed by Medicare for the period July 1, 2004
to June 30, 2005. If a patient's treatment at an acute care hospital
during a 1, 2, or 3-day interruption is grouped to a surgical DRG under
the acute care inpatient prospective payment system, a separate
Medicare payment will be made to the acute care hospital. Based on the
limited information we have regarding this specific issue, we believe
that this temporary and narrow exception to the general policy that we
are finalizing in this regulation is appropriate and may be understood
in relation to the logic that underlies our 3-day or less interruption
of stay policy. The 3-day or less interruption of stay policy described
above is based on the presumption that tests and procedures delivered
during a 1, 2, or 3-day interruption in a LTCH stay are an outgrowth of
the patient's principal and secondary diagnoses at the LTCH, not
requiring a discharge from the LTCH to another site of care, but rather
delivered by the LTCH either directly or under arrangements, as
required by section at section 1862(a)(14) of the Act and implemented
by Sec. 411.15(m) and Sec. 412.509. An emergency surgical procedure
may not be directly related to the patient's principle or secondary
diagnoses at the LTCH, but may arguably signify a distinct episode of
care. Therefore, while the two LTCH discharges will be paid as one
discharge, under this limited exception, the acute care hospital will
receive a separate payment from Medicare for treatment that is grouped
into a surgical DRG even during a 3-day or less interruption of stay
from a LTCH.
We are particularly concerned about protecting the Medicare Trust
Fund against unnecessary and inappropriate patient shifting and
additional Medicare payments in situations where a LTCH exists as a
hospital within a hospital, under Sec. 412.22(e) in situations where
both hospitals are under common ownership. In that situation, even if
the LTCH received only one discharge payment under the original
interrupted stay policy, the fact that a full DRG would have been paid
to the host acute care hospital (which is under common ownership with
the LTCH) could have served as an incentive for decisions to be made
for financial purposes rather than for clinical considerations. We are
also concerned that if a LTCH patient is discharged to an acute care
hospital for only 1, 2, or 3 days, followed by a readmission to the
LTCH, there may be reason to believe that the treatment delivered, even
if it was grouped to a surgical DRG, was not a major procedure because
of the relatively short length of stay, and, therefore, should have
been provided under arrangements. (Under the revised interrupted stay
policy established in the August 30, 2002 final rule (67 FR 56002-
56006), which we are now defining as the ``greater than 3-day
interruption of stay,'' at Sec. 412.531(a)(2)(i), we have provided for
a separate DRG to be paid to the acute care hospital if the treatment
in the acute care hospital requires a stay of greater than 3 days, but
less than or equal to 9 days, which is what we believe would commonly
be the case for a ``major'' surgical procedure.) In establishing the
one-year exception for surgical DRGs, set forth above, we understand
that this exception addresses only some of the concerns raised by the
commenters and that we are creating a distinction between surgical and
non-surgical care. We believe, however, that this temporary
``exception,'' limited to surgical DRGs, is appropriate as LTCHs
specialize in the treatment of complex medical cases. While they may
not be set up for a complex surgical intervention, they are generally
capable of handling an unexpected medical crisis and a ``discharge'' to
another site of care followed by a readmission to the LTCH within 3
days or less should be unnecessary. Furthermore, we will continue to
monitor ``surgical'' hospitalizations occurring during interruptions in
a LTCH stays to determine whether the distinction that we have
established with this policy actually accomplishes our goals of
preventing unnecessary and inappropriate Medicare payments. During the
2005 LTCH PPS rate year, we will analyze records of LTCH patients who
fall within this exception, particularly focusing on the surgical DRGs
to which their stays are grouped.
Comment: Several commenters assert that CMS is violating budget
neutrality by broadening the scope of financial responsibility beyond
what was provided ``under arrangements'' for base year rates fiscal
years 1998 and 1999 and that this would distort and reduce Medicare
payments to LTCHs. Two commenters were concerned that if the proposed
policy was finalized, there would be a significant financial impact on
the LTCH and also noted that there was not regulatory impact in the
proposed rule.
Response: We want to note that under the TEFRA payment system, if a
LTCH patient required tests and procedures that were unavailable at a
LTCH, under section 1862(a)(14) of the Act, implemented in regulations
at Sec. 411.15(m), the statute requires that they be provided under
arrangements. Thus, if a LTCH patient required tests and procedures
that were unavailable at the LTCH, we assume that the LTCH had provided
those services ``under arrangement'' (and did not discharge the patient
to another site of care and directly admit the patient following the
off-site treatment) because it is required by the statute and
regulations. Consequently, we can only assume that hospitals would have
included the costs of medical services procured elsewhere ``under
arrangements'' in a patient's Medicare claim since under the TEFRA
system, these additional costs would then have been included in the
hospital target amount and would be paid for by Medicare. We disagree
that our policy violates budget neutrality because LTCHs should have
included these

[[Page 25698]]

services in their claims data which we used from 1998 and 1999 to set
the base rates for the LTCH PPS. We expect that as responsible
corporate entities, LTCHs take necessary steps to comply with Medicare
regulations which they are required to follow through their provider
agreements under 42 CFR Part 489. We presume that LTCHs, to the extent
that they were following our regulations, would have included the costs
of services furnished under arrangement in their cost reports and, if
they failed to do so, those costs may not be reflected in the base
rates.
Data from analyses of FY 2000 and CY 2002 MedPAR files were
analyzed in order to track patient movement related to discharges from
a LTCH and admissions to other inpatient sites, which were followed by
readmission to the LTCH. If tests and procedures were being provided
and paid for ``under arrangements,'' in compliance with our
regulations, significant patient movement would have been uncommon. Our
data indicated that in FY 2000, only 1.1 percent of all Medicare
patients were readmitted to a LTCH within 3 days of a discharge (912/
80,893 patients) of which less than 700 were treated in acute care
hospitals during the 3-day period. Our CY 2002 data revealed that 1.0
percent of Medicare patients followed the above sequence (1,077/107,643
patients), of which 850 were treated in an acute care hospital during
the 3-day interruption. We believe that this data indicates that prior
to the implementation of the LTCH PPS, the vast majority of LTCHs
complied with the ``under arrangements'' regulations. Therefore, since
the patient was not discharged in order to procure the service, but
rather remained a LTCH patient, even though the LTCH moved the patient
to another site for needed tests or care, those tests or care were
provided under arrangements. Accordingly, the costs of these services
should have been included in the patient's Medicare claim during those
years and, thus, should have been factored in when we were calculating
our base rates for the LTCH PPS.
The policy that we are finalizing, as described above, therefore,
requires a LTCH to cover off-site tests or medical treatment, either
inpatient or outpatient, delivered at an acute care hospital or an IRF,
or care at a SNF, ``under arrangements'' if the patient is readmitted
to the LTCH within 3 days. We are establishing an exception if the
treatment is grouped to a surgical DRG under the IPPS at an acute care
hospital during the 2005 LTCH PPS rate year, under the 3-days or less
interruption of stay policy. In other words, if the intervening stay is
``sandwiched'' between two LTCH stays, one LTC-DRG payment will be made
by Medicare representing payment in full, as described in Sec.
412.521(b) for the entire episode of care including costs for care
delivered ``under arrangements''. We reiterate that Medicare will make
a separate payment to an acute hospital for care that is grouped to a
surgical DRG during a 3-day or less interruption during the 2005 LTCH
PPS rate year. The policy that we are finalizing adds no greater
financial responsibility for LTCHs than existed prior to the
implementation of the LTCH PPS. Therefore, we do not agree that this
policy will reduce payments to LTCHs in any significant way. We do not
believe that the policy will have a measurable impact on payments to
LTCHs and therefore we did not produce an impact analysis for this
policy.
Comment: Two commenters expressed concern that the proposed policy
penalizes appropriate discharges disregarding the clinical needs of
patients and that patients' safety could be jeopardized. They assert
that the proposed rule contains financial disincentives for a LTCH to
discharge a patient to an acute care hospital, even if appropriate, and
also discourages readmission of a patient discharged from an acute care
hospital.
Response: We disagree with the commenters concerns that the
proposed policy could have a negative impact on patient care in that a
LTCH would have a significant financial disincentive to seek the most
appropriate care for a patient who has developed an unrelated problem
that the LTCH could not treat on premises--such as the hypothetical
cardiac stent mentioned above--if the LTCH would have to pay for all
necessary care at the acute care hospital ``under arrangements.'' The
event that would trigger the LTCH's under arrangements financial
liability would be a readmission to the LTCH within a 3-day period.
Since the length of stay of the patient at the non-LTCH setting is
unknown, we do not believe that the LTCH will refrain from discharging
the patient for appropriate care. Although we believe that readmission
for necessary care to the LTCH should be controlled by the clinical
needs of the beneficiary, we understand, however, that the proposed
policy could serve to discourage the LTCH from readmitting the patient
that had a stay of up to 3 days at a non-LTCH site.
In response to these concerns, we have revised our 3-day
interrupted stay policy. Under the revised policy, as noted above, the
LTCH will be responsible for medical services obtained ``under
arrangements'' during the 3-day-or-less absence from the LTCH for
services provided to the patient during the interruption under the
following circumstances: (1) If the treatment is an outpatient service
delivered by an acute care hospital or IRF within 3 days; (2) if the
patient is admitted to an acute care hospital and is grouped to a
medical (but not a surgical) DRG and is readmitted within 3 days; (3)
If the patient was admitted to a IRF or a SNF and then readmitted to
the LTCH within 3 days. Should the patient's stay be grouped to a
medical DRG at the acute care hospital, no Medicare payment would be
made to the acute care hospital under the IPPS and the LTCH would
report any diagnoses or procedure codes provided at the acute hospital
on the patients LTCH record (which could affect the LTC-DRG to which
the case is assigned for payment purposes or LTCH outlier payments).
Medicare will pay the LTCH based on all of the diagnoses and procedure
codes listed, including those resulting from the ``under arrangements''
care and the LTCH would pay the acute care hospital for the patient's
care. If the patient's treatment at the acute care hospital is grouped
into a surgical DRG during the LTCH PPS rate year, however, Medicare
will generate a separate payment to the acute care hospital. (The
patient's readmission to the LTCH in this circumstance may also result
in the acute care hospital being paid under the post-acute transfer
policy at Sec. 412.4(c).) The patient's readmission to the LTCH,
however, would still be considered as a continuation of the original
stay for payment purposes, and the LTCH would not receive a second LTC-
DRG payment.
We also want to emphasize that any inpatient or outpatient medical
treatment at an acute care hospital or IRF or care at a SNF that
otherwise should have been provided by the LTCH ``under arrangements''
that occurs during a 1, 2, or 3-day interruption, is the responsibility
of the LTCH. Therefore, if the same day that a patient is discharged
from the LTCH, the patient obtains an outpatient test from an acute
care hospital and as a result of that test, the patient is admitted to
an acute care hospital for one day and is readmitted to the LTCH on the
third day, the LTCH is responsible for paying for services delivered at
both sites of care.
Comment: One commenter claims that this proposed policy is both
arbitrary and capricious and is based on financial

[[Page 25699]]

concerns rather than on clinical rationale and medical necessary.
Response: We disagree with the commenter that this policy is
arbitrary and capricious and based on financial concerns rather than on
clinical rationale or medical necessity. We have provided throughout
this final rule, as we did in the proposed rule, our rationale for this
policy in conformance with the applicable Administrative Procedures
Act. We have conducted thorough examinations of the issues, and our
proposed and final policies were formulated on the bases of these
detailed analyses. Nothing in the 3-day interrupted stay policy
prevents physicians from making appropriate medical decisions for the
benefit of patients. The 3-day interrupted stay policy merely addresses
how Medicare will pay for the necessary services resulting from those
decisions. Thus, we believe physicians make treatment decisions on the
basis of clinical judgment and medical necessity and do not let
Medicare payment policy dictate the course of action that they believe
to be in the best interests of their patients. The requirement for
hospitals to provide all inpatient services either directly or ``under
arrangements'' is not new policy. We believe that the revision of the
proposed 3-day interrupted stay policy in this final rule addresses the
legitimate concerns of our commenters by excepting acute surgical
inpatient episodes, during the 2005 LTCH PPS rate year, from the LTCH's
responsibility to pay for all medical care delivered to a LTCH patient
between a discharge and a subsequent readmission to the LTCH. Although
protection of the Medicare Trust Fund from inappropriate and
unnecessary overpayments is important, ensuring the delivery of high
quality medical care to beneficiaries, which was the rationale behind
the Congress' creation of the Medicare program over three decades ago,
continues to be our overriding goal. We do not believe that the
interrupted stay policy that we are finalizing in this rule should have
any negative affect on a LTCH's responsibility or capacity to deliver
high quality medical care nor do we believe that we have established a
system of financial disincentives that will lead to the compromising of
beneficiary care. LTCHs have been working under the principles of
``under arrangements'' since they were established as a provider
category over three decades ago. We also want to note that prospective
payment systems are dynamic entities. The Congress conferred broad
authority on the Secretary in section 307(b)(1) of Public Law 106-554
to design a PPS for LTCHs and permitted the Secretary to ``provide for
appropriate adjustments to the long-term hospital payment system * *
*'' This authority did not end with the implementation of the system on
October 1, 2002 and the Secretary is exercising his discretionary
authority as conferred by the statute to make these adjustments. As
with PPSs, we will continue to monitor the impacts of our policies to
determine whether proposed changes in the payment policy are warranted
or appropriate.
Comment: One commenter claims that no other provider type is
subject to a more stringent ``bundling'' rule or ``under arrangement''
rule.
Response: In response to the commenter's assertion that ``no other
provider is subject to a ``more stringent'' ``bundling rule'' or
``under arrangements'' rule, we would emphasize that all providers, not
just LTCHs, are required to provide all inpatient services directly or
under arrangements (section 1862(a)(14) of the Act), implemented by
Sec. 411.15. This final rule is doing nothing more than forcing those
providers that aren't complying with the longstanding ``under
arrangements'' policy to comply with this requirement. Those providers
already complying with our ``under arrangement'' regulations should
feel unaffected by our 3-day or less interruption of stay policy
because this policy ensures that they follow the ``under arrangement''
regulations that they are already following.
Typically, LTCHs are certified as inpatient acute care hospitals,
but are excluded from the IPPS and paid under a different PPS only if
they demonstrate that the patients that they treat require lengthy
hospital-level care for on the average, greater than 25 days. Payments
under the LTCH PPS are grouped into the same DRGs as are acute care
patients under the IPPS, but are weighted to reflect the high degree of
resources required to treat these severely sick patients. Therefore,
notwithstanding that all providers are required to provide all
inpatient services ``either directly or under arrangements'' under
Medicare, we would assert that in general, LTCHs are in a position to
offer ``directly'' a more comprehensive range of medical services than
are other excluded hospitals. We would also remind the commenter that
the responsibility for the LTCH to pay for any medical care delivered
during the up to 3-day interruption is only effectuated by a
readmission to the LTCH for additional treatment. This readmission,
which triggers the 3-day interrupted stay policy that we are
finalizing, serves to link both halves of the hospitalization (that is,
the stay at the LTCH before and after the discharge to the intervening
provider(s)) as one episode of hospital-level care. Since a LTCH is
certified as an acute care hospital, it is reasonable that if the
patient needed any additional care otherwise related to the LTCH stay
that was unavailable at the LTCH, the care should have been delivered
``under arrangements,'' with no need for a patient discharge. (An
exception to this policy would be if a patient received care at an
acute care hospital that was grouped to a surgical DRG during the 3-
days or less interruption, in which event, Medicare will make a
separate payment to the acute care hospital.) Furthermore, should the
patient be out of the LTCH and in an intervening acute care hospital,
IRF, or SNF before being readmitted to the LTCH, beyond 3-days, but
before the applicable fixed periods set forth in the greater than 3-day
interruption of stay policy at Sec. 412.531(a)(2) (that is, between 4
and 9 days at an acute care hospital, between 4 and 27 days at an IRF,
or between 4 and 45 days at a SNF), we believe the discharge to the
facility is bona fide. It is reasonable that a LTCH patient could
require a major surgical intervention at an acute care hospital, could
appear to be able to benefit from more rigorous rehabilitation at an
IRF, or appear to improve to the extent that hospital-level care was no
longer necessary. It is also reasonable that after a period of time,
which we are establishing as greater than 3 days, after the post-
operative period at the acute care hospital, the patient may require
further treatment at the LTCH based on the original diagnoses, or the
patient at the IRF or SNF could experience a setback and require a
readmission to the LTCH. Thus, we are basing this policy on the belief
that the intervening provider offered a full course of treatment or
care to the patient and should receive a separate Medicare payment.
Comment: One commenter expresses concern that the proposed policy
would require negotiations with acute care hospitals for payment of the
``under arrangements'' services. The commenter notes that since it is
customary for a LTCH to refer patients to acute care hospitals for a
variety of services, many of which are very costly and involve new
pharmaceutical or technological intervention, these costs would not
have been included in rate-setting for the LTCH PPS. Two commenters
included a list of conditions that a LTCH might not be able to treat
and that, in the best interests of the patient, might require

[[Page 25700]]

admission to an acute care hospital. Another commenter believes that
LTCHs are designed to provide a ``higher level of post acute care, not
a high level of acute care.''
Response: With regard to the commenter's concern that our policy
would require negotiations between LTCHs and acute care hospitals that
could theoretically put the LTCH at a disadvantage, we would reiterate
that even under the TEFRA payment system, LTCHs were required to
provide, and actually did provide, necessary patient care either
directly or ``under arrangements.'' Moreover, our other PPSs require
that necessary care be provided either directly or ``under
arrangements''. Thus, negotiations among hospitals for the payment of
medical care or services provided by one facility to the patient of
another facility has been and continues to be a common occurrence.
Compliance with this requirement presumes a relationship and,
therefore, a payment arrangement with an acute care hospital usually
existed even prior to the August 30, 2002 publication of the final rule
(67 FR 55954) establishing the LTCH PPS and its specific ``under
arrangements'' regulation at Sec. 412.509. With regards to the
commenter's concern about the responsibility for LTCHs to cover costs
for ``very costly'' new pharmaceutical or technological services
procured ``under arrangements'' from an acute care hospital for an LTCH
patient, we would reiterate that under the TEFRA payment system, LTCHs
were required to provide services ``under arrangements.'' To the extent
that new pharmaceutical or technological services were provided to LTCH
patients ``under arrangements'' by an acute care hospital, the LTCH was
responsible for those costs and should have included them in its
Medicare claim for that patient. Generally, these costs would have been
included in the base rate when we developed the LTCH PPS. We do not
believe that in the past this imposed a significant financial burden on
LTCHs, but based on the commenter's concerns, we will monitor the
effects of this policy on services involving new technologies and if
necessary, will consider addressing this issue in the future. Regarding
the two commenters who included a list of conditions that, in their
judgment, could result in a discharge from a LTCH and an admission to
an acute care hospital, some surgical diagnoses were present, in the
list forwarded by the commenters. In addition, there were a number of
medical diagnoses included in the commenter's list. As noted earlier,
we have modified the proposed policy in this final regulation, so that
where the acute stay is grouped to a surgical DRG during the 2005 LTCH
PPS rate year in a 3-day or less interrupted stay, the discharge to the
intervening provider would not be care provided ``under arrangements''
and the intervening acute care hospital would receive a separate
Medicare payment for the care associated with the surgical DRG. In
response to the medical diagnoses included by the commenters, our
physicians have reviewed the list and believe that in most cases, it
would be within the ability of a LTCH to treat those patients, since
LTCHs are certified as acute care hospitals. In response to the LTCHs
which see themselves as ``providing a higher level of post acute care,
not a high level of acute care'', as noted by one of the commenters, we
believe that this is an issue that we and MedPAC will continue to
evaluate, to determine whether higher LTCH PPS payments are appropriate
for these facilities. (We anticipate that MedPAC's June 2004 Report to
the Congress, will explore this issue, among others, dealing with
LTCHs.)
Comment: One of the commenters stated that the proposed expansion
of the interrupted stay rule could lead to more ``gaming'' of system by
large LTCH chain facilities which could likely have patients readmitted
to a sister LTCH facility in order to avoid this rule.
Response: We are aware of the potential for inappropriate
arrangements between closely-located LTCHs owned by the same
corporation that would side-step the application of the 3-day
interrupted stay policy. At the outset of the LTCH PPS, we noted that
as part of our monitoring efforts for the original interrupted stay
policy, we would examine patient movement among providers during an
episode of care and that our data analyses could, therefore, reveal
discharges and readmissions between LTCHs. As data become available, we
will certainly continue to monitor the activity and we will pursue
appropriate remedies if we detect this behavior.
d. Onsite discharges and readmittances. Under Sec. 412.532,
generally, if more than 5 percent of all Medicare discharges during a
cost reporting period are patients who are discharged to an onsite SNF,
IRF, or psychiatric facility, or to an onsite acute care hospital and
who are then directly readmitted to the LTCH, only one LTC-DRG payment
will be made to the LTCH for these type of discharges and readmittances
during the LTCH's cost reporting period. Therefore, payment for the
entire stay will be paid either as one full LTC-DRG payment or a short-
stay outlier, depending on the duration of the entire LTCH stay.
In applying the 5-percent threshold, we apply one threshold for
discharges and readmittances with a co-located acute care hospital.
There is also a separate 5-percent threshold for all discharges and
readmittances with co-located SNFs, IRFs, and psychiatric facilities.
In the case of a LTCH that is co-located with an acute care hospital,
an IRF, or a SNF, the interrupted stay policy at Sec. 412.531 applies
until the 5-percent threshold is reached. However, once the applicable
threshold is reached, all those discharges and readmittances to the
applicable site(s) for that cost reporting period are paid as one
discharge pursuant to Sec. 412.532. This means that even if a
discharged LTCH Medicare patient was readmitted to the LTCH following a
stay in an acute care hospital of greater than 9 days, if the
facilities share a common location and the 5-percent threshold were
exceeded, the subsequent discharge from the LTCH will not represent a
separate hospitalization for payment purposes. Only one LTC-DRG payment
will be made for all those discharges during a cost reporting period to
the acute care hospital, regardless of the length of stay at the acute
care hospital, that are followed by readmittances to the onsite LTCH.
Similarly, if the LTCH has exceeded its 5-percent threshold for all
discharges to an onsite IRF, SNF, or psychiatric hospital or unit, with
readmittances to the LTCH, the subsequent LTCH discharge for patients
from any of those sites for the entire cost reporting period will not
be treated as a separate discharge for Medicare payment purposes. (As
under the interrupted stay policy, payment to an acute care hospital
under the IPPS, to an IRF under the IRF PPS, and to a SNF under the SNF
PPS, will not be affected. Payments to the psychiatric facility also
will not be affected.)
5. Other Payment Adjustments
As indicated earlier, we have broad authority under section 123 of
Public Law 106-113, including whether (and how) to provide for
adjustments to reflect variations in the necessary costs of treatment
among LTCHs. Thus, in the August 30, 2002 final rule (67 FR 56014-
56027), we discussed our extensive data analysis and rationale for not
implementing an adjustment for geographic reclassification, rural
location, treating a disproportionate share of low-income patients
(DSH), or indirect medical education (IME) costs. In that same final
rule, we stated that we would collect data and reevaluate the

[[Page 25701]]

appropriateness of these adjustments in the future once more LTCH data
become available after the LTCH PPS is implemented. Because the LTCH
PPS has been implemented for less than 2 years and there is a lag-time
in data availability, sufficient new data have still not yet been
generated that would enable us to conduct a comprehensive reevaluation
of these payment adjustments. Nonetheless, in the January 30, 2004
proposed rule (69 FR 4764), we explained that we reviewed the limited
data that are available and found no evidence to support additional
policy changes. Therefore, we did not propose to make any adjustments
for geographic reclassification, rural location, DSH, or IME. We
received no comments, and therefore, in this final rule, we are not
making an adjustment for geographic reclassification, rural location,
DSH, or IME at this time. However, we will continue to collect and
interpret new data as they become available in the future to determine
if these data support proposing any additional payment adjustments.
6. Budget Neutrality Offset to Account for the Transition Methodology
Under Sec. 412.533, we implemented a 5-year transition period from
reasonable cost-based payment to prospective payment, during which a
LTCH is paid an increasing percentage of the LTCH PPS rate and a
decreasing percentage of its payments under the reasonable cost-based
payment methodology for each discharge. Furthermore, we allow a LTCH to
elect to be paid based on 100 percent of the standard Federal rate in
lieu of the blended methodology.
The standard Federal rate was determined as if all LTCHs will be
paid based on 100 percent of the standard Federal rate. As stated
earlier, we provide for a 5-year transition period that allows LTCHs to
receive payments based partially on the reasonable cost-based
methodology. In order to maintain budget neutrality as required by
section 123(a)(1) of the Public Law 106-113 and Sec. 412.523(d)(2)
during the 5-year transition period, we reduce all LTCH Medicare
payments (whether a LTCH elects payment based on 100 percent of the
Federal rate or whether a LTCH is being paid under the transition blend
methodology).
Specifically, we reduce all LTCH Medicare payments during the 5-
year transition by a factor that is equal to 1 minus the ratio of the
estimated TEFRA reasonable cost-based payments that would have been
made if the LTCH PPS had not been implemented, to the projected total
Medicare program PPS payments (that is, payments made under the
transition methodology and the option to elect payment based on 100
percent of the Federal rate).
In the June 6, 2003 final rule (68 FR 34512), based on the best
available data, we projected that a certain percentage of LTCHs would
elect to be paid based on 100 percent of the standard Federal rate
rather than receive payment based on the transition blend methodology.
As discussed in that same final rule, using the same methodology
established in the August 30, 2002 final rule (67 FR 56034), this
projection was based on our estimate that either: (1) A LTCH has
already elected payment based on 100 percent of the Federal rate prior
to the beginning of the 2004 LTCH PPS rate year (July 1, 2003); or (2)
a LTCH will receive higher payments based on 100 percent of the
standard Federal rate compared to the payments they would receive under
the transition blend methodology. Similarly, we projected that the
remaining LTCHs would choose to be paid based on the transition blend
methodology at Sec. 412.533 because those payments would be higher
than if they were paid based on 100 percent of the standard Federal
rate.
In the June 6, 2003 final rule (68 FR 34513), we projected that the
full effect of the remaining 4 years of the transition period,
including the election option, will result in a cost to the Medicare
program of $310 million. Specifically, for the 2005 LTCH PPS rate year,
we estimated that the cost of the transition would be $100 million.
This cost would have necessitated an estimated budget neutrality offset
of 4.6 percent (0.954) for payments to LTCHs in the 2005 rate year.
Furthermore, in order to maintain budget neutrality, we indicated that,
in the future, we would propose a budget neutrality offset for each of
the remaining years of the transition period to account for the
estimated payments for the respective fiscal year.
In the January 30, 2004 proposed rule (69 FR 4773), based on the
best available data at that time, we projected that approximately 69
percent of LTCHs would be paid based on 100 percent of the standard
Federal rate rather than receive payment under the transition blend
methodology for the 2005 LTCH PPS rate year. Using the same methodology
described in the August 30, 2002 final rule (67 FR 56034), this
projection, which used updated data and inflation factors, was based on
our estimate that either--(1) A LTCH has already elected payment based
on 100 percent of the Federal rate prior to the start of the 2005 LTCH
PPS rate year (July 1, 2004); or (2) a LTCH would receive higher
payments based on 100 percent of the 2005 LTCH PPS rate year standard
Federal rate compared to the payments it would receive under the
transition blend methodology. Similarly, we projected that the
remaining 31 percent of LTCHs would choose to be paid based on the
applicable transition blend methodology (as set forth under Sec.
412.533(a)) because they would receive higher payments than if they
were paid based on 100 percent of the proposed 2005 LTCH PPS rate year
standard Federal rate.
In that same proposed rule, based on the best available data at
that time and proposed policy revisions described in that same rule, we
projected that the full effect of the remaining 4 years of the
transition period (including the election option) would result in a
cost to the Medicare program of $170 million as follows: $80 million in
the 2005 LTCH PPS rate year; $50 million in the 2006 LTCH PPS rate
year; $30 million in the 2007 LTCH PPS rate year; and $10 million in
the 2008 LTCH PPS rate year.
Accordingly, using the methodology established in the August 30,
2002 final rule (67 FR 56034) based on updated data and the policies
and rates discussed in the January 30, 2004 proposed rule (69 FR 4774),
we proposed a 3.0 percent reduction (0.970) to all LTCHs' payments for
discharges occurring on or after July 1, 2004, and through June 30,
2005, to account for the estimated cost of the transition period
methodology (including the option to elect payment based on 100 percent
of the Federal rate) of the $80 million for the 2005 LTCH PPS rate
year.
In that same proposed rule, we explained that the proposed offset
of 3.0 percent had decreased relative to the prior estimate of 4.6
percent for several reasons. Specifically, we used data from more
recent cost reports and were able to obtain data from more LTCHs (211
LTCHs as compared to 194 LTCHs in the June 6, 2003 final rule). In
addition, in projecting the percentage of hospitals that would elect to
be paid based on 100 percent of the 2005 LTCH PPS rate year standard
Federal rate, we used data from the Provider Specific File (PSF), which
indicates whether a LTCH opted to be paid based on 100 percent of the
standard Federal rate or the transition blend methodology for the FY
2003 LTCH PPS payment year. However, based on information obtained from
the PSF, we learned that, for those LTCHs that we projected would
choose payment for FY 2003 based on 100 percent of the standard Federal
rate (where payment based on the full Federal rate would be expected to
be higher for those LTCHs than payment under the transition blend

[[Page 25702]]

methodology), a significant number of those LTCHs chose to be paid
under the transition blend methodology that is projected to result in
payment lower than that using 100 percent of the standard Federal rate.
Similarly, a significant number of those LTCHs that we expected
would choose payment under the transition blend methodology (where
payment under the transition blend for those LTCHs would be expected to
be higher than payment based on 100 percent of the standard Federal
rate) chose to be paid using 100 percent of the standard Federal rate,
which is projected to result in payment lower than that under the
transition blend methodology. Since a number of LTCHs opted to be paid
based on a methodology in which they would receive lower payments, we
assume that the overall cost of $100 million to the Medicare program of
the transition period will be less than what was projected in the June
6, 2003 final rule for the 2005 LTCH PPS rate year. Thus, in the June
6, 2003 final rule, in estimating the $100 million cost to the
transition, which would have necessitated a 4.6 percent reduction to
all LTCHs' payments for the 2005 LTCH PPS rate year, we overstated our
assumptions of the cost of the transition period.
Accordingly, to account for the projected lower cost of the
transition period due to those LTCHs that chose to be paid based on a
methodology in which they would receive lower payments in FY 2003, in
the January 30, 2004 proposed rule (69 FR 4773), we proposed a 3.0
percent (0.970) reduction to all LTCHs' payments during the 2005 LTCH
PPS rate year. We also noted that the proposed 0.970 transition period
budget neutrality factor for the 2005 LTCH PPS rate year was 3
percentage points lower than the transition period budget neutrality
factor for the 2004 LTCH PPS rate year (0.940). We explained that this
smaller budget neutrality offset would contribute to greater LTCH
payment increases between the 2004 and 2005 LTCH PPS rate years
compared to the increases seen between FY 2003 and the 2004 LTCH PPS
rate year. We do not expect to see these large payments per discharge
increases in future years as the majority of LTCHs will have
transitioned fully to the LTCH PPS and, therefore, the transition
period budget neutrality factor should remain more stable.
In this final rule, based on the updated data, using the same
methodology established in the August 30, 2002 final rule (67 FR
56034), we are projecting that approximately 93 percent of LTCHs will
be paid based on 100 percent of the standard Federal rate rather than
receive payment under the transition blend methodology during the 2005
LTCH PPS rate year. This projection, which used updated data (including
data from the PSF) is based on our estimate that either: (1) A LTCH has
already elected payment based on 100 percent of the Federal rate prior
to the beginning of the 2005 LTCH PPS rate year (July 1, 2004); or (2)
a LTCH will receive higher payments based on 100 percent of the
standard Federal rate compared to the payments they would receive under
the transition blend methodology. Similarly, we project that the
remaining 7 percent of LTCHs will choose to be paid based on the
transition blend methodology at Sec. 412.533 because those payments
are estimated to be higher than if they were paid based on 100 percent
of the standard Federal rate. The applicable transition blend
percentage is applicable for a LTCH's entire cost reporting period
beginning on or after October 1 (unless the LTCH elects payment based
on 100 percent of the Federal rate).
We note that this projection of the percentage of LTCHs that will
be paid based on 100 percent of the Federal rate rather than receive
payments under the transition blend methodology during the 2005 LTCH
PPS rate year is higher than our estimate of 69 percent presented in
the January 30, 2004 proposed rule. For this final rule, we are using
the most recent available data (claims data from the FY 2003 MedPAR
files, cost report data from FYs 1999-2001, and data from the December
2003 update of the PSF) and we have obtained data for more LTCHs (239
LTCHs compared to 211 in the proposed rule.) Specifically, we used data
from the PSF as of December 31, 2003, which indicates whether an LTCH
has notified its fiscal intermediary that it has elected to receive
LTCH PPS payments based on 100 percent of the Federal rate. Based on
the information obtained from the PSF, we learned that, of the 65 out
of 211 LTCHs (65/211= 31 percent) that we projected in the proposed
rule would choose payment under the transition blend methodology for
the 2005 LTCH PPS rate year (where payment under the transition blend
for those LTCHs was expected to be higher than payment based on 100
percent of the Federal rate), 61 of those 65 LTCHs have in fact already
made the election to receive payment based on 100 percent of the
Federal rate, even though we had projected that this election would
result in a lower payment than payment under the transition blend
methodology.
Furthermore, we believe that more LTCHs have elected to receive
payments based on 100 percent of the Federal rate due to an increase in
estimated fully Federal LTCH PPS payments relative to decreasing
reasonable cost-based payments.
Specifically, as we discussed above in section V.C.3. of this
preamble, based on an analysis of LTCH claims data in the latest
available MedPAR files (December 2003 update of the FY 2003 MedPAR
data), we have found that the average LTC-DRG relative weight assigned
to each case has increased due to a comparatively larger number of
cases being assigned to LTC-DRGs with higher relative weights. This
increase may be attributable to a number of factors, including
improvements in coding practices, which are typically found when moving
from a cost-based reimbursement system to a PPS. Increase in case-mix
was also observed after the IPPS was implemented in FY 1984 for acute
care hospitals. Additionally, as discussed in the article ``Long-Term
Care Hospitals Under Medicare: Facility-Level Characteristics'' by Liu
and Associates published in the Winter 2001 Health Care Financing
Review (Volume 23, Number 2), when LTCHs received cost-based
reimbursement under the TEFRA system, the cap on LTCHs' target amounts
created inequities between older (existing before 1983) and newer
(opening after 1983) LTCHs. Specifically, older LTCHs had relatively
low target amounts compared to the newer LTCHs, and, therefore, treated
relatively less complicated patients in order to keep their costs below
their target amount. One of the goals in implementing the PPS for LTCHs
was to provide older LTCHs an incentive to treat more complex LTCH
patients. The fact that older LTCHs are no longer limited by their
relative lower target amounts and are now able to treat more complex
patients may be another factor which has contributed to the increase in
case-mix. This increase in case-mix has resulted in an increase in
projected LTCH PPS payments based on 100 percent of the Federal rate
for the 2005 LTCH PPS rate year. In contrast, based on the most recent
cost report data (FY 2001), the average cost per discharge appears to
be decreasing for many LTCHs. Decreasing costs are also to be expected
when converting from a retrospective cost-based reimbursement system to
a prospective DRG-based payment system. Accordingly, our projection of
the reasonable cost-based portion of the transition blend payment is
based on these lower costs. The cost

[[Page 25703]]

per discharge could be decreasing due to better operating efficiency of
the hospital, which is one of the incentives of a PPS. Thus, our
projection of increasing LTCH PPS payments based on 100 percent of the
Federal rate and our projection of decreasing payments based on
reasonable costs may explain why a much larger number of LTCHs have in
fact elected to receive payments based on 100 percent of the Federal
rate despite our previous projections to the contrary. Thus, we believe
that, in the 2005 LTCH PPS rate year, a larger percentage of LTCHs
(larger than we estimated in the January 30, 2004 proposed rule) will
elect payment based on 100 percent of the Federal rate rather than the
transition blend methodology.
Based on the best available data and the final policies described
in this final rule, we are projecting that in the absence of a
transition period budget neutrality offset, the full effect of the
remaining 4 years of the transition period (including the election
option) as compared to payments as if all LTCHs wouldbe paid based on
100 percent of the Federal rate would result in a cost to the Medicare
program of $29 million as follows:

------------------------------------------------------------------------
Estimated
LTCH PPS rate year cost (in
millions)
------------------------------------------------------------------------
2005....................................................... $15
2006....................................................... 10
2007....................................................... 4
2008....................................................... 0
------------------------------------------------------------------------

We are no longer projecting a small cost for the 2008 LTCH PPS rate
year (July 1, 2007 through June 30, 2008) even though some LTCH's will
have a cost reporting period for the 5th year of the transition period
which will be concluding in the first 3 months of the 2008 LTCH PPS
rate year because as we discussed above, based on the most recent
available data, we are projecting that the vast majority of LTCHs will
have made the election to be paid based on 100 percent of the Federal
rate rather than the transition blend.
Accordingly, using the methodology established in the August 30,
2002 final rule (67 FR 56034) based on updated data and the policies
and rates discussed in this final rule, we are implementing a 0.5
percent reduction (0.995) to all LTCHs' payments for discharges
occurring on or after July 1, 2004, and through June 30, 2005, to
account for the estimated cost of the transition period methodology
(including the option to elect payment based on 100 percent of the
Federal rate) of the $15 million for the 2005 LTCH PPS rate year.
We note that the 0.5 percent transition period budget neutrality
offset for the 2005 LTCH PPS rate year is lower than the proposed
transition period budget neutrality offset for the 2005 LTCH PPS rate
year (3.0 percent). As discussed above, we are projecting that the vast
majority of LTCHs (93 percent) will be paid based on 100 percent of the
Federal rate during the 2005 LTCH PPS rate year. Accordingly, as
discussed above, we are projecting a much lower cost ($15 million
compared to $80 million in the proposed rule) of the full effect of the
transition period methodology (including the election option) for the
2005 LTCH PPS rate year.
As noted above, in order to maintain budget neutrality, we
indicated that we would propose a budget neutrality offset for each of
the remaining years of the transition period to account for the
estimated costs for the respective LTCH PPS rate years. In this final
rule, based on the best available data, we estimate the following
budget neutrality offsets to LTCH PPS payments during the remaining
years of the transition period: 0.4 percent (0.996) for the 2006 LTCH
PPS rate year, 0.1 percent (0.999) for the 2007 LTCH PPS rate year, and
0 percent (no adjustment) for the 2008 LTCH PPS rate year. As noted
above, we believe there is no longer a need for a small offset in the
2008 LTCH PPS rate year because we project that the vast majority of
those LTCHs whose 5th year of the transition period will be concluding
in the first 3 months of the 2008 LTCH PPS rate year will be paid based
on 100 percent of the Federal rate rather than the transition blend.
As we discussed in the August 30, 2002 final rule (67 FR 56036),
consistent with the statutory requirement for budget neutrality in
section 123(a)(1) of Public Law 106-113, we intended that estimated
aggregate payments under the LTCH PPS equal the estimated aggregate
payments that would be made if the LTCH PPS were not implemented. Our
methodology for estimating payments for purposes of the budget
neutrality calculations uses the best available data at the time and
necessarily reflect assumptions. As the LTCH PPS progresses, we are
monitoring payment data and will evaluate the ultimate accuracy of the
assumptions used in the budget neutrality calculations (for example,
inflation factors, intensity of services provided, or behavioral
response to the implementation of the LTCH PPS) described in the August
30, 2002 final rule (67 FR 56027-56037). To the extent these
assumptions significantly differ from actual experience, the aggregate
amount of actual payments may turn out to be significantly higher or
lower than the estimates on which the budget neutrality calculations
were based.
Section 123 of Public Law 106-113 and section 307 of Public Law
106-554 provide broad authority to the Secretary in developing the LTCH
PPS, including the authority for appropriate adjustments. Under this
broad authority, as implemented in the regulations at Sec.
412.523(d)(3), we have provided for the possibility of making a one-
time prospective adjustment to the LTCH PPS rates by October 1, 2006,
so that the effect of any significant difference between actual
payments and estimated payments for the first year of the LTCH PPS
would not be perpetuated in the LTCH PPS rates for future years.
In the June 6, 2003 final rule (67 FR 34153), we estimated that
total Medicare program payments for LTCH services over the next 5 LTCH
PPS rate years would be $2.17 billion for the 2004 LTCH PPS rate year;
$2.29 billion for the 2005 LTCH PPS rate year; $2.42 billion for the
2006 LTCH PPS rate year; $2.56 billion for the 2007 LTCH PPS rate year;
and $2.71 billion for the 2008 LTCH PPS rate year.
In the January 30, 2004 proposed rule (69 FR 4774), based on the
best available data at that time, we estimated that total Medicare
program payments for LTCH services over the next 5 LTCH PPS rate years
would be $2.33 billion for the 2005 LTCH PPS rate year; $2.48 billion
for the 2006 LTCH PPS rate year; $2.64 billion for the 2007 LTCH PPS
rate year; $2.79 billion for the 2008 LTCH PPS rate year; and $2.96
billion for the 2009 LTCH PPS rate year.
In this final rule, consistent with the methodology established in
the August 30, 2002 final rule (67 FR 56036), based on the most recent
available data, we estimate that total Medicare program payments for
LTCH services for the next 5 LTCH PPS rate years will be as follows:

------------------------------------------------------------------------
Estimated
payments
LTCH PPS rate year ($ in
billions)
------------------------------------------------------------------------
2005....................................................... 2.96
2006....................................................... 2.98
2007....................................................... 2.95
2008....................................................... 3.01
2009....................................................... 3.12
------------------------------------------------------------------------

In accordance with the methodology established in the August 30,
2002 final rule (67 FR 56037), these estimates are based on the
projection that 93 percent of LTCHs will elect to be paid based on 100
percent of the 2005 LTCH PPS rate year standard Federal rate rather
than the applicable transition blend, and our

[[Page 25704]]

estimate of 2005 LTCH PPS rate year payments to LTCHs using our Office
of the Actuary's most recent estimate of the excluded hospital with
capital market basket of 3.1 percent for the 2005 LTCH PPS rate year,
3.2 percent for the 2006 and 2007 LTCH PPS rate year, 2.8 percent for
the 2008 LTCH PPS rate year, and 3.1 percent for the 2009 LTCH PPS rate
year. We also took into account our Office of the Actuary's projection
that there will be a change in Medicare beneficiary enrollment of 1.0
percent in the 2005 LTCH PPS rate year, -4.8 percent in the 2006 LTCH
PPS rate year, -6.4 percent in the 2007 LTCH PPS rate year, -1.2
percent in the 2008 LTCH PPS rate year, and 0.2 percent in the 2009
LTCH PPS rate year. (We note that our Office of the Actuary is
projecting a decrease in Medicare Part A enrollment, in part, because
they are projecting an increase in Medicare managed care enrollment as
a result of the implementation of several provisions of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003.)
Comment: Two commenters endorsed the proposed 3.0 percent
transition period budget neutrality adjustment for the 2005 LTCH PPS
rate year, but expressed concern that the new data sources for
determining the budget neutrality offset (that is, use of cost report
data from 211 LTCHs, and the PSF) suggest an error in previous budget
neutrality adjustments (for FY 2003 and the 2004 LTCH PPS rate year).
The commenters asked if and how CMS plans to account for errors in past
estimates, and specifically asked whether CMS would use the one-time
prospective adjustment to the LTCH PPS rates (effective October 1,
2006) to account for errors in previous transition period budget
neutrality adjustments.
Response: The commenters are referring to the one-time prospective
adjustment at 42 CFR Sec. 412.523(d)(3), which states that the
Secretary may make a one-time prospective adjustment to the LTCH PPS
rates by October 1, 2006, so that the effect of any significant
difference between actual payments and estimated payments for the first
year of the LTCH PPS would not be perpetuated in the LTCH PPS rates for
future years. The purpose of this one-time adjustment is to ensure that
ultimately, total payments under the LTCH PPS are budget neutral to
what total payments would have been if the LTCH PPS were not
implemented in FY 2003, by correcting for possible significant errors
in CMS' calculation of the LTCH PPS standard Federal rate. However, the
transition period budget neutrality offset is a separate budget
neutrality adjustment. The purpose of the latter adjustment is to
maintain budget neutrality during the 5-year transition period, since
the standard Federal rate was determined based on the assumption that
all LTCHs would be paid under 100 percent of the standard Federal rate,
while some LTCHs have, in fact, elected to be paid on the transition
blend methodology. The budget neutrality adjustment is intended to
account for those LTCHs that elected the blend methodology and,
therefore, receive higher payments under the blend methodology relative
to 100 percent of the standard Federal rate.
Because the transition period budget neutrality offsets are made to
all LTCHs' payments under the LTCH PPS during each year of the 5-year
transition period and are not a reduction to the LTCH standard Federal
rate during the 5-year transition period, any errors in past estimates
would not be perpetuated in the LTCH PPS rates for future years. In
fact, by the end of the 5-year transition, there will be no budget
neutrality offset since all LTCHs will then be paid based on 100
percent of the standard Federal rate. Thus, the one-time prospective
adjustment was not intended to address possible errors in the
transition period budget neutrality offsets used during the 5-year
transition period. Furthermore, while we are aware that there are some
limitations in the data, as with other Medicare prospective payment
systems, the data that we use to determine the rates, adjustments and
other factors under the LTCH PPS, including the transition period
budget neutrality offsets, are always based on the best data that we
have available at the time. We would expect that the projections of the
budget neutrality offsets might fluctuate somewhat from rate year to
rate year as more data upon which we base our projections become
available, particularly, information on whether a LTCH has actually
elected payment based on 100 percent of the standard Federal rate.
Accordingly, we are not planning to make an adjustment by 2006 for
errors in the estimates of the transition period budget neutrality
offsets used in FY 2003 or in the LTCH PPS 2004 rate year.
As we discussed in the January 30, 2004 proposed rule (69 FR 4774),
because the LTCH PPS has only been implemented for less than 2 years,
sufficient new data have not been generated that would enable us to
conduct a comprehensive reevaluation of our budget neutrality
calculations. Accordingly, we did not propose to make a one-time
adjustment under Sec. 412.523(d)(3). At this time, we still do not
have sufficient new data to enable us to conduct a comprehensive
reevaluation of our budget neutrality calculations. Therefore, in this
final rule, we are not making a one-time adjustment under Sec.
412.523(d)(3) so that the effect of any significant difference between
actual payments and estimated payments for the first year of the LTCH
PPS is not perpetuated in the PPS rates for future years. However, we
will continue to collect and interpret new data as the data become
available in the future to determine if such an adjustment should be
proposed.
7. Changes in the Procedure for Counting Days in the Average Length of
Stay Calculation
Before the implementation of the PPS for LTCHs, Medicare paid LTCHs
under the reasonable cost methodology subject to limitations on
payments. Both the BBRA and BIPA required the development and
implementation of a per discharge PPS for LTCHs based on DRGs for cost
reporting periods beginning on or after October 1, 2002 (67 FR 55954,
August 30, 2002).
Under the reasonable cost-based reimbursement system, the number of
patient days that occurred during a cost reporting period and the costs
associated with those days were reported on the hospital's cost report
(Hospital and Hospital Health Care Complex Cost Report, CMS Form 2552-
96), as were the number of patient discharges that occurred during that
same period. This method of reporting and reimbursement did not require
that all of the days of care to a patient be counted as occurring in
the cost reporting period during which the patient was discharged.
Under this method of reporting and reimbursement, the days of care to a
patient are counted in the cost reporting period in which they
occurred.
With the FY 2003 implementation of the LTCH PPS, as in other
discharge-based PPS', such as those for acute care hospitals and for
IRFs, all days of the patient's stay, even those occurring prior to the
cost reporting period in which the discharge occurs are counted for
payment purposes as occurring in the cost reporting period of the
patient's discharge. An example of this distinction is as follows: A
LTCH has a January 1 through December 31 cost reporting period; a
Medicare patient is admitted on December 15 and discharged on February
5, 2004. Prior to the LTCH PPS, under the reasonable cost-based
reimbursement system, costs and patient days occurring in December 2003
would be included in the January 1 through December 31, 2003 cost
reporting period, even though the

[[Page 25705]]

patient was not discharged until February of the next cost reporting
period that began January 1, 2004. Those patient days occurring in
January and February would be counted in the next cost reporting period
(2004) in which the discharge occurred. Since the implementation of the
LTCH PPS, for payment purposes, all patient days for this stay would be
reported in the cost reporting period in which the discharge occurred.
In the above example, therefore, all of the patient stay would be
counted in the next cost reporting period, which is the 2004 cost
reporting period. Even if a LTCH is transitioning into fully Federal
payments and a percentage of its payments is based upon what would have
been paid under the former reasonable cost-based reimbursement system,
under Sec. Sec. 412.500 and 412.533, payment policy is governed by the
LTCH PPS. At cost report settlement, payment is discharge-based.
Therefore, once a LTCH is subject to the LTCH PPS, that is, for its
first cost reporting period starting on or after October 1, 2002, the
``days follow the discharge,'' which means that both days and costs are
linked to the patient's discharge, even when the days occurred in a
previous cost reporting period.
In the August 30, 2002 final rule (67 FR 55972), which established
the policies of the LTCH PPS, we stated that ``[t]he procedure by which
a LTCH will be evaluated by its fiscal intermediary to determine
whether it will qualify as a LTCH... is the same procedure currently
employed under the TEFRA system.'' Currently, for determining whether a
hospital meets the greater than 25 day average Medicare inpatient
length of stay criterion, in the case of a Medicare patient who was
admitted during one cost reporting period, but was discharged in a
following cost reporting period, both covered and uncovered days are
counted in the cost reporting period in which they occurred and not
linked to the cost reporting period in which the patient is discharged.
Therefore, presently, for a LTCH with a January 1 through December
31 cost reporting period, if a patient was admitted on December 1, 2002
and discharged on January 15, 2003, patient days would be counted one
way for payment purposes and another way for purposes of counting the
average length of stay. For payment purposes, all 46 days of the stay
and the costs associated with them would be reported during the cost
reporting period that the discharge occurred, that is, January 1, 2003
through December 31, 2003. For purposes of determining whether a
hospital meets the greater than 25 day length of stay criterion, under
Sec. 412.23(e)(2)(i), however, for the same patient, the 31 days in
December would be counted as occurring during the January 1, 2002 to
December 31, 2002 cost reporting period and the 15 days in January 2003
would be counted, along with the discharge, during the January 1, 2003
through December 31, 2003 cost reporting period.
As we stated in the January 30, 2004 proposed rule, we had received
numerous inquiries from providers and fiscal intermediaries indicating
that our two different ways of counting days under the LTCH PPS for
payment and for average length of stay calculations have created
considerable confusion. Therefore, in response to those inquiries and
consistent with the payment system already in place for LTCHs as
discussed above, we proposed to revise Sec. 412.23(e)(3)(i) of the
regulations to specify that if a patient's stay includes days of care
furnished during two or more separate consecutive cost reporting
periods, the total days of a patient's stay would be reported in the
cost reporting period during which the patient is discharged in
calculating the average length of stay for hospitals that qualify as
LTCHs under both Sec. 412.23(e)(2)(i) and (e)(2)(ii). We did not
propose any changes to the formula of dividing the number of total days
for Medicare patients by discharges for LTCHs in order to determine
whether a hospital qualifies as a LTCH under Sec. 412.23(e)(2)(i) or
in the formula of dividing total days for all patients by discharges
for LTCHs to qualify under Sec. 412.23(e)(2)(ii).
In the August 1, 2003 final rule for the IPPS (68 FR 45464), we
discussed the inability of the present cost report (Hospital and
Hospital Health Care Complex Cost Report, CMS Form 2552-96) to capture
total days for Medicare patients as required under Sec. Sec.
412.23(e)(2) and (e)(3) for hospitals qualifying under Sec.
412.23(e)(2)(i) and our present use of census data gathered from the
Medicare provider analysis and review (MedPAR) files for this purpose.
Prior to the October 1, 2002 implementation of the LTCH PPS, we relied
on data from the most recently submitted hospital cost report in order
to determine whether or not a hospital qualified as a LTCH. We will
continue to utilize patient days and discharge data from MedPAR files
for the qualification calculation under the revised Sec.
412.23(e)(3)(i) until the cost reporting form is revised to capture
total days for Medicare inpatients. As discussed earlier, for a
hospital to qualify as a LTCH under Sec. 412.23(e)(2)(i), it must
demonstrate that the Medicare inpatients require care for an average
Medicare inpatient length of stay of greater than 25 days for the
hospital's most recent cost reporting period. Alternatively, for cost
reporting periods beginning on or after August 5, 1997, a hospital that
was first excluded from the PPS in 1986, and can demonstrate that at
least 80 percent of its annual Medicare inpatient discharges in the 12-
month cost reporting period ending in FY 1997 have a principal
diagnosis that reflects a finding of neoplastic disease must have an
average inpatient length of stay for all patients, including both
Medicare and non-Medicare inpatients, of greater than 20 days (Sec.
412.23(e)(2)(ii)). Under the previous reasonable cost-based
reimbursement system to determine whether or not a hospital met this
requirement, total days for all patients were divided by the total
number of discharges that occurred during a cost reporting period. When
we implemented the LTCH PPS on October 1, 2002, we limited this
calculation to only Medicare patients for hospitals to qualify under
Sec. 412.23(e)(2)(i), but did not change the calculation for hospitals
to qualify under Sec. 412.23(e)(2)(ii). As we noted in the August 30,
2002 final rule, ``[w]e believe that excluding non-Medicare patients in
determining the average inpatient length of stay for purposes of
subclause (I) would be more appropriate in identifying the hospitals
that warrant exclusion under the general definition of LTCH in
subclause (I). However, in enacting subclause (II), the Congress
provided an exception to the general definition of LTCH under subclause
(I), and we have no reason to believe that the change in methodology
for determining the average inpatient length of stay would better
identify the hospitals that the Congress intended to exclude under
subclause (II) (67 FR 55974). These hospitals will continue to have
their greater than 20 days average length of stay calculated based on
all days for all patients, whether Medicare or non-Medicare patients.''
As with a subclause (I) LTCH, payments for a subclause (II) LTCH have
been discharge-based since the implementation of the LTCH PPS and,
therefore, for consistency, days for all patients will be counted for
ALOS purposes, during the cost reporting period when those patients are
discharged.
Comment: We received three comments on our proposal to change the
procedure for counting days in the ALOS calculation. The commenters
generally supported the proposed change provided that CMS establish
exceptions for LTCHs that previously

[[Page 25706]]

qualified under the existing criteria, but would lose LTCH status under
the new procedure. Both commenters suggested that we should allow the
LTCHs to present additional data to their fiscal intermediaries
indicating that the LTCHs were treating Medicare LTCH patients who had
not been discharged in time to comply with the ALOS requirements
computed under the new procedure before losing LTCH designation. One of
these commenters suggested that only after two years of failing to meet
the ``days follow the discharge'' ALOS requirement, if a LTCH lose its
designation. The same commenter asked us to clarify the impact of the
proposed ``days follow the discharge'' policy on our existing policy
which allows a LTCH that submits 5 months of data, under Sec.
412.23(e)(3)(ii), to retain its LTCH status.
Response: We thank the commenters for their general endorsement of
the proposed policy, and we understand their concern about LTCHs that
are providing long-term hospital-level care for Medicare patients
losing their designation under the new procedure. We want to reassure
the commenters that under Sec. 412.22(d), even if a fiscal
intermediary determined that a LTCH was not meeting the ALOS under the
new procedure, hospital status changes only at the start of a cost
reporting period. Accordingly, even if a determination is made that the
LTCH no longer meets the greater than 25 day length of stay criteria,
it may be possible for the LTCH to show that for 5 of the 6 months
immediately preceding the start of the next cost reporting period it
meets the length of stay criteria and, therefore, not have a break in
its payment status as a LTCH.
In response to one commenter's concerns, however, we are also
providing a one-year grandfathering of LTCH status for all existing
LTCHs that will give each hospital an additional cost reporting period
to adjust to the new methodology. Therefore, for cost reporting periods
beginning on or after July 1, 2004, but before July 1, 2005, no LTCH
would lose its designation if it was unable to demonstrate its
compliance with the ALOS requirement (Sec. 412.23(e)(3)(ii)) during
its first cost reporting period under the new procedure. An example of
our grandfathering provision is as follows: A LTCH's cost reporting
period begins on October 1, 2004 and it is informed shortly thereafter
by its fiscal intermediary, that it had not met the length of stay
requirement under the new computational procedure based on data from
its most recent cost reporting period, and the LTCH's data from April
1, 2005 through August 30, 2005 (at least 5 of the immediately
preceding 6-month period before the start of its next cost reporting
period) also did not show compliance. The LTCH would not lose its
designation on October 1, 2005, but would have until the end of this
cost reporting period (October 1, 2005 through September 30, 2006) to
comply.
In response to the commenter who questioned the impact of the
``days follow the discharge'' policy on the provider's option to submit
additional data demonstrating compliance with the ALOS requirement, we
believe that Sec. 412.23(e)(3)(i) is clear. The calculation resulting
in the 5 months of data that the LTCH will have to present in order to
indicate compliance will be made by the same method as proposed under
Sec. 412.23(e)(3)(i) for calculating the initial data reviewed by the
fiscal intermediary. This means that the LTCH would not lose its status
if its submitted data indicated that by dividing the patient days that
represented patients who had been discharged during those 5 months by
those discharges and omitting days for patients who had not yet been
discharged, the LTCH served patients with a ALOS of greater than 25
days. Therefore, we do not believe that there is any incompatibility
between the requirements of Sec. 412.23(e)(3)(i) which establishes the
new procedure linking days to discharges for the ALOS calculation and
the presentation of 5 months of data by the LTCH by the same method
under Sec. 412.23(e)(3)(ii). In addition, while the commenter suggests
that we consider an alternate method for meeting the 25 day length of
stay criteria, we believe it would be inappropriate to allow a LTCH to
present alternative data for indicating its inpatient census to its
fiscal intermediary in situations where the LTCH fails to comply with
the discharge-based day count, if it also failed to meet the revised
computational procedure. We have always been aware of concerns
regarding fluctuations in discharges and patient census at LTCHs that
could jeopardize LTCH status and that is why, prior to the LTCH PPS,
under the TEFRA system, we delay the effect of any determination to the
beginning of the hospitals' next cost reporting period and we allowed a
LTCH an opportunity to present its most recent data (Sec.
412.23(e)(3)(ii)) to maintain LTCH status, a policy that continues
under the LTCH PPS. We do not believe that in establishing the
discharge-based computation, it is appropriate to allow all LTCHs time
to make changes, if necessary, to assure compliance with the revised
criteria. Therefore, we are also finalizing the 1-year grandfathering
provision described above, which gives LTCHs additional time to adjust
to the new procedure without jeopardizing LTCH status. We believe that
this provision addresses the concerns of the commenter who suggested
that we allow non-compliance for 2 years prior to revoking LTCH status.
Finally, we want to clarify that LTCHs that qualify as LTCHs under
Sec. 412.23(e)(2)(ii) would also be subject to this requirement. We
are issuing this clarification because we discovered that although we
expressly provided in our January 30, 2004 proposed rule (69 FR 4775)
that the total days of a patient's stay would be reported in the cost
reporting periods during which the patient is discharged in calculating
the ALOS for hospitals that qualify under both Sec. 412.23(e)(2)(i)
and (ii) (and our proposed regulation text is consistent with this
language), we inadvertently included preamble language that may have
caused confusion about this proposed policy. We also want to clarify
that in the proposed regulation text at proposed Sec. 412.23(e)(3)(i)
that our ``days follow the discharge policy'' was applicable to days
involving ``* * * an admission during one cost reporting period and a
discharge in a second consecutive cost reporting period * * *'' This
regulation text was not as refined as the articulation of the policy in
the preamble where it was stated that the policy was applicable ``if a
patient's stay includes days of care furnished during two or more
separate consecutive cost reporting periods.'' In other words, the days
follows discharge policy is not limited to stays that occur in just 2
consecutive cost reporting periods, rather, it applies to stays that
span 2 or more consecutive cost reporting periods. Thus, we are making
a conforming change to the regulations text to clarify this policy. We
apologize for any ambiguity in the proposed rule on this subject.
8. Clarification of the Requirements for a Satellite Facility or a
Remote Location To Qualify as a LTCH and Changes to the Requirements
for Certain Satellite Facilities and Remote Locations
a. Policy Change. In Sec. 412.22(h)(1), we define a satellite as
``a part of a hospital that provides inpatient services in a building
also used by another hospital, or in one or more entire buildings
located on the same campus as buildings used by another hospital.''
Satellite arrangements exist when an IPPS excluded hospital is either a
freestanding hospital or a hospital-within-a-hospital under Sec.
412.22(e) that

[[Page 25707]]

establishes an additional location by sharing space in a building also
used by another hospital, or in one or more entire buildings located on
the same campus as buildings used by another hospital. A detailed
discussion of our policies regarding Medicare payments for satellite
facilities of hospitals excluded from the IPPS was set forth in the
IPPS final rules published on July 30, 1999 (64 FR 41532-41534) and
August 1, 2003 (67 FR 49982).
We established Medicare regulations regarding satellite facilities
for several reasons. First, we believe that whenever a facility that is
co-located with an acute care hospital is presented as part of another
IPPS-excluded hospital, it is necessary to ensure that the facility is,
in fact, organized and operated as part of the IPPS-excluded hospital
and is not simply a unit of the acute hospital with which it is co-
located. Although we recognize that the co-location of Medicare
providers, in the form of satellite facilities, hospitals-within-
hospitals, and excluded units, may have some legitimate advantages from
the standpoint of clinical care as well as medical efficiency, we
continue to believe that the physical proximity inherent in such
arrangements also has considerable potential for Medicare program
payment abuse in that it may facilitate patient shifting for reasons
related to payment rather than clinical benefits. In existing
regulations at Sec. 412.22(e) for hospitals-within-hospitals (59 FR
45330, September 1, 1994), at Sec. 412.23(h) for hospital satellites
(64 FR 41532-41534, July 30, 1999 and 67 FR 49982, August 1, 2002), and
Sec. 412.25(e) for satellite facilities, we established ``separateness
and control'' requirements governing the relationships between these
facilities and their host hospitals.
Research by The Urban Institute on the universe of LTCHs that was
used in developing the LTCH PPS pointed to the considerable growth of
new LTCHs (or LTCH beds, as in the case of satellite facilities) that
were co-located with other Medicare providers. Our more recent data
confirm that this trend has continued. Even though our existing
regulations governing hospitals-within-hospitals and satellite
facilities established certain functional boundaries between these
entities and their hosts, we instituted a policy under the LTCH
regulations at Sec. 412.532 to discourage inappropriate patient
discharges and readmissions among co-located Medicare providers (67 FR
56007-56010, August 30, 2002). Furthermore, in the June 6, 2003 LTCH
PPS final rule (68 FR 34157), we noted that we are monitoring the
movement of patients among onsite providers for the purpose of
determining whether we should consider proposing further changes to
LTCH coverage and payment policy.
LTCH hospitals-within-hospitals and LTCH satellite facilities are
similar in that both are located on the same campus or in the same
building as another hospital, and many of the same separateness and
control regulations exist for both types of facilities. However, there
is an important distinction between them. A LTCH that is co-located
with another Medicare hospital (generally an acute care hospital) is
itself a distinct hospital (Sec. 412.22(e)). Section 412.23(e)(1)
requires a LTCH to have a provider agreement as described under 42 CFR
Part 489 to participate as a hospital. A satellite facility of a LTCH,
like all satellite facilities of hospitals excluded from the IPPS
(Sec. 412.22(h)), is not itself a separate hospital, but a ``part of a
hospital that provides inpatient services in a building also used by
another hospital * * *'' Consistent with its status as another
hospital, a hospital-within-a-hospital has its own Medicare provider
number. A satellite facility shares the provider number of the parent
hospital.
Because a satellite facility is not considered a separate hospital
under Medicare, if a LTCH with a satellite facility is interested in
``spinning off'' the satellite facility and establishing the previous
satellite facility as an independent LTCH, the satellite must first be
separately licensed by the State. The facility must further demonstrate
compliance with the Medicare conditions of participation (COPs) under
part 482 and other requirements for establishing a provider agreement
under parts 482 and 489 to participate under Medicare as a hospital
(Sec. 412.23(e)(1)). (Compliance with the COPs may be either
demonstrated by a State agency survey or based on accreditation as a
hospital by the Joint Commission on Accreditation of Healthcare
Organizations (JCAHO or the American Osteopathic Association (AOA)
(section 1865 of the Act).) Second, if the newly established hospital
meets the provider agreement requirements under 42 CFR part 489, it
must demonstrate that it has an average Medicare inpatient length of
stay of greater than 25 days (Sec. 412.23(e)(2)(i)) by providing data
of a period of at least 5 months of the preceding 6-month period (Sec.
412.22(e)(3)(ii) and (iii)). The data used by the fiscal intermediary
to calculate the average length of stay would be from discharges from
the newly established hospital and not from discharges attributable to
stays at the previous satellite facility for the period prior to its
participation as a separate hospital.
Although we believe that these requirements, under existing Sec.
412.23(e)(1) and (e)(2), are clear and unambiguous, we have been
informed that due to misinterpretation, in some circumstances,
application of this policy has been inconsistent. Therefore, some
facilities operating as LTCH satellite facilities have been
inappropriately granted autonomous status that has resulted in the
assignment of their own Medicare provider numbers as LTCHs without
first obtaining provider agreements to participate in Medicare as
hospitals, under Sec. 412.23(e)(1). Apparently, in these cases, the
satellite facilities were able to demonstrate that as satellite
facilities of LTCHs, Medicare patients at their location had an average
length of stay of greater than 25 days, in compliance with Sec.
412.22(h)(2)(ii) which required satellite facilities of hospitals
excluded from the IPPS to comply with specific requirements for their
provider category. In other situations, we understand that fiscal
intermediaries correctly refused to accept data from LTCH satellite
facilities for purposes of qualification as an autonomous LTCH and
instead required the satellites to satisfy criteria for designation as
a hospital, under Sec. 412.23 (e)(1). In these cases, the fiscal
intermediary evaluated average length of stay data dating from that
hospital designation forward, as required by Sec. 412.23(e)(2).
We believe consistency in the application of this policy is needed,
in compliance with existing regulations at Sec. 412.23(e)(1) and
(e)(2). We are emphasizing that a LTCH satellite facility that is ``a
part of a hospital that provides inpatient services in a building also
used by another hospital * * * '' that is seeking to become an
independent LTCH, must comply with the requirements set forth in the
definition of a new LTCH in existing Sec. 412.23(e)(4). Therefore, in
the January 30, 2004 proposed rule (69 FR 4775-4777), we proposed to
revise Sec. 412.23(e)(4) to include a new paragraph (e)(4)(ii) that
specifies that only data reflecting the average length of stay for
Medicare patients in the newly established hospital will be utilized in
the qualifying calculation at Sec. 412.23(e)(2). Thus, we proposed to
clarify language that emphasized that if a satellite facility is
reorganized as a separately participating hospital under Medicare with
or without a concurrent change of ownership, the new hospital cannot be
paid under Medicare as a

[[Page 25708]]

LTCH until it demonstrates that it has an average Medicare inpatient
length of stay in excess of 25 days based on discharges occurring on or
after its effective date of participation as a hospital and not based
on discharges at the satellite facility site when it was part of
another hospital (Sec. 412.23(e)(4)(ii)).
We proposed that this policy clarification would also be applicable
to remote locations of LTCHs that are being voluntarily separated from
the parent LTCHs or sold and are seeking status as independent LTCHs. A
remote location of a hospital (as defined at Sec. 413.65(a)(2)) is
similar to a satellite facility because it does not participate in
Medicare as a separate hospital, but only as an integral and
subordinate part of another hospital. However, unlike a satellite
facility, a remote location is not one that is in the same building or
on the same campus as another hospital. (Because a remote location has
no ``host'' hospital, it is not required to meet the separateness
criteria as hospitals-within-hospitals in Sec. 412.22(e) that would
arise for satellite facilities that become independent LTCHs, as
discussed above.) Since the hospital would not be a LTCH until the
fiscal intermediary reviews its documentation and determines that it
qualifies, during those initial months, the hospital would be paid
under the IPPS.
We emphasized that notwithstanding the fact that satellite
facilities of LTCHs are required to independently meet the average
Medicare inpatient length of stay requirement of greater than 25 days
under Sec. 412.22(h)(2)(ii)(D), we proposed to evaluate length of stay
data only from discharges occurring after the facility has become a
hospital. This is the case as the prerequisite to designation as a LTCH
is a provider agreement under Part 489 of Chapter IV to participate as
a hospital in the Medicare program (Sec. 412.23(e)(1)). The
requirement that a satellite facility independently meets the length of
stay criterion was never intended as an alternative method of
qualifying as a separate excluded hospital. Under Sec.
412.23(h)(2)(ii), satellite facilities of psychiatric, rehabilitation,
and children's hospitals, as well as LTCHs, are required to meet
specific requirements for their provider category because we believed
that it was essential to ensure that satellite facilities of excluded
hospitals actually delivered the specialized care for which Medicare
was paying (Sec. 412.23(h)(2)(ii)). Furthermore, those regulations
were designed to ensure that there is both an appropriate financial and
administrative linkage between the satellite facility and the parent
hospital, and a clear separation of the satellite facility from the
host hospital. These policies are set forth in the July 30, 1999 IPPS
final rule (64 FR 41534). In the case of a LTCH, we believe that our
existing requirement that a satellite facility independently meet the
greater than 25-day average Medicare inpatient length of stay
requirement is consistent with the guiding principles of the LTCH PPS.
We do not believe patients who do not require long-term hospital-level
care should be admitted to either a LTCH or its satellite facility. In
addition, we were concerned that, without requiring separate
compliance, shorter lengths of stay at either the LTCH or its satellite
facility could be balanced by longer stays at the other. By
establishing these distinct standards for satellite facilities of
excluded hospitals, we also wanted to safeguard against the possibility
of these facilities functioning as a part of an acute care hospital. In
the case of a LTCH, that result would be inconsistent with section
1886(d)(1)(B) of the Act, which provides for excluded rehabilitation
and psychiatric units to be established in acute care hospitals, but
not long-term care units.
There is another situation that must be distinguished from the
scenario discussed above in which a LTCH is voluntarily separating from
or selling its satellite facility or remote location with the intent of
the satellite facility or remote location converting into an
independent hospital and eventually a LTCH. Our recent provider-based
regulations under Sec. 413.65 require a remote location of a hospital
that fails to meet certain requirements at Sec. 413.65(e)(3) to seek
status as a separate hospital if it is to continue functioning and
being paid by Medicare. Satellite facilities of excluded hospitals,
such as LTCHs, may also be affected by these new provider-based
requirements and, in those cases, the following procedure would also be
applicable.
Under the provider-based regulations, which became effective for
the main providers as defined in Sec. 413.65(a)(2), for cost reporting
periods beginning on or after July 1, 2003, certain facilities that
were formerly treated for payment purposes by Medicare as remote
locations or satellite facilities of hospitals, are now precluded from
continuing in that status because they do not meet the ``common service
area'' location requirement for provider-based facilities under Sec.
413.65(e)(3) (67 FR 50078, August 1, 2002). It has come to our
attention that certain satellite facilities and remote locations of
LTCHs are being affected by this preclusion. Due to the compulsory
nature of this separation requirement, we proposed an exception for
these affected satellite facilities and remote locations of LTCHs that
would allow them to utilize length of stay data from the 5 months of
the previous 6 months prior to when they were compelled to separate
from their main provider under Sec. 413.65(e)(3) (Sec.
412.23(e)(4)(iii)).
We wanted to emphasize that the only distinction between
requirements under Sec. 412.23(e)(4)(ii), for satellite facilities and
remote locations that voluntarily separate from their parent LTCHs and
requirements in Sec. 412.23(e)(4)(iii) that apply to satellite
facilities and remote locations compelled by provider-based location
requirements at Sec. 413.65(e)(3) to terminate their link to their
main providers, is that we proposed to allow the latter group to
utilize data gathered prior to establishing themselves as distinct
hospitals. Furthermore, this distinction only exists for satellite
facilities and remote locations of LTCHs that are affected by (Sec.
413.65(e)(3)) and which were in existence prior to the effective date
of the provider-based location requirements (July 1, 2003). Under the
regulations at Sec. 413.65(e)(3), we did not propose to permit these
entities to be established more than 35 miles from the main providers
after June 30, 2003. We will assign new Medicare provider numbers to
former remote locations of LTCH hospitals or satellite facilities that
fail the new location requirement in Sec. 413.65(e)(3), but want to
become new LTCHs, if the following conditions were satisfied in Sec.
412.23(e)(4)(iii):
The facility meets all Medicare COPs in part 482 and other
participation requirements set forth in 4part 489.
The facility provides data to its fiscal intermediary
indicating that during 5 of the immediate 6 months preceding its
separation from the main hospital, it has independently met the greater
than 25-day average length of stay requirement for its Medicare
patients (Sec. 412.23(e)(3)).
Comment: Two commenters endorsed our codification of existing
policy that requires a satellite to be certified first as an acute care
hospital prior to meeting the requirements for designation as a LTCH.
The commenters also endorsed the exception that we proposed to allow a
satellite or remote location that must involuntarily separate from the
main hospital because it failed to meet the ``common service area''
requirements under provider-based regulations to utilize ALOS data
collected prior to its separation.
Response: We thank the commenters for endorsing both the basic
policy and the exception. We believe that the policy that we have
proposed is well within the authority given to the

[[Page 25709]]

Secretary under section 1886(d)(1)(B)(I) of the Act and, therefore, we
are finalizing the policy, as well as the exception to the policy.
Comment: Several commenters asserted that since satellite
facilities are already required to demonstrate independent compliance
with ALOS provisions, CMS has the authority to allow LTCH satellites
and remote locations to gain independent status as LTCHs without
waiting the required time period. Furthermore, they state that there is
no statutory or regulatory authority that mandates a certification
waiting period. If CMS is reluctant to immediately certify satellites
as LTCHs, however, they suggest it should implement the proposed policy
prospectively, beginning on or after July 1, 2004. That is, this policy
should not apply to LTCH satellites and remote locations that otherwise
meet the requirements and that commenced the process for obtaining
independent LTCH certification status prior to the effective date of
this final rule. In addition, the commenters are of the opinion that an
exception to the new policy should be created allowing LTCH satellite
facilities and remote locations to gain immediate independent LTCH
certification status if they meet the applicable requirements and have
already been a part of a LTCH for at least 3 years.
Response: As we stated earlier, under Sec. 412.22(h)(1)(ii), we
have required satellites to independently meet the specific
requirements related to their provider type. In establishing these
regulations, our intention was to ensure that the satellite facilities
of excluded hospitals were actually delivering the specialized care and
indeed existed as an extension of the LTCH and not to provide
alternative methodologies for qualifying as a particular category of
excluded hospital. Since the satellite facilities share the same
provider number as the parent hospital and are governed in all ways by
that parent, it would be consistent for us to expect that the satellite
facility also meets the length of stay requirement. However, as we have
stated previously, if a satellite facility wishes to become an
independent LTCH, we require that the satellite facility demonstrate
that it meets the necessary requirements to be certified as an acute
care hospital; once the satellite facility is Medicare certified, then
the hospital may consider the classification requirements for becoming
a ``specialty'' hospital. We are requiring satellites to undertake the
same procedures that were in effect with the implementation of the IPPS
by the Congress in 1983 in order to be designated as LTCHs. As one of
the commenters indicated, the Secretary is not required, but
nonetheless, has the statutory authority to establish this policy under
section 1886(d)(1)(B)(iv)(I) of the Act. Section 1886(d)(1)(B)(iv)(I)
of the Act defines a LTCH as ``a hospital which has an average
inpatient length of stay (as determined by the Secretary) of greater
than 25 days.'' Thus, the statute is clear that the Secretary decides
how the ALOS is calculated. By virtue of the broad authority conferred
on the Secretary by the statute, we published regulations at Sec.
412.23(e) describing how the ALOS is determined as well as specifying
the procedure for designation as a LTCH. Under the regulations, an
entity must be certified as an acute care hospital; the hospital would
receive payment under the IPPS until such time (5 out of 6 months) that
meet the classification requirement as an LTCH.
In enacting these regulations, the Secretary is exercising the
discretionary authority given in section 1886(d)(1)(B)(I) of the Act in
permitting an exception for those satellite facilities and remote
locations that are required by Sec. 413.65(e)(3) to separate from
their parent hospitals because they fail to meet certain requirements.
This particular group of satellites or remote locations will be
permitted to use their length of stay data from 5 months of the
previous 6 months prior to when they were compelled to separate from
their main provider. This is appropriate because these satellite
facilities and remote locations were compelled to ``spin off'' by our
provider-based regulations at Sec. 413.65(e)(3). With respect to
satellite facilities and remote locations of LTCHs that voluntarily
``spin off'', we have not been given any compelling information that
would cause us to make a change to the requirements for classifying
LTCHS and, thus, under the Secretary's discretionary authority to
determine the methodology for calculating the ALOS, we will continue to
use discharges occurring on or after the effective date of
participation as a hospital for purposes of qualifying as LTCHs.
While there may have been misunderstandings in the past regarding
this policy, we believe we have clarified this long-standing policy in
this final rule by unambiguously stating that a satellite facility or
remote location must first be considered a hospital before being
classified as a LTCH. In other words, a new hospital cannot be paid as
a LTCH until it demonstrates that it has an average Medicare inpatient
length of stay in excess of 25 days based on discharges occurring on or
after the effective date of participation as a hospital. Therefore, we
do not think that it is appropriate to apply what, in fact, is existing
CMS policy only ``prospectively,'' as suggested by one of the
commenters, or to establish a grandfathering provision for LTCH
satellites that have existed for at least 3 years.
Comment: One commenter requested that we clarify whether the
proposed change to Sec. 412.23(e)(4)(ii) applies to only ``voluntary''
separation.
Response: Section 412.23(e)(4)(ii) states that a satellite facility
that voluntarily separates from its parent LTCH in order to become an
independent LTCH must comply with all requirements of Sec. 412.23(e)
which includes the 6 month waiting period. However, for a satellite
facility or remote location that is being forced to separate from the
main hospital ``involuntarily'' due to not meeting specific provider-
based requirements, there would be an exception to this policy (Sec.
412.23(e)(1)(iii)). Thus, to become an independent LTCH, the remote
location or satellite facility would be permitted to utilize data
gathered from 5 of the preceding 6 months prior to the involuntary
separation. We are finalizing our clarification of this policy as well
as the exception to the policy for those providers that are
involuntarily separated from the main facility.
Comment: One commenter expressed concern about our proposed policy,
but the concern was based on the commenter's confusion over satellites
and hospitals-within-hospitals. The commenter also requested a waiver
of the provider-based location requirement for a particular facility.
Response: Under Sec. 412.22(h), a satellite facility is defined as
``a part of a hospital that provides inpatient services in a building
also used by another hospital, or in one or more entire buildings
located on the same campus as buildings used by another hospital.''
Where a satellite shares a provider number with its parent hospital and
is not in itself a hospital under Sec. 412.22(e), we define a
hospital-within-a-hospital as ``* * * a hospital that occupies space in
a building also used by another hospital or in one or more buildings
located on the same campus as buildings used by another hospital * *
*'' Regarding the commenter's request for a waiver of the provider-
based location, this request is beyond the scope of this rule and,
therefore, we have no comments to make. However, we would suggest that
the commenter contact appropriate CMS staff to discuss the issue.

[[Page 25710]]

b. Technical correction. In the August 30, 2002 LTCH PPS final rule
(67 FR 56053), we issued regulations at Sec. 412.532(i) that require a
LTCH or a satellite of a LTCH that occupies space in a building used by
another hospital, or in one or more entire buildings located on the
same campus as buildings used by another hospital and that meets the
criteria of paragraphs (h)(1) through (h)(4) of Sec. 412.532, to
notify its fiscal intermediary and us, in writing, of its co-location
and any changes in co-location status. In Sec. 412.532(i), we include
a cross-reference to the Medicare regulations that contain the
requirements for a satellite facility to be paid under Medicare. In the
January 30, 2004 proposed rule (69 FR 4777-4778), we stated that we
made an unintentional error in specifying this cross-reference as
paragraphs (h)(1) through (h)(4) of Sec. 412.532. The correct cross-
reference to the requirements for satellite facilities is Sec.
412.22(h)(1) through (h)(4).
In this final rule, we are revising Sec. 412.532(i) to include the
correct cross-reference to Sec. 412.22(h)(1) through (h)(4).
We also received several comments that discussed issues outside the
scope of the LTCH PPS. Under the circumstances, we will not be
responding to these comments since they are not related to the subject
of this rule.

VI. Computing the Adjusted Federal Prospective Payments for the 2005
LTCH PPS Rate Year

In accordance with Sec. 412.525 and as discussed in section V.C.
of this final rule, the standard Federal rate is adjusted to account
for differences in area wages by multiplying the labor-related share of
the standard Federal rate by the appropriate LTCH PPS wage index (as
shown in Tables 1 and 2 of the Addendum to this final rule). The
standard Federal rate is also adjusted to account for the higher costs
of hospitals in Alaska and Hawaii by multiplying the nonlabor-related
share of the standard Federal rate by the appropriate cost-of-living
factor (shown in Table I in section V.C.2. of this preamble). In the
January 30, 2004 proposed rule (69 FR 4754), we proposed a standard
Federal rate of $36,762.24 for the 2005 LTCH PPS rate year. In this
final rule, based on the best available data and the finalized policies
described in this final rule, we are establishing a standard Federal
rate of $36,833.69 for the 2005 LTCH PPS rate year as discussed in
section V.B. of this preamble. We illustrate the methodology used to
adjust the Federal prospective payments for the 2005 LTCH PPS rate year
in the following example:
During the 2005 LTCH PPS rate year, a Medicare patient is in a LTCH
located in Chicago, Illinois (MSA 1600) with a two-fifths wage index
value of 1.0357 (see table 1 in the Addendum to this final rule). The
Medicare patient is classified into LTC-DRG 9 (Spinal Disorders and
Injuries), which has a relative weight of 1.5025 (see table 3 of the
Addendum to this final rule). To calculate the LTCH's total adjusted
Federal prospective payment for this Medicare patient, we compute the
wage-adjusted Federal prospective payment amount by multiplying the
unadjusted standard Federal rate ($36,833.69) by the labor-related
share (72.885 percent) and the wage index value (1.0357). (We note that
the LTCH in this example is in the second year of the wage index phase-
in, thus, the two-fifths wage index value is applicable.) This wage-
adjusted amount is then added to the nonlabor-related portion of the
unadjusted standard Federal rate (27.115 percent; adjusted for cost of
living, if applicable) to determine the adjusted Federal rate, which is
then multiplied by the LTC-DRG relative weight (1.5025) to calculate
the total adjusted Federal prospective payment for the 2005 LTCH PPS
rate year ($56,498.72). In addition, as discussed in section V.C.6. of
this preamble, for the 2005 LTCH PPS rate year, we are reducing the
LTCH PPS payment by 0.5 percent for the budget neutrality offset to
account for the costs of the transition methodology. The following
illustrates the components of the calculations in this example:

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

------------------------------------------------------------------------
Unadjusted Standard Federal Prospective $36,833.69
Payment Rate.............................
Labor-Related Share....................... 0.72885
Labor-Related Portion of the Federal Rate. = $26,846.23
2/5th Wage Index (MSA 1600)............... 1.0357
Wage-Adjusted Labor Share of Federal Rate. = $27,804.64
Nonlabor-Related Portion of the Federal + $9,987.46
Rate ($36,833.69 x 0.27115)..............
Adjusted Federal Rate Amount.............. = $37,792.10
LTC-DRG 4 Relative Weight................. x 1.5025
Total Adjusted Federal Prospective Payment = $56,782.63
(Before the Budget Neutrality Offset)....
Budget Neutrality Offset.................. x 0.995
Total Federal Prospective Payment = $56,498.72
(Including the Budget Neutrality
Offset)..............................
------------------------------------------------------------------------

VII. Transition Period

To provide a stable fiscal base for LTCHs, under Sec. 412.533, we
implemented a 5-year transition period from reasonable cost-based
reimbursement under the TEFRA system to a prospective payment based on
industry-wide average operating and capital-related costs. Under the
average pricing system, payment is not based on the experience of an
individual hospital. As discussed in the August 30, 2002 final rule (67
FR 56038), we believe that a 5-year phase-in provides LTCHs time to
adjust their operations and capital financing to the LTCH PPS, which is
based on prospectively determined Federal payment rates. Furthermore,
we believe that the 5-year phase-in of the LTCH PPS also allows LTCH
personnel to develop proficiency with the LTC-DRG coding system, which
will result in improvement in the quality of the data used for
generating our annual determination of relative weights and payment
rates.
In accordance with Sec. 412.533, the transition period for all
hospitals subject to the LTCH PPS begins with the hospital's first cost
reporting period beginning on or after October 1, 2002, and extends
through the hospital's last cost reporting period beginning before
October 1, 2006. During the 5-year transition period, a LTCH's total
payment under the LTCH PPS is based on two payment percentages--one
based on reasonable cost-based (TEFRA) payments and the other based on
the standard Federal prospective payment rate. The percentage of
payment based on the LTCH PPS Federal rate increases by 20 percentage
points each year, while the reasonable cost-based payment rate
percentage decreases by 20 percentage points each year, for the next 3
fiscal years. For cost reporting periods beginning on or after October
1, 2006, Medicare payment to LTCHs will be determined entirely under
the Federal PPS methodology. The blend

[[Page 25711]]

percentages as set forth in Sec. 412.533(a) are as follows:

------------------------------------------------------------------------
Reasonable
Federal cost
Cost reporting periods beginning on or after rate principles
percentage rate
percentage
------------------------------------------------------------------------
October 1, 2002................................. 20 80
October 1, 2003................................. 40 60
October 1, 2004................................. 60 40
October 1, 2005................................. 80 20
October 1, 2006................................. 100 0
------------------------------------------------------------------------

For cost reporting periods that begin on or after October 1, 2003,
and before October 1, 2004 (FY 2004), the total payment for a LTCH is
60 percent of the amount calculated under reasonable cost principles
for that specific LTCH and 40 percent of the Federal prospective
payment amount. For cost reporting periods that begin on or after
October 1, 2004, and before October 1, 2005 (FY 2005), the total
payment for a LTCH will be 40 percent of the amount calculated under
reasonable cost principles for that specific LTCH and 60 percent of the
Federal prospective payment amount. As we noted in the January 30, 2004
proposed rule (69 FR 4754), the change in the effective date of the
annual LTCH PPS rate update from October 1 to July 1 has no effect on
the LTCH PPS transition period as set forth in Sec. 412.533(a). That
is, LTCHs paid under the transition blend under Sec. 412.533(a) will
receive those blend percentages for the entire 5-year transition period
(unless they elect payments based on 100 percent of the Federal rate).
Furthermore, LTCHs paid under the transition blend will receive the
appropriate blend percentages of the Federal and reasonable cost-based
rate for their entire cost reporting period as prescribed in Sec.
412.533(a)(1) through (a)(5).
The reasonable cost-based rate percentage is a LTCH specific amount
that is based on the amount that the LTCH would have been paid (under
TEFRA) if the PPS were not implemented. Medicare fiscal intermediaries
will continue to compute the LTCH reasonable cost-based payment amount
according to Sec. 412.22(b) of the regulations and sections 1886(d)
and (g) of the Act.
In implementing the PPS for LTCHs, one of our goals is to
transition hospitals to full prospective payments as soon as
appropriate. Therefore, under Sec. 412.533(c), we allow a LTCH, which
is subject to a blended rate, to elect payment based on 100 percent of
the Federal rate at the start of any of its cost reporting periods
during the 5-year transition period rather than incrementally shifting
from reasonable cost-based payments to prospective payments. Once a
LTCH elects to be paid based on 100 percent of the Federal rate, it
will not be able to revert to the transition blend. For cost reporting
periods that began on or after December 1, 2002, and for the remainder
of the 5-year transition period, a LTCH must notify its fiscal
intermediary in writing of its election on or before the 30th day prior
to the start of the LTCH's next cost reporting period. For example, a
LTCH with a cost reporting period that begins on May 1, 2004, must
notify its fiscal intermediary in writing of an election before April
1, 2004.
Under Sec. 412.533(c)(2)(i), the notification by the LTCH to make
the election must be made in writing to the Medicare fiscal
intermediary. Under Sec. Sec. 412.533(c)(2)(ii) and (c)(2)(iii), the
intermediary must receive the request on or before the specified date
(that is, on or before the 30th day before the applicable cost
reporting period begins for cost reporting periods beginning on or
after December 1, 2002 through September 30, 2006), regardless of any
postmarks or anticipated delivery dates.
Notifications received, postmarked, or delivered by other means
after the specified date will not be accepted. If the specified date
falls on a day that the postal service or other delivery sources are
not open for business, the LTCH will be responsible for allowing
sufficient time for the delivery of the request before the deadline. If
a LTCH's notification is not received timely, payment will be based on
the transition period blend percentages.

VIII. Payments to New LTCHs

Under Sec. 412.23(e)(4), for purposes of Medicare payment under
the LTCH PPS, we define a new LTCH as a provider of inpatient hospital
services that otherwise meets the qualifying criteria for LTCHs, set
forth in Sec. 412.23(e)(1) and (e)(2), under present or previous
ownership (or both), and its first cost reporting period as a LTCH
begins on or after October 1, 2002. We also specify in Sec. 412.500
that the LTCH PPS is applicable to hospitals with a cost reporting
period that began on or after October 1, 2002. (In section V.C.8. of
this final rule, we clarify existing policy for the time frame for
calculating the average length of stay of a new LTCH as it relates to a
satellite facility or remote location of a LTCH that voluntarily seeks
to become a separate LTCH. We are also implementing a policy for the
time frame for calculating the average length of stay as it relates to
a remote location of a hospital that fails to meet certain requirements
at Sec. 413.65 and is required to seek status as a separate LTCH.)
As we discussed in the August 30, 2002 final rule (67 FR 56040),
this definition of new LTCHs should not be confused with those LTCHs
first paid under the TEFRA payment system for discharges occurring on
or after October 1, 1997, described in section 1886(b)(7)(A) of the
Act, as added by section 4416 of Public Law 105-33. As stated in Sec.
413.40(f)(2)(ii), for cost reporting periods beginning on or after
October 1, 1997, the payment amount for a ``new'' (post-FY 1998) LTCH
is the lower of the hospital's net inpatient operating cost per case or
110 percent of the national median target amount payment limit for
hospitals in the same class for cost reporting periods ending during FY
1996, updated to the applicable cost reporting period (see 62 FR 46019,
August 29, 1997). Under the LTCH PPS, those ``new'' LTCHs that meet the
definition of ``new'' under Sec. 413.40(f)(2)(ii) and that have their
first cost reporting period as a LTCH beginning prior to October 1,
2002, will be paid under the transition methodology described in Sec.
412.533.
As noted above and in accordance with Sec. 412.533(d), new LTCHs
will not participate in the 5-year transition from reasonable cost-
based reimbursement to prospective payment. As we discussed in the
August 30, 2002 final rule (67 FR 56040), the transition period is
intended to provide existing LTCHs time to adjust to payment under the
new system. Since these new LTCHs with cost reporting periods beginning
on or after October 1, 2002, would not have received payment under
reasonable cost-based reimbursement for the delivery of LTCH services
prior to the effective date of the LTCH PPS, we do not believe that
those new LTCHs require a transition period in order to make
adjustments to their operations and capital financing, as will LTCHs
that have been paid under the reasonable cost-based methodology.

IX. Method of Payment

Under Sec. 412.513, a Medicare LTCH patient is classified into a
LTC-DRG based on the principal diagnosis, up to eight additional
(secondary) diagnoses, and up to six procedures performed during the
stay, as well as age, sex, and discharge status of the patient. The
LTC-DRG is used to determine the Federal prospective payment that the
LTCH will receive for the Medicare-covered Part A services the LTCH
furnished during the Medicare patient's stay. Under Sec. 412.541(a),
the payment is based on the submission of the

[[Page 25712]]

discharge bill. The discharge bill also provides data to allow for
reclassifying the stay from payment at the full LTC-DRG rate to payment
for a case as a short-stay outlier (under Sec. 412.529) or as an
interrupted stay (under Sec. 412.531), or to determine if the case
will qualify for a high-cost outlier payment (under Sec. 412.525(a)).
Accordingly, the ICD-9-CM codes and other information used to
determine if an adjustment to the full LTC-DRG payment is necessary
(for example, length of stay or interrupted stay status) are recorded
by the LTCH on the Medicare patient's discharge bill and submitted to
the Medicare fiscal intermediary for processing. The payment represents
payment in full, under Sec. 412.521(b), for inpatient operating and
capital-related costs, but not for the costs of an approved medical
education program, bad debts, blood clotting factors, anesthesia
services by hospital-employed nonphysician anesthetists or obtained
under arrangement, or the costs of photocopying and mailing medical
records requested by a QIO, which are costs paid outside the LTCH PPS.
As under the previous reasonable cost-based payment system, under
Sec. 412.541(b), a LTCH may elect to be paid using the periodic
interim payment (PIP) method described in Sec. 413.64(h) and may be
eligible to receive accelerated payments as described in Sec.
413.64(g).
For those LTCHs that are paid during the 5-year transition based on
the blended transition methodology in Sec. 412.533(a) for cost
reporting periods that began on or after October 1, 2002, and before
October 1, 2006, the PIP amount is based on the transition blend. For
those LTCHs that are paid based on 100 percent of the standard Federal
rate, the PIP amount is based on the estimated prospective payment for
the year rather than on the estimated reasonable cost-based
reimbursement. We exclude high-cost outlier payments that are paid upon
submission of a discharge bill from the PIP amounts. In addition, Part
A costs that are not paid for under the LTCH PPS, including Medicare
costs of an approved medical education program, bad debts, blood
clotting factors, anesthesia services by hospital-employed nonphysician
anesthetists or obtained under arrangement, and the costs of
photocopying and mailing medical records requested by a QIO, are
subject to the interim payment provisions (Sec. 412.541(c)).
Under Sec. 412.541(d), LTCHs with unusually long lengths of stay
that are not receiving payment under the PIP method may bill on an
interim basis (60 days after an admission and at intervals of at least
60 days after the date of the first interim bill).

X. Monitoring

In the August 30, 2002 final rule (67 FR 56014), we discussed our
intent to develop a monitoring system that will assist us in evaluating
the LTCH PPS. Specifically, we discussed the monitoring of the various
policies that we believe would provide equitable payment for stays that
reflect less than the full course of treatment and reduce the
incentives for inappropriate admissions, transfers, or premature
discharges of patients that are present in a discharge-based
prospective payment system. We also stated our intent to collect and
interpret data on changes in average lengths of stay under the LTCH PPS
for specific LTC-DRGs and the impact of these changes on the Medicare
program. We stated that if our data indicate that changes might be
warranted, we may revisit these issues and consider proposing revisions
to these policies in the future. To this end, we have designed system
features utilizing MedPAR data that will enable CMS and the fiscal
intermediary to track beneficiary movement to and from a LTCH and to
and from another Medicare provider. As we discussed in the June 6, 2003
final rule (68 FR 34157), the MedPAC has endorsed this monitoring
activity and is pursuing an independent research initiative that will
evaluate all aspects of LTCHs, including the accuracy of data
reporting, provision of equivalent services by other providers, growth
in the number of LTCHs, and clinical outcomes. We are particularly
concerned with the recent significant growth in the number of LTCHs.
Since the implementation of the LTCH PPS, we have observed a growth of
nearly 50 percent in the number of LTCHs, and that growth is almost
exclusively in the number of LTCH that are hospitals within hospitals.
We intend to focus our monitoring on this growth and the potential for
gaming the IPPS by the co-located acute care hospital; and gaming the
LTCH PPS by the LTC hospital-within-a-hospital. Based on the outcome of
that monitoring activity we may need to address either the criteria for
qualifying for LTCH PPS payments for hospital within hospitals, the
payment rates for patients that are discharged from acute care
hospitals and admitted to a co-located LTCH, or other policy issues
that may arise as a result of our monitoring activity.
Also, in the June 6, 2003 final rule (68 FR 34157), we explained
that, given that the only unique requirement that distinguishes a LTCH
from other acute care hospitals is an average inpatient length of stay
of greater than 25 days, we continue to be concerned about the extent
to which LTCH services and patients differ from those services and
patients treated in other Medicare covered settings (for example, SNFs
and IRFs) and how the LTCH PPS will affect the access, quality, and
costs across the health care continuum. Thus, we will monitor trends in
the supply and utilization of LTCHs and Medicare's costs in LTCHs
relative to other Medicare providers. For example, we may conduct
medical record reviews of Medicare patients to monitor changes in
service use (for example, ventilator use) over a LTCH episode of care
and to assess patterns in the average length of stay at the facility
level.
We also are collecting data on patients staying for periods of 6
months or longer in LTCHs and may involve QIOs in evaluating whether or
not such extensive stays may be indicative of LTCH patients who could
be more appropriately served at a SNF.
Existing policy at Sec. 412.509(c) provides that the LTCH must
``furnish all necessary covered services to the Medicare beneficiary
who is an inpatient of the hospital either directly or under
arrangements.'' In the January 30, 2004 proposed rule (69 FR 4780-
4781), we discussed our proposed extension of the interrupted stay
policy, at Sec. 412.531, to include LTCH discharges and readmissions
within a period of 3 days.
We believe that such behavior by certain LTCHs may constitute
gaming of the Medicare system, circumventing existing Medicare policy,
and generating unnecessary Medicare payments.
Therefore, in this final rule, we are extending our interrupted
stay policy at Sec. 412.531 to address this situation. (See section
V.C.4.c. of this final rule for additional information regarding the
extension of the interrupted stay policy.)
We did not propose any policies regarding monitoring, but we
received three comments expressing support for our plans to monitor
LTCHs.
Comment: Two of the commenters were concerned about some of the
conclusions that emerged from the recent research initiative by MedPAC.
These conclusions concerned the rapid growth in the number of LTCHs as
well as whether the appropriate patients are being treated in these
facilities. The independent analysis conducted by these commenters
indicated different conclusions than those of MedPAC. However, while
the commenters support our efforts to collect data

[[Page 25713]]

regarding the type of patient that stays in a LTCH for an extended
period of time, they recommend that we standardize medical necessity
evaluation criteria for OIOs.
Response: We appreciate the commenters support of our monitoring
activities. We have been informed of proposals circulating in the LTCH
community about QIO admission standards, and we are also aware of
discussions regarding the MedPAC research. We continue to be very
interested in QIOs reviewing the records of extremely long stays (over
6 months) at LTCHs for purposes of medical necessity. As the new LTCH
PPS generates data, we will continue to evaluate patient treatment
patterns; beneficiary movement between providers; growth in the number
of free-standing LTCHs, HwHs, and satellite facilities; cost/benefit
analyses of alternative treatment settings for LTCH patients; and other
relevant topics. We will also be reviewing data with regards to the
finalized 3-day interrupted stay policy (section V.C.4.c.) to determine
compliance and also to evaluate whether there is an increase in the
number of patients being discharged and readmitted to the LTCH within
4-days. While we continue to believe in the importance of anecdotal
information that we receive from providers, consultants, trade groups,
regional offices, and fiscal intermediaries, we intend to monitor these
issues and obtain as much data as we can to either confirm or refute
the anecdotal information. If our evaluations and investigations reveal
the need for policy revisions, we will propose those revisions in a
future proposed rule.

XI. Collection of Information Requirements

Under the Paperwork Reduction Act (PRA) of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that
we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In the January 30, 2004 proposed rule, we solicited public comments
on each of these issues for the information collection requirements
discussed below.
The following information collection requirements and associated
burdens are subject to the PRA:

Section 412.23 Excluded Hospitals: Classifications

In summary, this section requires a satellite facility or a remote
location of a hospital that voluntarily reorganizes as a separate
Medicare participating hospital that seeks to qualify as a new long-
term care hospital for Medicare payment purposes, to demonstrate
through documentation that it meets the average length of stay
requirement.
The burden associated with this requirement is the time required to
maintain documentation to demonstrate that a satellite facility or a
remote location of a hospital has an average length of stay as
specified by this section. Since this requirement is a voluntary
decision that is made by each facility, we do not know the number of
facilities and remote locations that will seek to become new LTCHs.
However, the information to be documented is currently being collected
and maintained on each facility's cost report; therefore, this
information collection requirement is currently approved under OMB
control number 0938-0050.
This section also requires satellite facilities and remote
locations of hospitals that became subject to the provider-based status
rules, that become separately participating hospitals, and that seek to
qualify as long-term care hospitals for Medicare payment purposes, to
submit discharge data for calculation of the greater than 25-day
average Medicare inpatient length of stay requirement in Sec.
412.23(e)(2).
The burden associated with this requirement is the time required of
the satellite facilities and remote locations of hospitals that became
subject to the provider-based status rules (Sec. 413.65) to submit
discharge data to the fiscal intermediary. We estimate that it will
take approximately 5 minutes for each of the 300 facilities to submit
the required information for a total one-time burden of 25 hours.
We have submitted a copy of this final rule to OMB for its review
of the information collection requirements described above. These
requirements are not effective until they have been approved by OMB.
If you comment on any of these information collection and
recordkeeping requirements, please mail copies directly to the
following: Centers for Medicare & Medicaid Services, Office of
Strategic Operations and Regulatory Affairs, Regulations Development
and Issuances Group, Attn: Dawn Willinghan, CMS-1263-F, Room C5-09-26,
7500 Security Boulevard, Baltimore, MD 21244-1850; and
Office of Information and Regulatory Affairs, Office of Management
and Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Brenda Aguilar, CMS Desk Officer.
Comments submitted to OMB may also be emailed to the following
address: e-mail: baguilar@omb.eop.gov; or faxed to OMB at (202) 395-
6974.

XII. Regulatory Impact Analysis

A. Introduction

We have examined the impact of this final 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 Social Security Act (the Act), the
Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4), and
Executive Order 13132.
1. Executive Order 12866
Executive Order 12866 (as amended by Executive Order 13258, which
merely assigns 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 one
year). In this final rule, we are using the most recent estimate of the
LTCH PPS market basket, updated claims data, and updated wage index
values to estimate payments for the 2005 LTCH PPS rate year. Based on
the best available data for 239 LTCHs, we estimate that the 3.1 percent
increase in the standard Federal rate for the 2005 LTCH PPS rate year,
in conjunction with the observed increase in case-mix (discussed in
section V.C.4. of this preamble) and decrease in the budget neutrality
offset to account for the transition methodology (discussed in section
V.C.6. of this preamble), will result in an increase in payments from
the 2004 LTCH PPS rate year of $235

[[Page 25714]]

million for the 239 LTCHs. (Section V.C.6. of this preamble includes an
estimate of Medicare program payments for LTCH services.) Because the
combined distributional effects and costs to the Medicare program are
greater than $100 million, this final rule is considered a major
economic rule, as defined above.
2. Regulatory Flexibility Act (RFA)
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 $26
million or less in any 1 year. For purposes of the RFA, all hospitals
are considered small entities according to the Small Business
Administration's latest size standards with total revenues of $26
million or less in any 1 year (for further information, see the Small
Business Administration's regulation at 65 FR 69432, November 17,
2000). Because we lack data on individual hospital receipts, we cannot
determine the number of small proprietary LTCHs. Therefore, we assume
that all LTCHs are considered small entities for the purpose of the
analysis that follows. Medicare fiscal intermediaries are not
considered to be small entities. Individuals and States are not
included in the definition of a small entity.
The provisions of this final rule represent a 13.8 percent increase
in estimated payments in the 2005 LTCH PPS rate year (as shown in Table
II below). We do not expect an incremental increase of 9.0 percent to
the Medicare payment rates to have a significant adverse effect on the
overall revenues of most LTCHs. In addition, LTCHs also provide
services to (and generate revenue from) patients other than Medicare
beneficiaries. Accordingly, we certify that this final rule will not
have a significant impact on a substantial number of small entities, in
accordance with RFA.
3. Impact on Rural Hospitals
Section 1102(b) of the Social Security Act requires us to prepare a
regulatory impact analysis if a proposed or final 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 604 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
a Metropolitan Statistical Area and has fewer than 100 beds. As
discussed in detail below, the rates and policies set forth in this
final rule will not have an adverse impact on rural hospitals based on
the data of the 16 rural hospitals in our database of 239 LTCHs for
which data were available.
4. Unfunded Mandates
Section 202 of the UMRA requires that agencies assess anticipated
costs and benefits before issuing any rule that may result in
expenditure in any one year by State, local, or tribal governments, in
the aggregate, or by the private sector, of $110 million or more. This
final rule will 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 one year.
5. Federalism
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 final rule under the criteria set forth in
Executive Order 13132 and have determined that this final rule will not
have any significant impact on the rights, roles, and responsibilities
of State, local, or tribal governments or preempt State law, based on
the 15 State and local LTCHs in our database of 239 LTCHs for which
data were available.

B. Anticipated Effects of Payment Rate Changes

We discuss the impact of the payment rate changes in this final
rule below in terms of their fiscal impact on the Medicare budget and
on LTCHs.
1. Budgetary Impact
Section 123(a)(1) of Medicare, Medicaid and State Child Health
Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113) requires us to set the payment rates contained in
this final rule such that total payments under the LTCH PPS are
projected to equal the amount that would have been paid if this PPS had
not been implemented. However, as discussed in greater detail in the
August 30, 2002 final rule (67 FR 56033-56036), the FY 2003 standard
Federal rate ($34,956.15) was calculated as though all LTCHs will be
paid based on 100 percent of the standard Federal rate in FY 2003. As
discussed in section V.C.6 of this final rule, we would apply a budget
neutrality offset to payments to account for the monetary effect of the
5-year transition period and the policy to permit LTCHs to elect to be
paid based on 100 percent of the standard Federal rate rather than a
blend of Federal prospective payments and reasonable cost-based
payments during the transition. The amount of the offset is equal to 1
minus the ratio of the estimated payments based on 100 percent of the
LTCH PPS Federal rate to the projected total Medicare program payments
that would be made under the transition methodology and the option to
elect payment based on 100 percent of the Federal prospective payment
rate.
2. Impact on Providers
The basic methodology for determining a LTCH PPS payment is set
forth in the regulations at Sec. 412.515 through Sec. 412.525. In
addition to the basic LTC-DRG payment (standard Federal rate x LTC-DRG
relative weight), we make adjustments for differences in area wage
levels, cost-of-living adjustment for Alaska and Hawaii, and short-stay
outliers. In addition, LTCHs may also receive high-cost outlier
payments for those cases that qualify under the threshold established
each rate year. Section 412.533 provides for a 5-year transition to
fully prospective payments from payment based on reasonable cost-based
methodology. During the 5-year transition period, payments to LTCHs are
based on an increasing percentage of the LTCH PPS Federal rate and a
decreasing percentage of payment based on reasonable cost-based
methodology. Section 412.533(c) provides for a one-time opportunity for
LTCHs to elect payments based on 100 percent of the LTCH PPS Federal
rate.
In order to understand the impact of the changes to the LTCH PPS
discussed in this final rule on different categories of LTCHs for the
2005 LTCH PPS rate year, it is necessary to estimate payments per
discharge under the LTCH PPS rates and factors for the 2004 LTCH PPS
rate year (see the June 6, 2003 final rule; 68 FR 34122-34190) and
payments per discharge that will be made under the LTCH PPS rates and
factors for the 2005 LTCH PPS rate year as discussed in the preamble of
this final rule. We also evaluated the percent change in payments per
discharge of estimated 2004 LTCH PPS rate year payments to estimated
2005 LTCH PPS rate year payments for each category of LTCHs.
Hospital groups were based on characteristics provided in the
Online Survey Certification and Reporting (System) (OSCAR) data, FYs
1999 through 2001 cost report data, and Provider Specific File data.
Hospitals with incomplete characteristics were

[[Page 25715]]

grouped into the ``unknown'' category. Hospital groups include:

--Location: Large Urban/Other Urban/Rural
--Participation Date
--Ownership Control
--Census Region
--Bed Size

To estimate the impacts among the various categories of providers
during the transition period, it is imperative that reasonable cost-
based methodology payments and prospective payments contain similar
inputs. More specifically, in the impact analysis showing the impact
reflecting the applicable transition blend percentages of prospective
payments and reasonable cost-based methodology payments and the option
to elect payment based on 100 percent of the Federal rate (Table III
below), we estimated payments only for those providers for whom we are
able to calculate payments based on reasonable cost-based methodology.
For example, if we did not have at least 2 years of historical cost
data for a LTCH, we were unable to determine an update to the LTCH's
target amount to estimate payment under reasonable cost-based
methodology.
Using LTCH cases from the FY 2003 MedPAR file and cost data from
FYs 1996 through 2001 to estimate payments under the current reasonable
cost-based principles, we have both case-mix and cost data for 239
LTCHs. Thus, for the impact analyses reflecting the applicable
transition blend percentages of prospective payments and reasonable
cost-based methodology payments and the option to elect payment based
on 100 percent of the Federal rate (see Table II below), we used data
from 239 LTCHs. While currently there are more than 300 LTCHs, the most
recent growth is predominantly in for-profit LTCHs that provide
respiratory and ventilator-dependent patient care. We believe that the
discharges from the MedPAR data for the 239 LTCHs in our database
provide sufficient representation in the LTC-DRGs containing discharges
for patients who received respiratory and ventilator-dependent care.
However, using cases from the FY 2003 MedPAR file, we had case-mix data
for 298 LTCHs. Cost data to determine current payments under reasonable
cost-based methodology payments are not needed to simulate payments
based on 100 percent of the Federal rate. Therefore, for the impact
analyses reflecting fully phased-in prospective payments (see Table III
below), we used data from 298 LTCHs.
These impacts reflect the estimated ``losses'' or ``gains'' among
the various classifications of providers for the 2004 LTCH PPS rate
year (July 1, 2003 through June 30, 2004) compared to the 2005 LTCH PPS
rate year (July 1, 2004 through June 30, 2005). Prospective payments
for the 2004 LTCH rate year were based on the standard Federal rate of
$35,726.18 and the hospital's estimated case-mix based on FY 2003
claims data. Prospective payments for the 2005 LTCH PPS rate year were
based on the standard Federal rate of $36,833.69 and the same FY 2003
claims data.
3. Calculation of Prospective Payments
To estimate payments under the LTCH PPS, we simulated payments on a
case-by-case basis by applying the existing payment policy for short-
stay outliers (as described in section V.C.4.b. of this final rule) and
the existing adjustments for area wage differences (as described in
section V.C.1. of this final rule) and for the cost-of-living for
Alaska and Hawaii (as described in section V.C.2. of this final rule).
Additional payments will also be made for high-cost outlier cases (as
described in section V.C.3. of this final rule). As noted in section
V.C.5. of this final rule, we are not making adjustments for rural
location, geographic reclassification, indirect medical education
costs, or a disproportionate share of low-income patients because
sufficient new data have not been generated that would enable us to
conduct a comprehensive reevaluation of these payment adjustments.
We adjusted for area wage differences for estimated 2004 LTCH PPS
rate year payments by computing a weighted average of a LTCH's
applicable wage index during the period from July 1, 2003, through June
30, 2004, because some providers may experience a change in the wage
index phase-in percentage during that period. For cost reporting
periods beginning on or after October 1, 2002 and before September 30,
2003, the labor portion of the Federal rate is adjusted by one-fifth of
the applicable ``LTCH PPS wage index'' (that is, the FY 2004 IPPS wage
index data without geographic reclassification, under sections
1886(d)(8) and (d)(10)) of the Act. For cost reporting periods
beginning on or after October 1, 2003 and before September 30, 2004,
the labor portion of the Federal rate is adjusted by two-fifths of the
applicable LTCH PPS wage index. Therefore, a provider with a cost
reporting period that began October 1, 2003, will have 3 months of
payments under the one-fifth wage index value and 9 months of payment
under the two-fifths wage index value. For this provider, we computed a
blended wage index of 25 percent (3 months/12 months) of the one-fifth
wage index value and 75 percent (9 months/12 months) of the two-fifths
wage index value. Similarly, we adjusted for area wage differences for
estimated 2005 LTCH PPS rate year payments by computing a weighted
average of a LTCH's applicable wage index during the period from July
1, 2004, through June 30, 2005, because some providers may experience a
change in the wage index phase-in percentage during that period. For
cost reporting periods beginning on or after October 1, 2003 and before
September 30, 2004, the labor portion of the Federal rate is adjusted
by two-fifths of the applicable LTCH PPS wage index. For cost reporting
periods beginning on or after October 1, 2004 and before September 30,
2005, the labor portion of the Federal rate is adjusted by three-fifths
of the applicable LTCH PPS wage index. The applicable LTCH PPS wage
index values for the 2005 LTCH PPS rate year are shown in Tables 1 and
2 of the Addendum to this final rule.
For those providers projected to receive payment under the
transition blend methodology, we also calculated payments using the
applicable transition blend percentages. During the 2004 LTCH PPS rate
year, based on the transition blend percentages set forth in Sec.
412.533(a), some providers may experience a change in the transition
blend percentage during the period from July 1, 2003 through June 30,
2004. That is, during the period from July 1, 2003 through June 30,
2004, a provider with a cost reporting period beginning on October 1,
2002 (which is paid under the 80/20 transition blend (80 percent of
payments based on reasonable cost-based methodology and 20 percent of
payments under the LTCH PPS) beginning October 1, 2002) had 3 months
(July 1, 2003 through September 30, 2003) under the 80/20 blend and 9
months (October 1, 2003 through June 30, 2004) of payment under the 60/
40-transition blend (60 percent of payments based on reasonable cost-
based methodology and 40 percent of payments under the LTCH PPS). (The
60 percent/40 percent blend will continue until the provider's cost
reporting period beginning on October 1, 2004.)
Similarly, during the 2005 LTCH PPS rate year, based on the
transition blend percentages set forth in Sec. 412.533(a), some of the
providers paid under the transition blend methodology may experience a
change in the transition blend percentage during the period from July
1, 2004 through June 30, 2005. That is, during the period from July 1,
2004 through June 30, 2005, a provider with

[[Page 25716]]

a cost reporting period beginning on October 1, 2003 (which is paid
under the 60/40 transition blend had 3 months (July 1, 2004 through
September 30, 2004) under the 60/40 blend and 9 months (October 1, 2004
through June 30, 2005) of payment under the 40/60-transition blend (40
percent of payments based on reasonable cost-based methodology and 60
percent of payments under the LTCH PPS). (The 40 percent/60 percent
blend will continue until the provider's cost reporting period
beginning on October 1, 2005.)
In estimating blended transition payments, we estimated payments
based on reasonable cost-based methodology in accordance with the
methodology in section 1886(b) of the Act. For those providers who have
not already made the election to be paid based on 100 percent of the
Federal rate, we compared the estimated blended transition payment to
the LTCH's estimated payment if it would elect payment based on 100
percent of the Federal rate. If we estimated that the LTCH would be
paid more based on 100 percent of the Federal rate, we assumed that it
would elect to bypass the transition methodology and to receive
immediate prospective payments.
Then we applied the 6.0 percent budget neutrality reduction to
payments to account for the effect of the 5-year transition methodology
and election of payment based on 100 percent of the Federal rate on
Medicare program payments established in the June 6, 2003 final rule
(68 FR 34153) to each LTCH's estimated payments under the LTCH PPS for
the 2004 LTCH PPS rate year. Similarly, we applied the 0.5 percent
budget neutrality reduction to payment to account for the effect of the
5-year transition methodology and election of payment based on 100
percent of the Federal rate on Medicare program payments (see section
V.C.6. of this final rule) to each LTCH's estimated payments under the
LTCH PPS for the 2005 LTCH PPS rate year. The impact based on our
projection of whether a LTCH will be paid based on the transition blend
methodology or will elect payment based on 100 percent of the Federal
rate is shown below in Table II.
In Table III below, we also show the impact if the LTCH PPS were
fully implemented; that is, as if there were an immediate transition to
fully Federal prospective payments under the LTCH PPS for the 2004 LTCH
PPS rate year and the 2005 LTCH PPS rate year. Accordingly, the 6.0
percent budget neutrality reduction to account for the 5-year
transition methodology on LTCHs' Medicare program payments for the 2004
LTCH PPS rate year and the 0.5 percent budget neutrality reduction to
account for the 5-year transition methodology on LTCHs' Medicare
program payments established for the 2005 LTCH PPS rate year were not
applied to LTCHs' estimated payments under the LTCH PPS.
Tables II and III below illustrate the aggregate impact of the
payment system among various classifications of LTCHs.
The first column, LTCH Classification, identifies the type
of LTCH.
The second column lists the number of LTCHs of each
classification type.
The third column identifies the number of long-term care
cases.
The fourth column shows the estimated payment per
discharge for the 2004 LTCH PPS rate year.
The fifth column shows the estimated payment per discharge
for the 2005 LTCH PPS rate year.
The sixth column shows the percent change of 2004 LTCH PPS
rate year compared to the 2005 LTCH PPS rate year.

Table II.--Projected Impact Reflecting Applicable Transition Blend Percentages of Prospective Payments and
Reasonable Cost-Based (TEFRA) Payments and Option To Elect Payment Based on 100 Percent of the Federal Rate \1\
[2004 LTCH PPS Rate Year Payments Compared to 2005 LTCH Prospective Payment System Rate Year]
----------------------------------------------------------------------------------------------------------------
Average 2005
Average LTCH
2004 LTCH prospective
LTCH classification Number of Number of PPS rate payment system Percent
LTCHs LTCH cases year rate year change
payment per payment per
case \2\ case \3\
----------------------------------------------------------------------------------------------------------------
All Providers............................... 239 94,169 $27,181 $29,629 9.0
By Location:
Rural................................... 16 7,782 $24,309 $26,303 8.2
Urban................................... 223 86,387 27,439 29,928 9.1
Large............................... 107 37,759 26,212 28,360 8.2
Other............................... 116 48,628 28,392 31,146 9.7
By Participation Date:
Before October 1983..................... 15 7,527 $22,088 $24,166 9.4
October 1983-September 1993............. 44 22,119 28,994 31,6649. D2
October 1993-September 2002............. 180 64,523 27,155 29,568 8.9
By Ownership Control:
Voluntary............................... 58 22,630 25,656 27,887 8.7
Proprietary............................. 166 64,680 27,882 30,444 9.2
Government.............................. 15 6,859 25,597 27,691 8.2
By Census Region:
New England............................. 13 9,377 22,146 24,442 10.4
Middle Atlantic......................... 15 5,290 26,344 28,421 7.9
South Atlantic.......................... 22 7,859 32,432 35,264 8.7
East North Central...................... 45 12,914 29,681 32,417 9.2
East South Central...................... 14 4,281 26,934 29,224 8.5
West North Central...................... 17 4,761 29,285 31,988 9.2
West South Central...................... 83 39,528 25,228 27,310 8.3
Mountain................................ 18 4,513 29,961 33,104 10.5
Pacific................................. 12 5,646 33,159 36,930 11.4

[[Page 25717]]

BY BED SIZE:
Beds: 0-24.............................. 17 2,627 30,162 32,717 8.5
Beds: 25-49............................. 117 30,558 26,480 28,712 8.4
Beds: 50-74............................. 33 11,632 28,911 31,476 8.9
Beds: 75-124............................ 36 16,321 28,092 30,655 9.1
Beds: 125-199........................... 24 19,899 26,501 28,953 9.3
Beds: 200+.............................. 12 13,132 26,579 29,258 10.1
----------------------------------------------------------------------------------------------------------------
\1\ These calculations take into account that some providers may experience a change in the blend percentage
changes during the 2004 and 2005 LTCH PPS rate years. For example, during the period of July 1, 2003 through
June 30, 2004, a provider with a cost reporting period beginning October 1 would have 3 months (July 1, 2003
through September 30, 2003) of payments under the 80/20 blend and 9 months (October 1, 2003 through June 30,
2004) of payment under the 60/40 blend.
\2\ Average payment per case for the 12-month period of July 1, 2003 through June 30, 2004.
\3\ Average payment per case for the 12-month period of July 1, 2004 through June 30, 2005.

Table III.--Projected Impact Reflecting the Fully Phased-In Prospective Payments
[2004 LTCH PPS Rate Year Payments Compared to 2005 LTCH Prospective Payment System Rate Year Payments]
----------------------------------------------------------------------------------------------------------------
Average Average 2005
2004 LTCH LTCH
PPS rate prospective
LTCH classification Number of Number of year payment system Percent
LTCHs LTCH cases payment rate year change
per case payment per
\1\ case \2\
----------------------------------------------------------------------------------------------------------------
All Providers............................... 298 105,732 $28,537 $29,457 3.2
By Location:
Rural................................... 20 8,455 25,723 26,267 2.1
Urban................................... 278 97,277 28,782 29,734 3.3
Large............................... 151 45,567 27,603 28,318 2.6
Other............................... 127 51,710 29,820 30,981 3.9
By Participation Date:
Before October 1983..................... 17 7,545 23,119 24,022 3.9
October 1983-September 1993............. 205 71,916 30,325 29,427 3.7
October 1993-September 2002............. 45 22,159 28,560 31,453 3.0
After October 2002...................... 21 2,670 26,876 27,523 2.4
Unknown................................. 10 1,442 31,342 32,268 3.0
By Ownership Control:
Voluntary............................... 62 23,243 26,870 27,730 3.2
Proprietary............................. 182 69,801 29,404 30,375 3.3
Government.............................. 18 8,008 26,618 27,439 3.1
Unknown................................. 36 4,680 27,165 27,787 2.3
By Census Region:
New England............................. 15 9,395 23,458 24,493 4.4
Middle Atlantic......................... 21 6,762 27,528 28,137 2.2
South Atlantic.......................... 30 9,250 33,279 34,424 3.4
East North Central...................... 56 14,904 31,282 32,325 3.3
East South Central...................... 17 4,540 28,600 29,312 2.5
West North Central...................... 17 4,761 30,882 31,937 3.4
West South Central...................... 108 44,492 26,517 27,197 2.6
Mountain................................ 21 5,321 31,011 32,416 4.5
Pacific................................. 13 6,307 34,093 35,878 05.2
BY BED SIZE:
Beds: 0-24.............................. 21 3,185 31,087 31,805 2.3
Beds: 25-49............................. 127 33,296 28,105 28,835 2.6
Beds: 50-74............................. 37 13,401 29,767 30,813 3.5
Beds: 75-124............................ 37 16,982 29,353 30,426 3.7
Beds: 125-199........................... 24 19,899 27,950 28,915 3.5
Beds: 200+.............................. 13 13,140 28,208 29,359 4.1
Unknown................................. 39 5,829 27,155 27,322 2.6
----------------------------------------------------------------------------------------------------------------
\1\ Average payment per case for the 12-month period of July 1, 2003 through June 30, 2004.
\2\ Average payment per case for the 12-month period of July 1, 2004 through June 30, 2005.

[[Page 25718]]

4. Results
Based on the most recent available data (as described above for 230
LTCHs), we have prepared the following summary of the impact (as shown
in Table II) of the LTCH PPS set forth in this final rule.
a. Location. Based on the most recent available data, the majority
of LTCHs are in urban areas. Approximately 7 percent of the LTCHs are
identified as being located in a rural area, and approximately 8
percent of all LTCH cases are treated in these rural hospitals. Impact
analysis in Table II shows that the percent change in estimated
payments per discharge for the 2004 LTCH PPS rate year compared to the
2005 LTCH PPS rate year for rural LTCHs will be 8.2 percent, and will
be 9.1 percent for urban LTCHs. Large urban LTCHs are projected to
experience a 8.2 percent increase in payments per discharge from the
2004 LTCH PPS rate year compared to the 2005 LTCH PPS rate year, while
other urban LTCHs projected to experience a 9.7 percent increase in
payments per discharge from the 2004 LTCH PPS rate year compared to the
2005 LTCH PPS rate year. (See Table II.)
As noted above, in addition to the update in the standard Federal
rate, the estimated percent increase in payments per discharge from the
2004 LTCH PPS rate year to the 2005 LTCH PPS rate year is largely
attributable to the decrease in the budget neutrality offset to account
for the transition methodology (discussed in section V.C.6. of this
preamble). Specifically, we are applying a 0.5 percent budget
neutrality reduction (0.995) to payments in the 2005 LTCH PPS rate year
to account for the effect of the 5-year transition methodology. The
0.995 transition period budget neutrality factor for the 2005 LTCH PPS
rate year is lower than the transition period budget neutrality factor
for the 2004 LTCH PPS rate year (0.940). This smaller budget neutrality
offset contributes to greater LTCH payment increases between the 2004
and 2005 LTCH PPS rate years compared to the increases seen between FY
2003 and the 2004 LTCH PPS rate year. Furthermore, many LTCHs are
experiencing increases in payments because of an increasing wage index
adjustment, which is two-fifths of the applicable LTCH PPS wage index
for cost reporting periods beginning on or after October 1, 2003, and
three-fifths of the applicable wage index for cost reporting periods
beginning on or after October 1, 2004. Additionally, many LTCHs are
expected to receive an increase in high-cost outlier payments as a
result of the decrease in the fixed-loss amount from the 2004 LTCH PPS
rate year ($19,590) to the 2005 LTCH PPS rate year ($17,864) as
discussed in section V.C.4. of this preamble. We do not expect to see
these large payment per discharge increases in future years as the
majority of LTCHs have transitioned fully to the LTCH PPS and,
therefore, the transition period budget neutrality factor should remain
more stable.
b. Participation Date. LTCHs are grouped by participation date into
three categories: (1) Before October 1983; (2) between October 1983 and
September 1993; and (3) between October 1993 and September 2002. At
this time, we do not have sufficient cost report data for any of the
LTCHs that began participating in the Medicare program after October
2002 (the implementation of the LTCH PPS), and therefore, they are not
included in the impact analysis shown below in Table II.
Based on the most recent available data, the majority,
approximately 75 percent, of the LTCH cases are in hospitals that began
participating between October 1993 and September 2002, and are
projected to experience a 8.9 percent increase in payments per
discharge from the 2004 LTCH PPS rate year compared to the 2005 LTCH
PPS rate year. Approximately 23 percent of the cases are in LTCHs that
began participating in Medicare between October 1983 and September
1993, and are projected to experience a 9.2 percent increase in
payments per discharge from the 2004 LTCH PPS rate year compared to the
2005 LTCH PPS rate year. LTCHs that began participating before October
1983 are projected to experience a 9.4 percent increase in payments per
discharge from the 2004 LTCH PPS rate year compared to the 2005 LTCH
PPS rate year. (See Table II.)
As discussed above, these relatively large increases in payments
for the 2005 LTCH PPS rate year are mostly due to the decrease in the
budget neutrality offset to account for the transition methodology
(discussed in section V.C.6. of this preamble). Furthermore, in
addition to the update in the standard Federal rate, many of these
LTCHs will experience an increase in payments because of an increasing
wage index adjustment, which is two-fifths of the applicable LTCH PPS
wage index for cost reporting periods beginning on or after October 1,
2003, and three-fifths of the applicable wage index for cost reporting
periods beginning on or after October 1, 2004. As noted above, LTCHs
may also experience an increase in high-cost outlier payments as a
result of the decrease in the fixed-loss amount from the 2004 LTCH PPS
rate year ($19,590) to the 2005 LTCH PPS rate year ($17,864). As we
also explain above, we do not expect to see these large payment
increases in future years as the majority of LTCHs have transitioned
fully to the LTCH PPS and, therefore, the transition period budget
neutrality factor should remain more stable.
c. Ownership Control. LTCHs are grouped into three categories based
on ownership control type--(1) voluntary; (2) proprietary; and (3)
government.
Based on the most recent available data, approximately 6 percent of
LTCHs are government run and we expect that they will experience a 8.2
percent increase in payments per discharge from the 2004 LTCH PPS rate
year compared to the 2005 LTCH PPS rate year. Voluntary and proprietary
LTCHs are projected to experience a 8.7 percent and 9.2 percent
increase in payments per discharge from the 2004 LTCH PPS rate year
compared to the 2005 LTCH PPS rate year, respectively. (See Table II.)
d. Census Region. LTCHs located in all regions are expected to
experience an increase in payments per discharge from the 2004 LTCH PPS
rate year compared to the 2005 LTCH PPS rate year. Specifically, of the
nine census regions, we expect that LTCHs in the Pacific, Mountain, and
New England regions will experience the largest percent increase in
payments per discharge from the 2004 LTCH PPS rate year compared to the
2005 LTCH PPS rate year (11.4 percent, 10.5 percent, and 10.4 percent,
respectively). LTCHs located in the East North Central and West North
Central regions are also projected to experience a 9.2 percent increase
in payments per discharge from the 2004 LTCH PPS rate year compared to
the 2005 LTCH PPS rate year. (See Table II.)
As explained above, these relatively large increases in payments
for the 2005 LTCH PPS rate year are mostly attributable to the decrease
in the budget neutrality offset to account for the transition
methodology (discussed in section V.C.6. of this preamble).
Furthermore, in addition to the update in the standard Federal rate,
many LTCHs will experience an increase in payments because of an
increasing wage index adjustment, which is two-fifths of the applicable
LTCH PPS wage index for cost reporting periods beginning on or after
October 1, 2003, and three-fifths of the applicable wage index for cost
reporting periods beginning on or after October 1, 2004. As noted
above, LTCHs may also experience an increase in high-cost outlier
payments as a result of the decrease in the fixed-loss amount from the
2004 LTCH PPS rate year ($19,590)

[[Page 25719]]

to the 2005 LTCH PPS rate year ($17,864). As we also explained above,
we do not expect to see these large payment increases in future years
as the majority of LTCHs have transitioned fully to the LTCH PPS and,
therefore, the transition period budget neutrality factor should remain
more stable.
We expect LTCHs in the MidAtlantic region to experience the
smallest percent increase in payments per discharge from the 2004 LTCH
PPS rate year compared to the 2005 LTCH PPS rate year (7.9 percent). We
are projecting a slightly lower percent increase in payments per
discharge for LTCHs located in this region because of the increasing
wage index adjustment. Specifically, many LTCHs located in these areas
have a wage index value of less than 1.0. (See Table II.)
e. Bed Size. LTCHs were grouped into six categories based on bed
size--0-24 beds, 25-49 beds, 50-74 beds, 75-124 beds, 125-199 beds, and
200+ beds.
The percent increase in payments per discharge from the 2004 LTCH
PPS rate year compared to the 2005 LTCH PPS rate year are projected to
increase for all bed size categories. Most LTCHs were in bed size
categories where the percent increase in payments per discharge from
the 2004 LTCH PPS rate year compared to the 2005 LTCH PPS rate year is
estimated to be approximately 9 percent. LTCHs with greater than 200
beds have the largest estimated percent change in payments per
discharge from the 2004 LTCH PPS rate year compared to the 2005 LTCH
PPS rate year (10.1 percent), while LTCHs with 25-49 beds have the
lowest projected increase in the percent change in payments per
discharge from the 2004 LTCH PPS rate year compared to the 2005 LTCH
PPS rate year (8.4 percent). (See Table II.)
5. Effect on the Medicare Program
Based on actuarial projections, we estimate that Medicare spending
(total Medicare program payments) for LTCH services over the next 5
years will be as follows:

------------------------------------------------------------------------
Estimated
LTCH PPS rate year payments ($
in billions)
------------------------------------------------------------------------
2005.................................................... 2.96
2006.................................................... 2.98
2007.................................................... 2.95
2008.................................................... 3.01
2009.................................................... 3.12
------------------------------------------------------------------------

These estimates are based on the current estimate of increase in
the excluded hospital with capital market basket of 3.1 percent for the
2005 LTCH PPS rate year, 3.2 percent for the 2006 and 2007 LTCH PPS
rate years, 2.8 percent for the 2008 LTCH PPS rate year, and 3.1
percent for the 2009 LTCH PPS rate year. We estimate that there will be
a change in Medicare beneficiary enrollment of 1.0 percent in the 2005
LTCH PPS rate year, -4.8 percent in the 2006 LTCH PPS rate year, -6.4
percent in 2007 LTCH PPS rate year, -1.2 percent in the 2008 LTCH PPS
rate year, 0.2 percent in the 2009 LTCH PPS rate year, and an estimated
increase in the total number of LTCHs. (We note that our Office of the
Actuary is projecting a decrease in Medicare fee-for-service Part A
enrollment, in part, because they are projecting an increase in
Medicare managed care enrollment as a result of the implementation of
several provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003.)
Consistent with the statutory requirement for budget neutrality, we
intend for estimated aggregate payments under the LTCH PPS in FY 2003
to equal the estimated aggregate payments that would have been made if
the LTCH PPS were not implemented. Our methodology for estimating
payments for purposes of the budget neutrality calculations uses the
best available data and necessarily reflects assumptions. As we collect
data from LTCHs, we will monitor payments and evaluate the ultimate
accuracy of the assumptions used to calculate the budget neutrality
calculations (that is, inflation factors, intensity of services
provided, or behavioral response to the implementation of the LTCH
PPS).
Section 123 of BBRA and section 307 of BIPA provide the Secretary
with extremely broad authority in developing the LTCH PPS, including
the authority for appropriate adjustments. In accordance with this
broad authority, we may discuss in a future proposed rule a possible
one-time prospective adjustment to the LTCH PPS rates to maintain
budget neutrality so that the effect of the difference between actual
payments and estimated payments for the first year of LTCH PPS is not
perpetuated in the PPS rates for future years. Because the LTCH PPS was
only recently implemented, we do not yet have sufficient complete data
to determine whether such an adjustment is warranted.
6. Effect on Medicare Beneficiaries
Under the LTCH PPS, hospitals receive payment based on the average
resources consumed by patients for each diagnosis. We do not expect any
changes in the quality of care or access to services for Medicare
beneficiaries under the LTCH PPS, but we expect that paying
prospectively for LTCH services will enhance the efficiency of the
Medicare program.

C. Impact of Policy Changes

1. Requirements for Satellite Facilities and Remote Locations of
Hospitals To Qualify as Long-Term Care Hospitals
Under section V.C.8. of the preamble of this final rule, we discuss
our clarification of the procedures under which a satellite facility or
a remote location of a hospital must meet the statutory and regulatory
requirements to qualify as a distinct LTCH. In particular, we are
specifying the procedure for determining the period from which the
fiscal intermediaries will use discharge data in calculating the
average Medicare inpatient length of stay requirement for a new,
separately participating hospital that seeks classification as a LTCH.
In this final rule, we are restating in regulations our existing
policy that a satellite facility or remote location of a hospital
(except for those that are subject to the location requirement under
the provider-based rules at Sec. 413.65) that voluntarily reorganizes
itself as a separate hospital and meets the provider agreement
requirements of 42 CFR part 489 and the Medicare conditions of
participation under 42 CFR part 482 will have its average Medicare
inpatient length of stay calculated based on discharges that occur
after the satellite facility or remote location is established as a
separate participating hospital.
The policy that we are incorporating in the regulations is already
in existence. Therefore, complying with the regulation amendments will
pose no additional burden on LTCHs.
We are further incorporating in regulations that govern
requirements for LTCHs an exception to the above policy for satellite
facilities and remote locations of hospitals that became subject to the
revised location-based provider-based requirements on July 1, 2003,
that reorganize as separate participating hospitals, and that seek
classification as LTCHs. Under this provision, calculation of the
average Medicare inpatient length of stay for purposes of qualifying as
a LTCH are based on discharge data during the 5 months of the immediate
6 months preceding the facility's separation from the main hospital.
This specific regulation applies only to those facilities or locations
that became subject to the revised provider-based location rules on
July 1, 2003, and that seek classification as LTCHs for Medicare
payment purposes. Therefore, we are unable to quantify how many or

[[Page 25720]]

when a facility or location would seek LTCH classification.
These amendments to the regulations will not impose any additional
requirements on providers. The data used in the calculation of the
average length of stay are already being collected. The existing
procedure for application of the discharge data in calculating the
average length of stay in both circumstances is consistent with
existing statutory and regulatory requirements.
2. Change in Policy on Interruption of a Stay in a LTCH
Under section V.C.4.c. of the preamble of this final rule, we are
expanding the definition of an interruption of a stay to include an
interruption in which the patient is discharged from the LTCH, and
returns to the LTCH within 3 days of the original discharge. We have
found, through monitoring activities and other sources, that certain
LTCHs appear to be discharging patients during the course of their
treatment for the sole purpose of the patient receiving specific tests
or procedures and then readmitting the patient following the
administration of the test or procedure. We believe these situations
are resulting in improper increases in Medicare costs through separate
billings for services that are already included in the LTC-DRG payment
made to the LTCH. The regulation change will prevent these
inappropriate Medicare payments. However, we do not have sufficient
data at this time to quantify either the number of providers that would
be affected by the change nor the savings to the Medicare program.
3. Change in Procedure for Counting Covered and Noncovered Days in a
Stay That Crosses Two Consecutive Cost Reporting Periods
Under section V.C.7. of the preamble to this final rule, we are
specifying the procedure for calculating a hospital's inpatient average
length of stay for purposes of classification as a LTCH when covered
and noncovered days of the stay involve admission in one cost reporting
period and discharge in another cost reporting period. We are
finalizing the policy of counting the total number of days of the stay
in the cost reporting period during which the inpatient was discharged.
This policy revises the existing procedure to make it consistent with
reporting and payment procedures already in place for discharge-based
payment systems that link patient days to discharges. Effective for the
2005 LTCH PPS rate year (July 1, 2004 through June 30, 2005, we have
provided for an exception in the event some providers fail to meet the
25-day ALOS criteria due to this change in policy. The fiscal
intermediaries will then do an additional calculation to determine if
these providers meet the old 25-day criteria. We do not envision many
instances where this will be necessary and believe that it will only
have minimal impact, if any.
The regulation imposes no additional requirements on providers. The
discharge data are already being collected and the revision would
merely change the procedure for reporting it.

D. Executive Order 12866

In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 412

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

0
In accordance with the discussion in this preamble, the Centers for
Medicare & Medicaid Services amends 42 CFR chapter IV, part 412 as set
forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

0
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).

0
2. Section 412.23 is amended by--
0
A. Revising paragraph (e)(3).
0
B. Revising paragraph (e)(4).
The revisions and additions read as follows:

Sec. 412.23 Excluded hospitals: classifications.

* * * * *
(e) Long-term care hospitals.* * *
(3) Calculation of average length of stay. (i) Subject to the
provisions of paragraphs (e)(3)(ii) through (e)(3)(iv) of this section,
the average Medicare inpatient length of stay specified under paragraph
(e)(2)(i) of this section is calculated by dividing the total number of
covered and noncovered days of stay of Medicare inpatients (less leave
or pass days) by the number of total Medicare discharges for the
hospital's most recent complete cost reporting period. Subject to the
provisions of paragraphs (e)(3)(ii) through (e)(3)(iv) of this section,
the average inpatient length of stay specified under paragraph
(e)(2)(ii) of this section is calculated by dividing the total number
of days for all patients, including both Medicare and non-Medicare
inpatients (less leave or pass days) by the number of total discharges
for the hospital's most recent complete cost reporting period.
(ii) Effective for cost reporting periods beginning on or after
July 1, 2004, in calculating the hospital's average length of stay, if
the days of a stay of an inpatient involves days of care furnished
during two or more separate consecutive cost reporting periods, that
is, an admission during one cost reporting period and a discharge
during a future consecutive cost reporting period, the total number of
days of the stay are considered to have occurred in the cost reporting
period during which the inpatient was discharged. However, if after
application of this provision, a hospital fails to meet the average
length of stay specified under paragraphs (e)(2)(i) and (ii) of this
section, Medicare will determine the hospital's average inpatient
length of stay for cost reporting periods beginning on or after July 1,
2004, but before July 1, 2005, by dividing the applicable total days
for Medicare inpatients under paragraph (e)(2)(i) of this section or
the total days for all inpatients under paragraph (e)(2)(ii) of this
section, during the cost reporting period when they occur, by the
number of discharges occurring during the same cost reporting period.
(iii) If a change in a hospital's average length of stay specified
under paragraph (e)(2)(i) or paragraph (e)(2)(ii) of this section is
indicated, the calculation is made by the same method for the period of
at least 5 months of the immediately preceding 6-month period.
(iv) If a hospital has undergone a change of ownership (as
described in Sec. 489.18 of this chapter) at the start of a cost
reporting period or at any time within the period of at least 5 months
of the preceding 6-month period, the hospital may be excluded from the
prospective payment system as a long-term care hospital for a cost
reporting period if, for the period of at least 5 months of the 6
months immediately preceding the start of the period (including time
before the change of ownership), the hospital has the required average
length of stay, continuously operated as a hospital, and continuously
participated as a hospital in Medicare.
(4) Rules applicable to new long-term care hospitals--(i)
Definition. For purposes of payment under the long-term care hospital
prospective payment system under subpart O of this part, a new long-
term care hospital is a provider of inpatient hospital services that
meets the qualifying criteria in paragraphs (e)(1) and (e)(2) of this

[[Page 25721]]

section and, under present or previous ownership (or both), its first
cost reporting period as a LTCH begins on or after October 1, 2002.
(ii) Satellite facilities and remote locations of hospitals seeking
to become new long-term care hospitals. Except as specified in
paragraph (e)(4)(iii) of this section, a satellite facility (as defined
in Sec. 412.22(h)) or a remote location of a hospital (as defined in
Sec. 413.65(a)(2) of this chapter) that voluntarily reorganizes as a
separate Medicare participating hospital, with or without a concurrent
change in ownership, and that seeks to qualify as a new long-term care
hospital for Medicare payment purposes must demonstrate through
documentation that it meets the average length of stay requirement as
specified under paragraphs (e)(2)(i) or (e)(2)(ii) of this section
based on discharges that occur on or after the effective date of its
participation under Medicare as a separate hospital.
(iii) Provider-based facility or organization identified as a
satellite facility and remote location of a hospital prior to July 1,
2003. Satellite facilities and remote locations of hospitals that
became subject to the provider-based status rules under Sec. 413.65 as
of July 1, 2003, that become separately participating hospitals, and
that seek to qualify as long-term care hospitals for Medicare payment
purposes may submit to the fiscal intermediary discharge data gathered
during 5 months of the immediate 6 months preceding the facility's
separation from the main hospital for calculation of the average length
of stay specified under paragraph (e)(2)(i) or paragraph (e)(2)(ii) of
this section.
* * * * *

0
3. Section 412.525 is amended by revising paragraph (d)(2) to read as
follows:

Sec. 412.525 Adjustments to the Federal prospective payment.

* * * * *
(d) Special payment provisions. * * *
(2) A 3-day or less interruption of a stay and a greater than 3-day
interruption of a stay, as provided for in Sec. 412.531.

0
4. Section 412.531 is amended by--
0
A. Revising paragraph (a).
0
B. Revising paragraph (b)(1), (b)(2) and (b)(3).
The revisions read as follows:

Sec. 412.531 Special payment provisions when interruptions of a stay
occurs in a long-term care hospital.

(a) Definitions--(1) A 3-day or less interruption of stay defined.
``A 3-day or less interruption of stay'' means a stay at a long-term
care hospital during which a Medicare inpatient is discharged from the
long-term care hospital to an acute care hospital, IRF, SNF, or the
patient's home and readmitted to the same long-term care hospital
within 3 days of the discharge from the long-term care hospital. The 3-
day or less period begins with the date of discharge from the long-term
care hospital and ends not later than midnight of the third day.
(2) A greater than 3-day interruption of stay defined. ``A greater
than 3-day or less interruption of stay'' means A stay in a long-term
care hospital during which a Medicare inpatient is discharged from the
long-term care hospital to an acute care hospital, an IRF, or a SNF for
a period of greater than 3 days but within the applicable fixed-day
period specified in paragraphs (a)(2)(i) through (a)(2)(iii) of this
section before being readmitted to the same long-term care hospital.
(i) For a discharge to an acute care hospital, the applicable fixed
day period is between 4 and 9 consecutive days. The counting of the
days begins on the date of discharge from the long-term care hospital
and ends on the 9th date after the discharge.
(ii) For a discharge to an IRF, the applicable fixed day period is
between 4 and 27 consecutive days. The counting of the days begins on
the day of discharge from the long-term care hospital and ends on the
27th day after discharge.
(iii) For a discharge to a SNF, the applicable fixed day period is
between 4 and 45 consecutive days. The counting of the days begins on
the day of discharge from the long-term care hospital and ends on the
45th day after the discharge.
(b) Methods of determining payments. (1) For purposes of
determining a Federal prospective payment--
(i) Determining the length of stay. In determining the length of
stay of a patient at a long-term care hospital for payment purposes
under this paragraph (b)--
(A) Except as specified in paragraphs (b)(1)(i)(B) and (b)(1)(i)(C)
of this section, the number of days that a beneficiary spends away from
the long-term care hospital during a 3-day or less interruption of stay
under paragraph (a)(1) of this section is not included in determining
the length of stay of the patient at the long-term care hospital when
there is no outpatient or inpatient medical treatment or care provided
at an acute care hospital or an IRF, or SNF services during the
interruption that is considered a covered service delivered to the
beneficiary.
(B) The number of days that a beneficiary spends away from a long-
term care hospital during a 3-day or less interruption of stay under
paragraph (a)(1) of this section are counted in determining the length
of stay of the patient at the long-term care hospital if the
beneficiary receives inpatient or outpatient medical care or treatment
provided by an acute care hospital or IRF, or SNF services during the
interruption. In the case where these services are provided during
some, but not all days of a 3-day or less interruption, Medicare will
include all days of the interruption in the long-term care hospitals
day-count.
(C) The number of days that a beneficiary spends away from a long-
term care hospital during a 3-day or less interruption of stay under
paragraph (a)(1) of this section during which the beneficiary receives
a procedure grouped to a surgical DRG under the inpatient prospective
payment system in an acute care hospital during the 2005 LTCH PPS rate
year is not included in determining the length of stay of the patient
at the long-term care hospital.
(D) The number of days that a beneficiary spends away from a LTCH
during a greater than 3-day interruption of stay, as defined in
paragraph (a)(2) of this section, is not included in determining the
length of stay at the LTCH.
(ii) Determining how payment is made. (A) Subject to the provisions
of paragraphs (b)(1)(ii)(A)(1) and (b)(1)(ii)(A)(2) of this section,
for a 3-day or less interruption of stay under paragraph (a)(1) of this
section, the entire stay is paid as a single discharge from the long-
term care hospital. CMS makes only one LTC-DRG payment for all portions
of a long-term care stay.
(1) For a 3-day or less interruption of stay under paragraph (a)(1)
of this section in which a long-term care hospital discharges a patient
to an acute care hospital and the patient's treatment during the
interruption is grouped into a surgical DRG under the acute care
inpatient hospital prospective payment system, for the LTCH 2005 rate
year, CMS also makes a separate payment to the acute care hospital for
the surgical DRG discharge in accordance with paragraph (b)(1)(i)(C) of
this section.
(2) For a 3-day or less interruption of stay under paragraph (a)(1)
of this section during which the patient receives inpatient or
outpatient treatment or services at an acute care hospital or IRF, or
SNF services, that are not otherwise excluded under Sec. 412.509(a),
the services must be provided under arrangements in

[[Page 25722]]

accordance with Sec. 412.509(c). CMS does not make a separate payment
to the acute care hospital, IRF, or SNF for these services. The LTC-DRG
payment made to the long-term care hospital is considered payment in
full as specified in Sec. 412.521(b).
(B) For a greater than 3-day interruption of stay under paragraph
(a)(2) of this section, CMS will make only one LTC-DRG payment for all
portions of a long-term care stay. CMS also separately pays the acute
care hospital, the IRF, or the SNF in accordance with their respective
payment systems, as specified in paragraph (c) of this section.
(iii) Basis for the prospective payment. Payment to the long-term
care hospital is based on the patient's LTC-DRG that is determined in
accordance with Sec. 412.513(b).
(2) If the total number of days of a patient's length of stay in a
long-term care hospital prior to and following a 3-day or less
interruption of stay under paragraphs (b)(1)(i)(A), (B), or (C) of this
section or a greater than 3-day interruption of stay under paragraph
(b)(1)(i)(D) of this section is up to and including five-sixths of the
geometric average length of stay of the LTC-DRG, CMS will make a
Federal prospective payment for a short-stay outlier in accordance with
Sec. 412.529(c).
(3) If the total number of days of a patient's length of stay in a
long-term care hospital prior to and following a 3-day or less
interruption of stay under paragraphs (b)(1)(i)(A), (B), or (C) of this
section or a greater than 3-day interruption of stay under paragraph
(b)(1)(i)(D) of this section exceeds five-sixths of the geometric
average length of stay for the LTC-DRG, CMS will make one full Federal
LTC-DRG prospective payment for the case. An additional payment will be
made if the patient's stay qualifies as a high-cost outlier, as set
forth in Sec. 412.525(a).
* * * * *

Sec. 412.532 [Amended]

0
5. In Sec. 412.532--
0
A. In paragraph (f), the phrase ``under the policies on interruption of
a stay as specified in Sec. 412.531.'' is revised to read ``under the
policies on a 3-day or less interruption of a stay and a greater than
3-day interruption of a stay as specified in Sec. 412.531.''
0
B. In paragraph (i), the reference ``paragraphs (h)(1) through (h)(4)
of this section'' is revised to read ``Sec. 412.22(h)(1) through
(h)(4)''.

(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance)

Dated: April 26, 2004.
Mark McClellan,
Administrator, Centers for Medicare & Medicaid Services.

Dated: April 27, 2004.
Tommy G. Thompson,
Secretary.

Note: The following addendum will not appear in the Code of
Federal Regulations.

Addendum

This addendum contains the tables referred to throughout the
preamble to this final rule. The tables presented below are as follows:
Table 1.--Long-Term Care Hospital Wage Index for Urban Areas for
Discharges Occurring from July 1, 2004 through June 30, 2005
Table 2.--Long-Term Care Hospital Wage Index for Rural Areas for
Discharges Occurring from July 1, 2004 through June 30, 2005
Table 3.'' FY 2004 LTC-DRG Relative Weights, Geometric Mean Length
of Stay, and Short-Stay Five-Sixths Average Length of Stay for
Discharges Occurring from July 1, 2004 through September 30, 2004.

Note: This is the same information provided in Table 11 of the
August 1, 2003 IPPS final rule (68 FR 45650-45658), which has been
reprinted here for convenience.)

Table 1.--Long-Term Care Hospital Wage Index for Urban Areas for Discharges Occurring From July 1, 2004 Through
June 30, 2005
----------------------------------------------------------------------------------------------------------------
2/5ths 3/5ths
MSA Urban area (constituent Full wage 1/5th wage wage wage
counties) index \1\ index \2\ index \3\ index \4\
----------------------------------------------------------------------------------------------------------------
0040 Abilene, TX..................... 0.7627 0.9525 0.9051 0.8576
Taylor, TX
0060.......................... Aguadilla, PR................... 0.4306 0.8861 0.7722 0.6584
Aguada, PR
Aguadilla, PR
Moca, PR
0080.......................... Akron, OH....................... 0.9246 0.9849 0.9698 0.9548
Portage, OH
Summit, OH
0120.......................... Albany, GA...................... 1.0863 1.0173 1.0345 1.0518
Dougherty, GA
Lee, GA
0160.......................... Albany-Schenectady-Troy, NY..... 0.8489 0.9698 0.9396 0.9093
Albany, NY
Montgomery, NY
Rensselaer, NY
Saratoga, NY
Schenectady, NY
Schoharie, NY
0200.......................... Albuquerque, NM................. 0.9300 0.9860 0.9720 0.9580
Bernalillo, NM
Sandoval, NM
Valencia, NM
0220.......................... Alexandria, LA.................. 0.8019 0.9604 0.9208 0.8811
Rapides, LA
0240.......................... Allentown-Bethlehem-Easton, PA.. 0.9721 0.9944 0.9888 0.9833
Carbon, PA
Lehigh, PA
Northampton, PA
0280.......................... Altoona, PA..................... 0.8806 0.9761 0.9522 0.9284

[[Page 25723]]

Blair, PA
0320.......................... Amarillo, TX Potter, TX......... 0.8986 0.9797 0.9594 0.9392
Randall, TX
0380.......................... Anchorage, AK................... 1.2216 1.0443 1.0886 1.1330
Anchorage, AK
0440.......................... Ann Arbor, MI................... 1.1074 1.0215 1.0430 1.0644
Lenawee, MI
Livingston, MI
Washtenaw, MI
0450.......................... Anniston, AL.................... 0.8090 0.9618 0.9236 0.8854
Calhoun, AL
0460.......................... Appleton-Oshkosh-Neenah, WI..... 0.9035 0.9807 0.9614 0.9421
Calumet, WI
Outagamie, WI
Winnebago, WI
0470.......................... Arecibo, PR..................... 0.4155 0.8831 0.7662 0.6493
Arecibo, PR
Camuy, PR
Hatillo, PR
0480.......................... Asheville, NC................... 0.9720 0.9944 0.9888 0.9832
Buncombe, NC
Madison, NC
0500.......................... Athens, GA...................... 0.9818 0.9964 0.9927 0.9891
Clarke, GA
Madison, GA
Oconee, GA
0520.......................... Atlanta, GA..................... 1.0130 1.0026 1.0052 1.0078
Barrow, GA
Bartow, GA
Carroll, GA
Cherokee, GA
Clayton, GA
Cobb, GA
Coweta, GA
DeKalb, GA
Douglas, GA
Fayette, GA
Forsyth, GA
Fulton, GA
Gwinnett, GA
Henry, GA
Newton, GA
Paulding, GA
Pickens, GA
Rockdale, GA
Spalding, GA
Walton, GA
0560.......................... Atlantic-Cape May, NJ........... 1.0795 1.0159 1.0318 1.0477
Atlantic, NJ
Cape May, NJ
0580.......................... Auburn-Opelika, AL.............. 0.8494 0.9699 0.9398 0.9096
Lee, AL
0600.......................... Augusta-Aiken, GA-SC............ 0.9625 0.9925 0.9850 0.9775
Columbia, GA
McDuffie, GA
Richmond, GA
Aiken, SC
Edgefield, SC
0640.......................... Austin-San Marcos, TX........... 0.9609 0.9922 0.9844 0.9765
Bastrop, TX
Caldwell, TX
Hays, TX
Travis, TX
Williamson, TX
0680.......................... Bakersfield, CA................. 0.9810 0.9962 0.9924 0.9886
Kern, CA
0720.......................... Baltimore, MD................... 0.9919 0.9984 0.9968 0.9951
Anne Arundel, MD
Baltimore, MD

[[Page 25724]]

Baltimore City, MD
Carroll, MD
Harford, MD
Howard, MD
Queen Anne's, MD
0733.......................... Bangor, ME...................... 0.9904 0.9981 0.9962 0.9942
Penobscot, ME
0743.......................... Barnstable-Yarmouth, MA......... 1.2956 1.0591 1.1182 1.1774
Barnstable, MA
0760.......................... Baton Rouge, LA................. 0.8406 0.9681 0.9362 0.9044
Ascension, LA
East Baton Rouge, LA
Livingston, LA
West Baton Rouge, LA
0840.......................... Beaumont-Port Arthur, TX........ 0.8424 0.9685 0.9370 0.9054
Hardin, TX
Jefferson, TX
Orange, TX
0860.......................... Bellingham, WA.................. 1.1757 1.0351 1.0703 1.1054
Whatcom, WA
0870.......................... Benton Harbor, MI............... 0.8871 0.9774 0.9548 0.9323
Berrien, MI
0875.......................... Bergen-Passaic, NJ.............. 1.1692 1.0338 1.0677 1.1015
Bergen, NJ
Passaic, NJ
0880.......................... Billings, MT.................... 0.8961 0.9792 0.9584 0.9377
Yellowstone, MT
0920.......................... Biloxi-Gulfport-Pascagoula, MS.. 0.9029 0.9806 0.9612 0.9417
Hancock, MS
Harrison, MS
Jackson, MS
0960.......................... Binghamton, NY.................. 0.8428 0.9686 0.9371 0.9057
Broome, NY
Tioga, NY
1000.......................... Birmingham, AL.................. 0.9212 0.9842 0.9685 0.9527
Blount, AL
Jefferson, AL
St. Clair, AL
Shelby, AL
1010.......................... Bismarck, ND.................... 0.7965 0.9593 0.9186 0.8779
Burleigh, ND
Morton, ND
1020.......................... Bloomington, IN................. 0.8662 0.9732 0.9465 0.9197
Monroe, IN
1040.......................... Bloomington-Normal, IL.......... 0.8832 0.9766 0.9533 0.9299
McLean, IL
1080.......................... Boise City, ID.................. 0.9209 0.9842 0.9684 0.9525
Ada, ID
Canyon, ID
1123.......................... Boston-Worcester-Lawrence-Lowell- 1.1233 1.0247 1.0493 1.0740
Brockton, MA-NH (NH Hospitals).
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............ 1.0049 1.0010 1.0020 1.0029
Boulder, CO
1145.......................... Brazoria, TX.................... 0.8137 0.9627 0.9255 0.8882
Brazoria, TX
1150.......................... Bremerton, WA................... 1.0580 1.0116 1.0232 1.0348
Kitsap, WA
1240.......................... Brownsville-Harlingen-San 1.0303 1.0061 1.0121 1.0182
Benito, TX.
Cameron, TX

[[Page 25725]]

1260.......................... Bryan-College Station, TX....... 0.9019 0.9804 0.9608 0.9411
Brazos, TX
1280.......................... Buffalo-Niagara Falls, NY....... 0.9604 0.9921 0.9842 0.9762
Erie, NY
Niagara, NY
1303.......................... Burlington, VT.................. 0.9704 0.9941 0.9882 0.9822
Chittenden, VT
Franklin, VT
Grand Isle, VT
1310.......................... Caguas, PR...................... 0.4158 0.8832 0.7663 0.6495
Caguas, PR
Cayey, PR
Cidra, PR
Gurabo, PR
San Lorenzo, PR
1320.......................... Canton-Massillon, OH............ 0.9071 0.9814 0.9628 0.9443
Carroll, OH
Stark, OH
1350.......................... Casper, WY...................... 0.9095 0.9819 0.9638 0.9457
Natrona, WY
1360.......................... Cedar Rapids, IA................ 0.8874 0.9775 0.9550 0.9324
Linn, IA
1400.......................... Champaign-Urbana, IL............ 0.9907 0.9981 0.9963 0.9944
Champaign, IL
1440.......................... Charleston-North Charleston, SC. 0.9332 0.9866 0.9733 0.9599
Berkeley, SC
Charleston, SC
Dorchester, SC
1480.......................... Charleston, WV.................. 0.8880 0.9776 0.9552 0.9328
Kanawha, WV
Putnam, WV
1520.......................... Charlotte-Gastonia-Rock Hill, NC- 0.9760 0.9952 0.9904 0.9856
SC.
Cabarrus, NC
Gaston, NC
Lincoln, NC
Mecklenburg, NC
Rowan, NC
Stanly, NC
Union, NC
York, SC
1540.......................... Charlottesville, VA............. 1.0025 1.0005 1.0010 1.0015
Albemarle, VA
Charlottesville City, VA
Fluvanna, VA
Greene, VA
1560.......................... Chattanooga, TN-GA.............. 0.9086 0.9817 0.9634 0.9452
Catoosa, GA
Dade, GA
Walker, GA
Hamilton, TN
Marion, TN
1580.......................... Cheyenne, WY.................... 0.8796 0.9759 0.9518 0.9278
Laramie, WY
1600.......................... Chicago, IL..................... 1.0892 1.0178 1.0357 1.0535
Cook, IL
DeKalb, IL
DuPage, IL
Grundy, IL
Kane, IL
Kendall, IL
Lake, IL
McHenry, IL
Will, IL
1620.......................... Chico-Paradise, CA.............. 1.0193 1.0039 1.0077 1.0116
Butte, CA
1640.......................... Cincinnati, OH-KY-IN............ 0.9413 0.9883 0.9765 0.9648
Dearborn, IN
Ohio, IN
Boone, KY

[[Page 25726]]

Campbell, KY
Gallatin, KY
Grant, KY
Kenton, KY
Pendleton, KY
Brown, OH
Clermont, OH
Hamilton, OH
Warren, OH
1660.......................... Clarksville-Hopkinsville, TN-KY. 0.8244 0.9649 0.9298 0.8946
Christian, KY
Montgomery, TN
1680.......................... Cleveland-Lorain-Elyria, OH..... 0.9671 0.9934 0.9868 0.9803
Ashtabula, OH
Cuyahoga, OH
Geauga, OH
Lake, OH
Lorain, OH
Medina, OH
1720.......................... Colorado Springs, CO............ 0.9833 0.9967 0.9933 0.9900
El Paso, CO
1740.......................... Columbia, MO.................... 0.8695 0.9739 0.9478 0.9217
Boone, MO
1760.......................... Columbia, SC.................... 0.8902 0.9780 0.9561 0.9341
Lexington, SC
Richland, SC
1800.......................... Columbus, GA-AL Russell, AL..... 0.8694 0.9739 0.9478 0.9216
Chattahoochee, GA
Harris, GA
Muscogee, GA
1840.......................... Columbus, OH.................... 0.9648 0.9930 0.9859 0.9789
Delaware, OH
Fairfield, OH
Franklin, OH
Licking, OH
Madison, OH
Pickaway, OH
1880.......................... Corpus Christi, TX.............. 0.8521 0.9704 0.9408 0.9113
Nueces, TX
San Patricio, TX
1890.......................... Corvallis, OR................... 1.1516 1.0303 1.0606 1.0910
Benton, OR
1900.......................... Cumberland, MD-WV (WV Hospital). 0.8200 0.9640 0.9280 0.8920
Allegany, MD
Mineral, WV
1920.......................... Dallas, TX...................... 0.9974 0.9995 0.9990 0.9984
Collin, TX
Dallas, TX
Denton, TX
Ellis, TX
Henderson, TX
Hunt, TX
Kaufman, TX
Rockwall, TX
1950.......................... Danville, VA.................... 0.9035 0.9807 0.9614 0.9421
Danville City, VA
Pittsylvania, VA
1960.......................... Davenport-Moline-Rock Island, IA- 0.8985 0.9797 0.9594 0.9391
IL.
Scott, IA
Henry, IL
Rock Island, IL
2000.......................... Dayton-Springfield, OH.......... 0.9518 0.9904 0.9807 0.9711
Clark, OH
Greene, OH
Miami, OH
Montgomery, OH
2020.......................... Daytona Beach, FL............... 0.9078 0.9816 0.9631 0.9447
Flagler, FL
Volusia, FL

[[Page 25727]]

2030.......................... Decatur, AL..................... 0.8828 0.9766 0.9531 0.9297
Lawrence, AL
Morgan, AL
2040.......................... Decatur, IL..................... 0.8161 0.9632 0.9264 0.8897
Macon, IL
2080.......................... Denver, CO...................... 1.0837 1.0167 1.0335 1.0502
Adams, CO
Arapahoe, CO
Denver, CO
Douglas, CO
Jefferson, CO
2120.......................... Des Moines, IA.................. 0.9106 0.9821 0.9642 0.9464
Dallas, IA
Polk, IA
Warren, IA
2160.......................... Detroit, MI..................... 1.0101 1.0020 1.0040 1.0061
Lapeer, MI
Macomb, MI
Monroe, MI
Oakland, MI
St. Clair, MI
Wayne, MI
2180.......................... Dothan, AL...................... 0.7741 0.9548 0.9096 0.8645
Dale, AL
Houston, AL
2190.......................... Dover, DE....................... 0.9805 0.9961 0.9922 0.9883
Kent, DE
2200.......................... Dubuque, IA..................... 0.8886 0.9777 0.9554 0.9332
Dubuque, IA
2240.......................... Duluth-Superior, MN-WI.......... 1.0171 1.0034 1.0068 1.0103
St. Louis, MN
Douglas, WI
2281.......................... Dutchess County, NY............. 1.0934 1.0187 1.0374 1.0560
Dutchess, NY
2290.......................... Eau Claire, WI.................. 0.9064 0.9813 0.9626 0.9438
Chippewa, WI
Eau Claire, WI
2320.......................... El Paso, TX..................... 0.9196 0.9839 0.9678 0.9518
El Paso, TX
2330.......................... Elkhart-Goshen, IN.............. 0.9783 0.9957 0.9913 0.9870
Elkhart, IN
2335.......................... Elmira, NY...................... 0.8377 0.9675 0.9351 0.9026
Chemung, NY
2340.......................... Enid, OK........................ 0.8559 0.9712 0.9424 0.9135
Garfield, OK
2360.......................... Erie, PA........................ 0.8601 0.9720 0.9440 0.9161
Erie, PA
2400.......................... Eugene-Springfield, OR.......... 1.1456 1.0291 1.0582 1.0874
Lane, OR
2440.......................... Evansville-Henderson, IN-KY (IN 0.8429 0.9686 0.9372 0.9057
Hospitals).
Posey, IN
Vanderburgh, IN
Warrick, IN
Henderson, KY
2520.......................... Fargo-Moorhead, ND-MN........... 0.9797 0.9959 0.9919 0.9878
Clay, MN
Cass, ND
2560.......................... Fayetteville, NC................ 0.8986 0.9797 0.9594 0.9392
Cumberland, NC
2580.......................... Fayetteville-Springdale-Rogers, 0.8396 0.9679 0.9358 0.9038
AR.
Benton, AR
Washington, AR
2620.......................... Flagstaff, AZ-UT................ 1.1333 1.0267 1.0533 1.0800
Coconino, AZ
Kane, UT
2640.......................... Flint, MI....................... 1.0858 1.0172 1.0343 1.0515
Genesee, MI
2650.......................... Florence, AL.................... 0.7747 0.9549 0.9099 0.8648
Colbert, AL

[[Page 25728]]

Lauderdale, AL
2655.......................... Florence, SC.................... 0.8709 0.9742 0.9484 0.9225
Florence, SC
2670.......................... Fort Collins-Loveland, CO....... 1.0108 1.0022 1.0043 1.0065
Larimer, CO
2680.......................... Ft. Lauderdale, FL.............. 1.0163 1.0033 1.0065 1.0098
Broward, FL
2700.......................... Fort Myers-Cape Coral, FL....... 0.9816 0.9963 0.9926 0.9890
Lee, FL
2710.......................... Fort Pierce-Port St. Lucie, FL.. 1.0008 1.0002 1.0003 1.0005
Martin, FL
St. Lucie, FL
2720.......................... Fort Smith, AR-OK............... 0.8424 0.9685 0.9370 0.9054
Crawford, AR
Sebastian, AR
Sequoyah, OK
2750.......................... Fort Walton Beach, FL........... 0.8966 0.9793 0.9586 0.9380
Okaloosa, FL
2760.......................... Fort Wayne, IN.................. 0.9585 0.9917 0.9834 0.9751
Adams, IN
Allen, IN
De Kalb, IN
Huntington, IN
Wells, IN
Whitley, IN
2800.......................... Fort Worth-Arlington, TX........ 0.9359 0.9872 0.9744 0.9615
Hood, TX
Johnson, TX
Parker, TX
Tarrant, TX
2840.......................... Fresno, CA...................... 1.0094 1.0019 1.0038 1.0056
Fresno, CA
Madera, CA
2880.......................... Gadsden, AL..................... 0.8206 0.9641 0.9282 0.8924
Etowah, AL
2900.......................... Gainesville, FL................. 0.9693 0.9939 0.9877 0.9816
Alachua, FL
2920.......................... Galveston-Texas City, TX........ 0.9279 0.9856 0.9712 0.9567
Galveston, TX
2960.......................... Gary, IN........................ 0.9410 0.9882 0.9764 0.9646
Lake, IN
Porter, IN
2975.......................... Glens Falls, NY................. 0.8475 0.9695 0.9390 0.9085
Warren, NY
Washington, NY
2980.......................... Goldsboro, NC................... 0.8622 0.9724 0.9449 0.9173
Wayne, NC
2985.......................... Grand Forks, ND-MN.............. 0.8636 0.9727 0.9454 0.9182
Polk, MN
Grand Forks, ND
2995.......................... Grand Junction, CO.............. 0.9633 0.9927 0.9853 0.9780
Mesa, CO
3000.......................... Grand Rapids-Muskegon-Holland, 0.9469 0.9894 0.9788 0.9681
MI.
Allegan, MI
Kent, MI
Muskegon, MI
Ottawa, MI
3040.......................... Great Falls, MT................. 0.8809 0.9762 0.9524 0.9285
Cascade, MT
3060.......................... Greeley, CO..................... 0.9372 0.9874 0.9749 0.9623
Weld, CO
3080.......................... Green Bay, WI................... 0.9461 0.9892 0.9784 0.9677
Brown, WI
3120.......................... Greensboro-Winston-Salem-High 0.9166 0.9833 0.9666 0.9500
Point, NC.
Alamance, NC
Davidson, NC
Davie, NC
Forsyth, NC
Guilford, NC

[[Page 25729]]

Randolph, NC
Stokes, NC
Yadkin, NC
3150.......................... Greenville, NC.................. 0.9098 0.9820 0.9639 0.9459
Pitt, NC
3160.......................... Greenville-Spartanburg-Anderson, 0.9335 0.9867 0.9734 0.9601
SC.
Anderson, SC
Cherokee, SC
Greenville, SC
Pickens, SC
Spartanburg, SC
3180.......................... Hagerstown, MD.................. 0.9172 0.9834 0.9669 0.9503
Washington, MD
3200.......................... Hamilton-Middletown, OH......... 0.9214 0.9843 0.9686 0.9528
Butler, OH
3240.......................... Harrisburg-Lebanon-Carlisle, PA. 0.9164 0.9833 0.9666 0.9498
Cumberland, PA
Dauphin, PA
Lebanon, PA
Perry, PA
3283.......................... Hartford, CT.................... 1.1555 1.0311 1.0622 1.0933
Hartford, CT
Litchfield, CT
Middlesex, CT
Tolland, CT
3285.......................... Hattiesburg, MS \2\............. 0.7307 0.9461 0.8923 0.8384
Forrest, MS
Lamar, MS
3290.......................... Hickory-Morganton-Lenoir, NC.... 0.9242 0.9848 0.9697 0.9545
Alexander, NC
Burke, NC
Caldwell, NC
Catawba, NC
3320.......................... Honolulu, HI.................... 1.1098 1.0220 1.0439 1.0659
Honolulu, HI
3350.......................... Houma, LA....................... 0.7748 0.9550 0.9099 0.8649
Lafourche, LA
Terrebonne, LA
3360.......................... Houston, TX..................... 0.9834 0.9967 0.9934 0.9900
Chambers, TX
Fort Bend, TX
Harris, TX
Liberty, TX
Montgomery, TX
Waller, TX
3400.......................... Huntington-Ashland, WV-KY-OH.... 0.9595 0.9919 0.9838 0.9757
Boyd, KY
Carter, KY
Greenup, KY
Lawrence, OH
Cabell, WV
Wayne, WV
3440.......................... Huntsville, AL.................. 0.9245 0.9849 0.9698 0.9547
Limestone, AL
Madison, AL
3480.......................... Indianapolis, IN................ 0.9916 0.9983 0.9966 0.9950
Boone, IN
Hamilton, IN
Hancock, IN
Hendricks, IN
Johnson, IN
Madison, IN
Marion, IN
Morgan, IN
Shelby, IN
3500.......................... Iowa City, IA................... 0.9548 0.9910 0.9819 0.9729
Johnson, IA
3520.......................... Jackson, MI..................... 0.8986 0.9797 0.9594 0.9392
Jackson, MI

[[Page 25730]]

3560.......................... Jackson, MS..................... 0.8357 0.9671 0.9343 0.9014
Hinds, MS
Madison, MS
Rankin, MS
3580.......................... Jackson, TN..................... 0.8984 0.9797 0.9594 0.9390
Madison, TN
Chester, TN
3600.......................... Jacksonville, FL................ 0.9529 0.9906 0.9812 0.9717
Clay, FL
Duval, FL
Nassau, FL
St. Johns, FL
3605.......................... Jacksonville, NC................ 0.8544 0.9709 0.9418 0.9126
Onslow, NC
3610.......................... Jamestown, NY................... 0.7762 0.9552 0.9105 0.8657
Chautauqua, NY
3620.......................... Janesville-Beloit, WI........... 0.9282 0.9856 0.9713 0.9569
Rock, WI
3640.......................... Jersey City, NJ................. 1.1115 1.0223 1.0446 1.0669
Hudson, NJ
3660.......................... Johnson City-Kingsport-Bristol, 0.8253 0.9651 0.9301 0.8952
TN-VA.
Carter, TN
Hawkins, TN
Sullivan, TN
Unicoi, TN
Washington, TN
Bristol City, VA
Scott, VA
Washington, VA
3680.......................... Johnstown, PA................... 0.8158 0.9632 0.9263 0.8895
Cambria, PA
Somerset, PA
3700.......................... Jonesboro, AR................... 0.7794 0.9559 0.9118 0.8676
Craighead, AR
3710.......................... Joplin, MO...................... 0.8681 0.9736 0.9472 0.9209
Jasper, MO
Newton, MO
3720.......................... Kalamazoo-Battlecreek, MI....... 1.0500 1.0100 1.0200 1.0300
Calhoun, MI
Kalamazoo, MI
Van Buren, MI
3740.......................... Kankakee, IL.................... 1.0419 1.0084 1.0168 1.0251
Kankakee, IL
3760.......................... Kansas City, KS-MO.............. 0.9715 0.9943 0.9886 0.9829
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..................... 0.9761 0.9952 0.9904 0.9857
Kenosha, WI
3810.......................... Killeen-Temple, TX.............. 0.9159 0.9832 0.9664 0.9495
Bell, TX
Coryell, TX
3840.......................... Knoxville, TN................... 0.8820 0.9764 0.9528 0.9292
Anderson, TN
Blount, TN
Knox, TN
Loudon, TN
Sevier, TN
Union, TN
3850.......................... Kokomo, IN...................... 0.9045 0.9809 0.9618 0.9427
Howard, IN

[[Page 25731]]

Tipton, IN
3870.......................... La Crosse, WI-MN................ 0.9247 0.9849 0.9699 0.9548
Houston, MN
La Crosse, WI
3880.......................... Lafayette, LA................... 0.8189 0.9638 0.9276 0.8913
Acadia, LA
Lafayette, LA
St. Landry, LA
St. Martin, LA
3920.......................... Lafayette, IN................... 0.8584 0.9717 0.9434 0.9150
Clinton, IN
Tippecanoe, IN
3960.......................... Lake Charles, LA................ 0.7841 0.9568 0.9136 0.8705
Calcasieu, LA
3980.......................... Lakeland-Winter Haven, FL....... 0.8811 0.9762 0.9524 0.9287
Polk, FL
4000.......................... Lancaster, PA................... 0.9282 0.9856 0.9713 0.9569
Lancaster, PA
4040.......................... Lansing-East Lansing, MI........ 0.9714 0.9943 0.9886 0.9828
Clinton, MI
Eaton, MI
Ingham, MI
4080.......................... Laredo, TX...................... 0.8091 0.9618 0.9236 0.8855
Webb, TX
4100.......................... Las Cruces, NM.................. 0.8688 0.9738 0.9475 0.9213
Dona Ana, NM
4120.......................... Las Vegas, NV-AZ................ 1.1528 1.0306 1.0611 1.0917
Mohave, AZ
Clark, NV
Nye, NV
4150.......................... Lawrence, KS.................... 0.8677 0.9735 0.9471 0.9206
Douglas, KS
4200.......................... Lawton, OK...................... 0.8267 0.9653 0.9307 0.8960
Comanche, OK
4243.......................... Lewiston-Auburn, ME............. 0.9383 0.9877 0.9753 0.9630
Androscoggin, ME
4280.......................... Lexington, KY................... 0.8685 0.9737 0.9474 0.9211
Bourbon, KY
Clark, KY
Fayette, KY
Jessamine, KY
Madison, KY
Scott, KY
Woodford, KY
4320.......................... Lima, OH........................ 0.9522 0.9904 0.9809 0.9713
Allen, OH
Auglaize, OH
4360.......................... Lincoln, NE..................... 1.0033 1.0007 1.0013 1.0020
Lancaster, NE
4400.......................... Little Rock-North Little Rock, 0.8923 0.9785 0.9569 0.9354
AR.
Faulkner, AR
Lonoke, AR
Pulaski, AR
Saline, AR
4420.......................... Longview-Marshall, TX........... 0.9113 0.9823 0.9645 0.9468
Gregg, TX
Harrison, TX
Upshur, TX
4480.......................... Los Angeles-Long Beach, CA...... 1.1795 1.0359 1.0718 1.1077
Los Angeles, CA
4520.......................... Louisville, KY-IN \1\........... 0.9242 0.9848 0.9697 0.9545
Clark, IN
Floyd, IN
Harrison, IN
Scott, IN
Bullitt, KY
Jefferson, KY
Oldham, KY
4600.......................... Lubbock, TX..................... 0.8272 0.9654 0.9309 0.8963

[[Page 25732]]

Lubbock, TX
4640.......................... Lynchburg, VA................... 0.9134 0.9827 0.9654 0.9480
Amherst, VA
Bedford, VA
Bedford City, VA
Campbell, VA
Lynchburg City, VA
4680.......................... Macon, GA....................... 0.8953 0.9791 0.9581 0.9372
Bibb, GA
Houston, GA
Jones, GA
Peach, GA
Twiggs, GA
4720.......................... Madison, WI..................... 1.0264 1.0053 1.0106 1.0158
Dane, WI
4800.......................... Mansfield, OH................... 0.9180 0.9836 0.9672 0.9508
Crawford, OH
Richland, OH
4840.......................... Mayaguez, PR.................... 0.4795 0.8959 0.7918 0.6877
Anasco, PR
Cabo Rojo, PR
Hormigueros, PR
Mayaguez, PR
Sabana Grande, PR
San German, PR
4880.......................... McAllen-Edinburg-Mission, TX.... 0.8381 0.9676 0.9352 0.9029
Hidalgo, TX
4890.......................... Medford-Ashland, OR............. 1.0772 1.0154 1.0309 1.0463
Jackson, OR
4900.......................... Melbourne-Titusville-Palm Bay, 0.9776 0.9955 0.9910 0.9866
FL.
Brevard, Fl
4920.......................... Memphis, TN-AR-MS............... 0.9009 0.9802 0.9604 0.9405
Crittenden, AR
DeSoto, MS
Fayette, TN
Shelby, TN
Tipton, TN
4940.......................... Merced, CA...................... 0.9690 0.9938 0.9876 0.9814
Merced, CA
5000.......................... Miami, FL....................... 0.9894 0.9979 0.9958 0.9936
Dade, FL
5015.......................... Middlesex-Somerset-Hunterdon, NJ 1.1366 1.0273 1.0546 1.0820
Hunterdon, NJ
Middlesex, NJ
Somerset, NJ
5080.......................... Milwaukee-Waukesha, WI.......... 0.9988 0.9998 0.9995 0.9993
Milwaukee, WI
Ozaukee, WI
Washington, WI
Waukesha, WI
5120.......................... Minneapolis-St. Paul, MN-WI..... 1.1001 1.0200 1.0400 1.0601
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.................... 0.8718 0.9744 0.9487 0.9231
Missoula, MT
5160.......................... Mobile, AL...................... 0.7994 0.9599 0.9198 0.8796
Baldwin, AL
Mobile, AL

[[Page 25733]]

5170.......................... Modesto, CA..................... 1.1275 1.0255 1.0510 1.0765
Stanislaus, CA
5190.......................... Monmouth-Ocean, NJ.............. 1.0956 1.0191 1.0382 1.0574
Monmouth, NJ
Ocean, NJ
5200.......................... Monroe, LA...................... 0.7922 0.9584 0.9169 0.8753
Ouachita, LA
5240.......................... Montgomery, AL.................. 0.7907 0.9581 0.9163 0.8744
Autauga, AL
Elmore, AL
Montgomery, AL
5280.......................... Muncie, IN...................... 0.8775 0.9755 0.9510 0.9265
Delaware, IN
5330.......................... Myrtle Beach, SC................ 0.9112 0.9822 0.9645 0.9467
Horry, SC
5345.......................... Naples, FL...................... 0.9790 0.9958 0.9916 0.9874
Collier, FL
5360.......................... Nashville, TN................... 0.9855 0.9971 0.9942 0.9913
Cheatham, TN
Davidson, TN
Dickson, TN
Robertson, TN
Rutherford TN
Sumner, TN
Williamson, TN
Wilson, TN
5380.......................... Nassau-Suffolk, NY.............. 1.3140 1.0628 1.1256 1.1884
Nassau, NY
Suffolk, NY
5483.......................... New Haven-Bridgeport-Stamford- 1.2385 1.0477 1.0954 1.1431
Waterbury-Danbury, CT.
Fairfield, CT
New Haven, CT
5523.......................... New London-Norwich, CT.......... 1.1631 1.0326 1.0652 1.0979
New London, CT
5560.......................... New Orleans, LA................. 0.9174 0.9835 0.9670 0.9504
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.................... 1.4018 1.0804 1.1607 1.2411
Bronx, NY
Kings, NY
New York, NY
Putnam, NY
Queens, NY
Richmond, NY
Rockland, NY
Westchester, NY
5640.......................... Newark, NJ...................... 1.1518 1.0304 1.0607 1.0911
Essex, NJ
Morris, NJ
Sussex, NJ
Union, NJ
Warren, NJ
5660.......................... Newburgh, NY-PA................. 1.1509 1.0302 1.0604 1.0905
Orange, NY
Pike, PA
5720.......................... Norfolk-Virginia Beach-Newport 0.8619 0.9724 0.9448 0.9171
News, VA-NC.
Currituck, NC
Chesapeake City, VA
Gloucester, VA
Hampton City, VA
Isle of Wight, VA
James City, VA
Mathews, VA

[[Page 25734]]

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..................... 1.4921 1.0984 1.1968 1.2953
Alameda, CA
Contra Costa, CA
5790.......................... Ocala, FL....................... 0.9728 0.9946 0.9891 0.9837
Marion, FL
5800.......................... Odessa-Midland, TX.............. 0.9327 0.9865 0.9731 0.9596
Ector, TX
Midland, TX
5880.......................... Oklahoma City, OK............... 0.8984 0.9797 0.9594 0.9390
Canadian, OK
Cleveland, OK
Logan, OK
McClain, OK
Oklahoma, OK
Pottawatomie, OK
5910.......................... Olympia, WA..................... 1.0963 1.0193 1.0385 1.0578
Thurston, WA
5920.......................... Omaha, NE-IA.................... 0.9745 0.9949 0.9898 0.9847
Pottawattamie, IA
Cass, NE
Douglas, NE
Sarpy, NE
Washington, NE
5945.......................... Orange County, CA............... 1.1372 1.0274 1.0549 1.0823
Orange, CA
5960.......................... Orlando, FL..................... 0.9654 0.9931 0.9862 0.9792
Lake, FL
Orange, FL
Osceola, FL
Seminole, FL
5990.......................... Owensboro, KY................... 0.8374 0.9675 0.9350 0.9024
Daviess, KY
6015.......................... Panama City, FL................. 0.8202 0.9640 0.9281 0.8921
Bay, FL
6020.......................... Parkersburg-Marietta, WV-OH..... 0.8039 0.9608 0.9216 0.8823
Washington, OH
Wood, WV
6080.......................... Pensacola, FL................... 0.8707 0.9741 0.9483 0.9224
Escambia, FL
Santa Rosa, FL
6120.......................... Peoria-Pekin, IL................ 0.8734 0.9747 0.9494 0.9240
Peoria, IL
Tazewell, IL
Woodford, IL
6160.......................... Philadelphia, PA-NJ............. 1.0883 1.0177 1.0353 1.0530
Burlington, NJ
Camden, NJ
Gloucester, NJ
Salem, NJ
Bucks, PA
Chester, PA
Delaware, PA
Montgomery, PA
Philadelphia, PA
6200.......................... Phoenix-Mesa, AZ................ 1.0129 1.0026 1.0052 1.0077
Maricopa, AZ
Pinal, AZ
6240.......................... Pine Bluff, AR.................. 0.7865 0.9573 0.9146 0.8719
Jefferson, AR
6280.......................... Pittsburgh, PA.................. 0.8901 0.9780 0.9560 0.9341
Allegheny, PA

[[Page 25735]]

Beaver, PA
Butler, PA
Fayette, PA
Washington, PA
Westmoreland, PA
6323.......................... Pittsfield, MA.................. 1.0276 1.0055 1.0110 1.0166
Berkshire, MA
6340.......................... Pocatello, ID................... 0.9042 0.9808 0.9617 0.9425
Bannock, ID
6360.......................... Ponce, PR....................... 0.4708 0.8942 0.7883 0.6825
Guayanilla, PR
Juana Diaz, PR
Penuelas, PR
Ponce, PR
Villalba, PR
Yauco, PR
6403.......................... Portland, ME.................... 0.9949 0.9990 0.9980 0.9969
Cumberland, ME
Sagadahoc, ME
York, ME
6440.......................... Portland-Vancouver, OR-WA....... 1.1213 1.0243 1.0485 1.0728
Clackamas, OR
Columbia, OR
Multnomah, OR
Washington, OR
Yamhill, OR
Clark, WA
6483.......................... Providence-Warwick-Pawtucket, RI 1.0977 1.0195 1.0391 1.0586
Bristol, RI
Kent, RI
Newport, RI
Providence, RI
Washington, RI
6520.......................... Provo-Orem, UT.................. 0.9976 0.9995 0.9990 0.9986
Utah, UT
6560.......................... Pueblo, CO...................... 0.8778 0.9756 0.9511 0.9267
Pueblo, CO
6580.......................... Punta Gorda, FL................. 0.9510 0.9902 0.9804 0.9706
Charlotte, FL
6600.......................... Racine, WI...................... 0.8814 0.9763 0.9526 0.9288
Racine, WI
6640.......................... Raleigh-Durham-Chapel Hill, NC.. 0.9959 0.9992 0.9984 0.9975
Chatham, NC
Durham, NC
Franklin, NC
Johnston, NC
Orange, NC
Wake, NC
6660.......................... Rapid City, SD.................. 0.8806 0.9761 0.9522 0.9284
Pennington, SD
6680.......................... Reading, PA..................... 0.9133 0.9827 0.9653 0.9480
Berks, PA
6690.......................... Redding, CA..................... 1.1352 1.0270 1.0541 1.0811
Shasta, CA
6720.......................... Reno, NV........................ 1.0682 1.0136 1.0273 1.0409
Washoe, NV
6740.......................... Richland-Kennewick-Pasco, WA.... 1.0609 1.0122 1.0244 1.0365
Benton, WA
Franklin, WA
6760.......................... Richmond-Petersburg, VA......... 0.9349 0.9870 0.9740 0.9609
Charles City County, VA
Chesterfield, VA
Colonial Heights City, VA
Dinwiddie, VA
Goochland, VA
Hanover, VA
Henrico, VA
Hopewell City, VA
New Kent, VA

[[Page 25736]]

Petersburg City, VA
Powhatan, VA
Prince George, VA
Richmond City, VA
6780.......................... Riverside-San Bernardino, CA.... 1.1341 1.0268 1.0536 1.0805
Riverside, CA
San Bernardino, CA
6800.......................... Roanoke, VA..................... 0.8700 0.9740 0.9480 0.9220
Botetourt, VA
Roanoke, VA
Roanoke City, VA
Salem City, VA
6820.......................... Rochester, MN................... 1.1739 1.0348 1.0696 1.1043
Olmsted, MN
6840.......................... Rochester, NY................... 0.9430 0.9886 0.9772 0.9658
Genesee, NY
Livingston, NY
Monroe, NY
Ontario, NY
Orleans, NY
Wayne, NY
6880.......................... Rockford, IL.................... 0.9666 0.9933 0.9866 0.9800
Boone, IL
Ogle, IL
Winnebago, IL
6895.......................... Rocky Mount, NC................. 0.9076 0.9815 0.9630 0.9446
Edgecombe, NC
Nash, NC
6920.......................... Sacramento, CA.................. 1.1845 1.0369 1.0738 1.1107
El Dorado, CA
Placer, CA
Sacramento, CA
6960.......................... Saginaw-Bay City-Midland, MI.... 1.0032 1.0006 1.0013 1.0019
Bay, MI
Midland, MI
Saginaw, MI
6980.......................... St. Cloud, MN................... 0.9506 0.9901 0.9802 0.9704
Benton, MN
Stearns, MN
7000.......................... St. Joseph, MO.................. 0.9757 0.9951 0.9903 0.9854
Andrew, MO
Buchanan, MO
7040.......................... St. Louis, MO-IL................ 0.9033 0.9807 0.9613 0.9420
Clinton, IL
Jersey, IL
Madison, IL
Monroe, IL
St. Clair, IL
Franklin, MO
Jefferson, MO
Lincoln, MO
St. Charles, MO
St. Louis, MO
St. Louis City, MO
Warren, MO
7080.......................... Salem, OR....................... 1.0482 1.0096 1.0193 1.0289
Marion, OR
Polk, OR
7120.......................... Salinas, CA..................... 1.4339 1.0868 1.1736 1.2603
Monterey, CA
7160.......................... Salt Lake City-Ogden, UT........ 0.9913 0.9983 0.9965 0.9948
Davis, UT
Salt Lake, UT
Weber, UT
7200.......................... San Angelo, TX.................. 0.8535 0.9707 0.9414 0.9121
Tom Green, TX
7240.......................... San Antonio, TX................. 0.8870 0.9774 0.9548 0.9322
Bexar, TX
Comal, TX

[[Page 25737]]

Guadalupe, TX
Wilson, TX
7320.......................... San Diego, CA................... 1.1147 1.0229 1.0459 1.0688
San Diego, CA
7360.......................... San Francisco, CA............... 1.4514 1.0903 1.1806 1.2708
Marin, CA
San Francisco, CA
San Mateo, CA
7400.......................... San Jose, CA.................... 1.4626 1.0925 1.1850 1.2776
Santa Clara, CA
7440.......................... San Juan-Bayamon, PR............ 0.4909 0.8982 0.7964 0.6945
Aguas Buenas, PR
Barceloneta, PR
Bayamon, PR
Canovanas, PR
Carolina, PR
Catano, PR
Ceiba, PR
Comerio, PR
Corozal, PR
Dorado, PR
Fajardo, PR
Florida, PR
Guaynabo, PR
Humacao, PR
Juncos, PR
Los Piedras, PR
Loiza, PR
Luguillo, PR
Manati, PR
Morovis, PR
Naguabo, PR
Naranjito, PR
Rio Grande, PR
San Juan, PR
Toa Alta, PR
Toa Baja, PR
Trujillo Alto, PR
Vega Alta, PR
Vega Baja, PR
Yabucoa, PR
7460.......................... San Luis Obispo-Atascadero-Paso. 1.1429 1.0286 1.0572 1.0857
Robles, CA
San Luis Obispo, CA
7480.......................... Santa Barbara-Santa Maria- 1.0441 1.0088 1.0176 1.0265
Lompoc, CA.
Santa Barbara, CA
7485.......................... Santa Cruz-Watsonville, CA...... 1.2942 1.0588 1.1177 1.1765
Santa Cruz, CA
7490.......................... Santa Fe, NM.................... 1.0653 1.0131 1.0261 1.0392
Los Alamos, NM
Santa Fe, NM
7500.......................... Santa Rosa, CA.................. 1.2877 1.0575 1.1151 1.1726
Sonoma, CA
7510.......................... Sarasota-Bradenton, FL.......... 0.9964 0.9993 0.9986 0.9978
Manatee, FL
Sarasota, FL
7520.......................... Savannah, GA.................... 0.9472 0.9894 0.9789 0.9683
Bryan, GA
Chatham, GA
Effingham, GA
7560.......................... Scranton-Wilkes-Barre-Hazleton, 0.8412 0.9682 0.9365 0.9047
PA.
Columbia, PA
Lackawanna, PA
Luzerne, PA
Wyoming, PA
7600.......................... Seattle-Bellevue-Everett, WA.... 1.1562 1.0312 1.0625 1.0937
Island, WA
King, WA
Snohomish, WA

[[Page 25738]]

7610.......................... Sharon, PA...................... 0.7751 0.9550 0.9100 0.8651
Mercer, PA
7620.......................... Sheboygan, WI................... 0.8624 0.9725 0.9450 0.9174
Sheboygan, WI
7640.......................... Sherman-Denison, TX............. 0.9700 0.9940 0.9880 0.9820
Grayson, TX
7680.......................... Shreveport-Bossier City, LA..... 0.9083 0.9817 0.9633 0.9450
Bossier, LA
Caddo, LA
Webster, LA
7720.......................... Sioux City, IA-NE............... 0.8993 0.9799 0.9597 0.9396
Woodbury, IA
Dakota, NE
7760.......................... Sioux Falls, SD................. 0.9309 0.9862 0.9724 0.9585
Lincoln, SD
Minnehaha, SD
7800.......................... South Bend, IN.................. 0.9821 0.9964 0.9928 0.9893
St. Joseph, IN
7840.......................... Spokane, WA..................... 1.0901 1.0180 1.0360 1.0541
Spokane, WA
7880.......................... Springfield, IL................. 0.8944 0.9789 0.9578 0.9366
Menard, IL
Sangamon, IL
7920.......................... Springfield, MO................. 0.8457 0.9691 0.9383 0.9074
Christian, MO
Greene, MO
Webster, MO
8003.......................... Springfield, MA................. 1.0543 1.0109 1.0217 1.0326
Hampden, MA
Hampshire, MA
8050.......................... State College, PA............... 0.8740 0.9748 0.9496 0.9244
Centre, PA
8080.......................... Steubenville-Weirton, OH-WV (WV 0.8398 0.9680 0.9359 0.9039
Hospitals).
Jefferson, OH
Brooke, WV
Hancock, WV
8120.......................... Stockton-Lodi, CA............... 1.0404 1.0081 1.0162 1.0242
San Joaquin, CA
8140.......................... Sumter, SC...................... 0.8243 0.9649 0.9297 0.8946
Sumter, SC
8160.......................... Syracuse, NY.................... 0.9412 0.9882 0.9765 0.9647
Cayuga, NY
Madison, NY
Onondaga, NY
Oswego, NY
8200.......................... Tacoma, WA...................... 1.1116 1.0223 1.0446 1.0670
Pierce, WA
8240.......................... Tallahassee, FL................. 0.8520 0.9704 0.9408 0.9112
Gadsden, FL
Leon, FL
8280.......................... Tampa-St. Petersburg-Clearwater, 0.9103 0.9821 0.9641 0.9462
FL.
Hernando, FL
Hillsborough, FL
Pasco, FL
Pinellas, FL
8320.......................... Terre Haute, IN................. 0.8325 0.9665 0.9330 0.8995
Clay, IN
Vermillion, IN
Vigo, IN
8360.......................... Texarkana, AR-Texarkana, TX..... 0.8150 0.9630 0.9260 0.8890
Miller, AR
Bowie, TX
8400.......................... Toledo, OH...................... 0.9381 0.9876 0.9752 0.9629
Fulton, OH
Lucas, OH
Wood, OH
8440.......................... Topeka, KS...................... 0.9108 0.9822 0.9643 0.9465
Shawnee, KS
8480.......................... Trenton, NJ..................... 1.0517 1.0103 1.0207 1.0310
Mercer, NJ
8520.......................... Tucson, AZ...................... 0.8981 0.9796 0.9592 0.9389

[[Page 25739]]

Pima, AZ
8560.......................... Tulsa, OK....................... 0.9185 0.9837 0.9674 0.9511
Creek, OK
Osage, OK
Rogers, OK
Tulsa, OK
Wagoner, OK
8600.......................... Tuscaloosa, AL.................. 0.8212 0.9642 0.9285 0.8927
Tuscaloosa, AL
8640.......................... Tyler, TX....................... 0.9404 0.9881 0.9762 0.9642
Smith, TX
8680.......................... Utica-Rome, NY.................. 0.8403 0.9681 0.9361 0.9042
Herkimer, NY
Oneida, NY
8720.......................... Vallejo-Fairfield-Napa, CA...... 1.3377 1.0675 1.1351 1.2026
Napa, CA
Solano, CA
8735.......................... Ventura, CA..................... 1.1064 1.0213 1.0426 1.0638
Ventura, CA
8750.......................... Victoria, TX.................... 0.8184 0.9637 0.9274 0.8910
Victoria, TX
8760.......................... Vineland-Millville-Bridgeton, NJ 1.0405 1.0081 1.0162 1.0243
Cumberland, NJ
8780.......................... Visalia-Tulare-Porterville, CA.. 0.9794 0.9959 0.9918 0.9876
Tulare, CA
8800.......................... Waco, TX........................ 0.8394 0.9679 0.9358 0.9036
McLennan, TX
8840.......................... Washington, DC-MD-VA-WV......... 1.0904 1.0181 1.0362 1.0542
District of Columbia, DC
Calvert, MD
Charles, MD
Frederick, MD
Montgomery, MD
Prince Georges, MD
Alexandria City, VA
Arlington, VA
Clarke, VA
Culpeper, VA
Fairfax, VA
Fairfax City, VA
Falls Church City, VA
Fauquier, VA
Fredericksburg City, VA
King George, VA
Loudoun, VA
Manassas City, VA
Manassas Park City, VA
Prince William, VA
Spotsylvania, VA
Stafford, VA
Warren, VA
Berkeley, WV
Jefferson, WV
8920.......................... Waterloo-Cedar Falls, IA........ 0.8366 0.9673 0.9346 0.9020
Black Hawk, IA
8940.......................... Wausau, WI...................... 0.9692 0.9938 0.9877 0.9815
Marathon, WI
8960.......................... West Palm Beach-Boca Raton, FL.. 0.9798 0.9960 0.9919 0.9879
Palm Beach, FL
9000.......................... Wheeling, WV-OH................. 0.7494 0.9499 0.8998 0.8496
Belmont, OH
Marshall, WV
Ohio, WV
9040.......................... Wichita, KS..................... 0.9238 0.9848 0.9695 0.9543
Butler, KS
Harvey, KS
Sedgwick, KS
9080.......................... Wichita Falls, TX............... 0.8341 0.9668 0.9336 0.9005
Archer, TX

[[Page 25740]]

Wichita, TX
9140.......................... Williamsport, PA................ 0.8158 0.9632 0.9263 0.8895
Lycoming, PA
9160.......................... Wilmington-Newark, DE-MD........ 1.0882 1.0176 1.0353 1.0529
New Castle, DE
Cecil, MD
9200.......................... Wilmington, NC.................. 0.9563 0.9913 0.9825 0.9738
New Hanover, NC
Brunswick, NC
9260.......................... Yakima, WA...................... 1.0372 1.0074 1.0149 1.0223
Yakima, WA
9270.......................... Yolo, CA........................ 0.9204 0.9841 0.9682 0.9522
Yolo, CA
9280.......................... York, PA........................ 0.9119 0.9824 0.9648 0.9471
York, PA
9320.......................... Youngstown-Warren, OH........... 0.9214 0.9843 0.9686 0.9528
Columbiana, OH
Mahoning, OH
Trumbull, OH
9340.......................... Yuba City, CA................... 1.0196 1.0039 1.0078 1.0118
Sutter, CA
Yuba, CA
9360.......................... Yuma, AZ........................ 0.8895 0.9779 0.9558 0.9337
Yuma, AZ
----------------------------------------------------------------------------------------------------------------
\1\ Wage index calculated using the same wage data used to compute the wage index used by acute care hospitals
under the IPPS for Federal FY 2004 (that is, fiscal year 2000 audited acute care hospital inpatient wage data)
without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act.
\2\ One-fifth of the full wage index value, applicable for a LTCH's cost reporting period beginning on or after
October 1, 2002 through September 30, 2003 (Federal FY 2003). That is, for a LTCH's cost reporting period that
began during Federal FY 2003 and located in Chicago, Illinois (MSA 1600), the 1/5th wage index value is
computed as (1.0892 + 4)/5 = 1.0178. For further details on the 5-year phase-in of the wage index, see section
V.C.1. of this final rule.
\3\ Two-fifths of the full wage index value, applicable for a LTCH's cost reporting period beginning on or after
October 1, 2003 through September 30, 2004 (Federal FY 2004). That is, for a LTCH's cost reporting period that
begins during Federal FY 2004 and located in Chicago, Illinois (MSA 1600), the 2/5ths wage index value is
computed as ((2*1.0892) + 3)/5 = 1.0357. For further details on the 5-year phase-in of the wage index, see
section V.C.1. of this final rule.
\4\ Three-fifths of the full wage index value, applicable for a LTCH's cost reporting period beginning on or
after October 1, 2004 through September 30, 2005 (Federal FY 2005). That is, for a LTCH's cost reporting
period that begins during Federal FY 2004 and located in Chicago, Illinois (MSA 1600), the 3/5ths wage index
value is computed as ((3*1.0892) + 2)/5 = 1.0535. For further details on the 5-year phase-in of the wage
index, see section V.C.1. of this final rule.

Table 2.--Long-Term Care Hospital Wage Index for Rural Areas for Discharges Occurring From July 1, 2004 Through
June 30, 2005
----------------------------------------------------------------------------------------------------------------
Full wage 1/5th wage 2/5ths wage 3/5ths wage
Nonurban area index \1\ index \2\ index \3\ index \4\
----------------------------------------------------------------------------------------------------------------
Alabama......................................... 0.7492 0.9498 0.8997 0.8495
Alaska.......................................... 1.1886 1.0377 1.0754 1.1132
Arizona......................................... 0.9270 0.9854 0.9708 0.9562
Arkansas........................................ 0.7734 0.9547 0.9094 0.8640
California...................................... 1.0027 1.0005 1.0011 1.0016
Colorado........................................ 0.9328 0.9866 0.9731 0.9597
Connecticut..................................... 1.2183 1.0437 1.0873 1.1310
Delaware........................................ 0.9557 0.9911 0.9823 0.9734
Florida......................................... 0.8870 0.9774 0.9548 0.9322
Georgia......................................... 0.8595 0.9719 0.9438 0.9157
Hawaii.......................................... 0.9958 0.9992 0.9983 0.9975
Idaho........................................... 0.8974 0.9795 0.9590 0.9384
Illinois........................................ 0.8254 0.9651 0.9302 0.8952
Indiana......................................... 0.8824 0.9765 0.9530 0.9294
Iowa............................................ 0.8416 0.9683 0.9366 0.9050
Kansas.......................................... 0.8034 0.9607 0.9214 0.8820
Kentucky........................................ 0.7973 0.9595 0.9189 0.8784
Louisiana....................................... 0.7458 0.9492 0.8983 0.8475
Maine........................................... 0.8812 0.9762 0.9525 0.9287
Maryland........................................ 0.9125 0.9825 0.9650 0.9475
Massachusetts................................... 1.0432 1.0086 1.0173 1.0259
Michigan........................................ 0.8884 0.9777 0.9554 0.9330
Minnesota....................................... 0.9330 0.9866 0.9732 0.9598

[[Page 25741]]

Mississippi..................................... 0.7778 0.9556 0.9111 0.8667
Missouri........................................ 0.7892 0.9578 0.9157 0.8735
Montana......................................... 0.8800 0.9760 0.9520 0.9280
Nebraska........................................ 0.8822 0.9764 0.9529 0.9293
Nevada.......................................... 0.9806 0.9961 0.9922 0.9884
New Hampshire................................... 1.0030 1.0006 1.0012 1.0018
New Jersey \5\.................................. .............. .............. .............. ..............
New Mexico...................................... 0.8270 0.9654 0.9308 0.8962
New York........................................ 0.8526 0.9705 0.9410 0.9116
North Carolina.................................. 0.8458 0.9692 0.9383 0.9075
North Dakota.................................... 0.7778 0.9556 0.9111 0.8667
Ohio............................................ 0.8820 0.9764 0.9528 0.9292
Oklahoma........................................ 0.7537 0.9507 0.9015 0.8522
Oregon.......................................... 0.9994 0.9999 0.9998 0.9996
Pennsylvania.................................... 0.8378 0.9676 0.9351 0.9027
Puerto Rico..................................... 0.4018 0.8804 0.7607 0.6411
Rhode Island \5\................................ .............. .............. .............. ..............
South Carolina.................................. 0.8498 0.9700 0.9399 0.9099
South Dakota.................................... 0.8195 0.9639 0.9278 0.8917
Tennessee....................................... 0.7886 0.9577 0.9154 0.8732
Texas........................................... 0.7780 0.9556 0.9112 0.8668
Utah............................................ 0.8974 0.9795 0.9590 0.9384
Vermont......................................... 0.9307 0.9861 0.9723 0.9584
Virginia........................................ 0.8498 0.9700 0.9399 0.9099
Washington...................................... 1.0388 1.0078 1.0155 1.0233
West Virginia................................... 0.8018 0.9604 0.9207 0.8811
Wisconsin....................................... 0.9304 0.9861 0.9722 0.9582
Wyoming......................................... 0.9110 0.9822 0.9644 0.9466
----------------------------------------------------------------------------------------------------------------
\1\ Wage index calculated using the same wage data used to compute the wage index used by acute care hospitals
under the IPPS for Federal FY 2004 (that is, fiscal year 2000 audited acute care hospital inpatient wage data)
without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act.
\2\ One-fifth of the full wage index value, applicable for a LTCH's cost reporting period beginning on or after
October 1, 2002 through September 30, 2003 (Federal FY 2003). That is, for a LTCH's cost reporting period that
began during Federal FY 2003 and located in rural Illinois, the 1/5th wage index value is computed as (0.8254
+ 4)/5 = 0.9651. For further details on the 5-year phase-in of the wage index, see section V.C.1. of this
final rule.
\3\ Two-fifths of the full wage index value, applicable for a LTCH's cost reporting period beginning on or after
October 1, 2003 through September 30, 2004 (Federal FY 2004). That is, for a LTCH's cost reporting period that
begins during Federal FY 2004 and located in rural Illinois, the 2/5th wage index value is computed as
((2*0.8254) + 3))/5 = 0.9302. For further details on the 5-year phase-in of the wage index, see section V.C.1.
of this final rule.
\4\ Three-fifths of the full wage index value, applicable for a LTCH's cost reporting period beginning on or
after October 1, 2004 through September 30, 2005 (Federal FY 2005). That is, for a LTCH's cost reporting
period that begins during Federal FY 2004 and located in rural Illinois, the 3/5ths wage index value is
computed as ((3*0.8254) + 2))/5 = 0.8952. For further details on the 5-year phase-in of the wage index, see
section V.C.1. of this final rule.
\5\ All counties within the State are classified as urban.

Table 3.--Federal FY 2004 LTC-DRG Relative Weights, Geometric Mean
Length of Stay, and Short-Stays of Five-Sixths Average Length of Stay
for Discharges Occurring From October 1, 2004 Through September 30, 2004
------------------------------------------------------------------------
5/6th of
Geometric the
LTC-DRG Description Relative average average
weight length of length of
stay stay
------------------------------------------------------------------------
1............... CRANIOTOMY AGE >17 2.0841 40.0 33.3
W CC \5\.
2............... CRANIOTOMY AGE >17 2.0841 40.0 33.3
W/O CC \8\.
3............... CRANIOTOMY AGE 0- 2.0841 40.0 33.3
17 \8\.
6............... CARPAL TUNNEL 0.4964 18.5 15.4
RELEASE \8\.
7............... PERIPH & CRANIAL 1.5754 41.0 34.1
NERVE & OTHER
NERV SYST PROC W
CC \7\.
8............... PERIPH & CRANIAL 1.5754 41.0 34.1
NERVE & OTHER
NERV SYST PROC W/
O CC \7\.
9............... SPINAL DISORDERS & 1.5025 32.9 27.4
INJURIES.
10.............. NERVOUS SYSTEM 0.7549 23.4 19.5
NEOPLASMS W CC.
11.............. NERVOUS SYSTEM 0.7281 22.0 18.3
NEOPLASMS W/O CC.
12.............. DEGENERATIVE 0.7485 25.8 21.5
NERVOUS SYSTEM
DISORDERS.
13.............. MULTIPLE SCLEROSIS 0.7530 25.9 21.5
& CEREBELLAR
ATAXIA.
14.............. INTERCRANIAL 0.9196 27.4 22.8
HEMORRHAGE &
STROKE W INFARCT.
15.............. NONSPECIFIC CVA & 0.8714 28.8 24.0
PRECEREBRAL
OCCULUSION W/O
INFARCT.
16.............. NONSPECIFIC 0.9125 23.9 19.9
CEREBROVASCULAR
DISORDERS W CC.
17.............. NONSPECIFIC 0.5262 20.4 17.0
CEREBROVASCULAR
DISORDERS W/O CC.
18.............. CRANIAL & 0.8225 23.9 19.9
PERIPHERAL NERVE
DISORDERS W CC.

[[Page 25742]]

19.............. CRANIAL & 0.6236 22.7 18.9
PERIPHERAL NERVE
DISORDERS W/O CC.
20.............. NERVOUS SYSTEM 1.0097 24.8 20.6
INFECTION EXCEPT
VIRAL MENINGITIS.
21.............. VIRAL MENINGITIS 0.7372 23.5 19.5
\2\.
22.............. HYPERTENSIVE 0.7372 23.5 19.5
ENCEPHALOPATHY
\2\.
23.............. NONTRAUMATIC 0.9033 28.8 24.0
STUPOR & COMA.
24.............. SEIZURE & HEADACHE 0.8527 26.2 21.8
AGE >17 W CC.
25.............. SEIZURE & HEADACHE 0.7727 24.1 20.0
AGE >17 W/O CC.
26.............. SEIZURE & HEADACHE 0.7372 23.5 19.5
AGE 0-17 \8\.
27.............. TRAUMATIC STUPOR & 1.1929 30.4 25.3
COMA, COMA >1 HR.
28.............. TRAUMATIC STUPOR & 1.0211 29.0 24.1
COMA, COMA < 1 HR
AGE >17 W CC \8\.
29.............. TRAUMATIC STUPOR & 0.9056 26.6 22.1
COMA, COMA < 1 HR
AGE >17 W/O CC.
30.............. TRAUMATIC STUPOR & 0.9562 26.1 21.7
COMA, COMA < 1 HR
AGE 0-17 \8\.
31.............. CONCUSSION AGE >17 0.9562 26.1 21.7
W CC \7\.
32.............. CONCUSSION AGE >17 0.9562 26.1 21.7
W/O CC \7\.
33.............. CONCUSSION AGE 0- 0.7372 23.5 19.5
17 \8\.
34.............. OTHER DISORDERS OF 0.9140 27.8 23.1
NERVOUS SYSTEM W
CC.
35.............. OTHER DISORDERS OF 0.6651 24.5 20.4
NERVOUS SYSTEM W/
O CC.
36.............. RETINAL PROCEDURES 0.4964 18.5 15.4
\8\.
37.............. ORBITAL PROCEDURES 0.4964 18.5 15.4
\8\.
38.............. PRIMARY IRIS 0.4964 18.5 15.4
PROCEDURES \8\.
39.............. LENS PROCEDURES 0.4964 18.5 15.4
WITH OR WITHOUT
VITRECTOMY \8\.
40.............. EXTRAOCULAR 2.0841 40.0 33.3
PROCEDURES EXCEPT
ORBIT AGE >17 \5\.
41.............. EXTRAOCULAR 0.4964 18.5 15.4
PROCEDURES EXCEPT
ORBIT AGE 0-17
\8\.
42.............. INTRAOCULAR 0.4964 18.5 15.4
PROCEDURES EXCEPT
RETINA, IRIS &
LENS \8\.
43.............. HYPHEMA \8\....... 0.4964 18.5 15.4
44.............. ACUTE MAJOR EYE 0.4964 18.5 15.4
INFECTIONS \1\.
45.............. NEUROLOGICAL EYE 0.4964 18.5 15.4
DISORDERS \8\.
46.............. OTHER DISORDERS OF 0.4964 18.5 15.4
THE EYE AGE >17 W
CC \1\.
47.............. OTHER DISORDERS OF 0.4964 18.5 15.4
THE EYE AGE >17 W/
O CC \1\.
48.............. OTHER DISORDERS OF 0.4964 18.5 15.4
THE EYE AGE 0-17
\8\.
49.............. MAJOR HEAD & NECK 1.3569 32.5 27.0
PROCEDURES \8\.
50.............. SIALOADENECTOMY 0.9562 26.1 21.7
\8\.
51.............. SALIVARY GLAND 0.9562 26.1 21.7
PROCEDURES EXCEPT
SIALOADENECTOMY
\8\.
52.............. CLEFT LIP & PALATE 0.9562 26.1 21.7
REPAIR \8\.
53.............. SINUS & MASTOID 0.7372 23.5 19.5
PROCEDURES AGE
>17 \2\.
54.............. SINUS & MASTOID 0.9562 26.1 21.7
PROCEDURES AGE 0-
17 \8\.
55.............. MISCELLANEOUS EAR, 0.9562 26.1 21.7
NOSE, MOUTH &
THROAT PROCEDURES
\8\.
56.............. RHINOPLASTY \8\... 0.7372 23.5 19.5
57.............. T&A PROC, EXCEPT 0.9562 26.1 21.7
TONSILLECTOMY &/
OR ADENOIDECTOMY
ONLY, AGE >17 \8\.
58.............. T&A PROC, EXCEPT 0.9562 26.1 21.7
TONSILLECTOMY &/
OR ADENOIDECTOMY
ONLY, AGE 0-17
\8\.
59.............. TONSILLECTOMY &/OR 0.9562 26.1 21.7
ADENOIDECTOMY
ONLY, AGE >17 \8\.
60.............. TONSILLECTOMY &/OR 0.9562 26.1 21.7
ADENOIDECTOMY
ONLY, AGE 0-17
\8\.
61.............. MYRINGOTOMY W TUBE 0.7372 23.5 19.5
INSERTION AGE >17
\2\.
62.............. MYRINGOTOMY W TUBE 0.9562 26.1 21.7
INSERTION AGE 0-
17 \8\.
63.............. OTHER EAR, NOSE, 0.9562 26.1 21.7
MOUTH & THROAT
O.R. PROCEDURES
\3\.
64.............. EAR, NOSE, MOUTH & 1.2540 27.5 22.9
THROAT MALIGNANCY.
65.............. DYSEQUILIBRIUM \1\ 0.4964 18.5 15.4
66.............. EPISTAXIS \1\..... 0.4964 18.5 15.4
67.............. EPIGLOTTITIS \8\.. 0.9562 26.1 21.7
68.............. OTITIS MEDIA & URI 0.8243 21.9 18.2
AGE >17 W CC.
69.............. OTITIS MEDIA & URI 0.4964 18.5 15.4
AGE >17 W/O CC
\1\.
70.............. OTITIS MEDIA & URI 0.4964 18.5 15.4
AGE 0-17 \8\.
71.............. LARYNGOTRACHEITIS 0.4964 18.5 15.4
\8\.
72.............. NASAL TRAUMA & 0.7372 23.5 19.5
DEFORMITY \2\.
73.............. OTHER EAR, NOSE, 0.7215 20.3 16.9
MOUTH & THROAT
DIAGNOSES AGE >17.
74.............. OTHER EAR, NOSE, 0.4964 18.5 15.4
MOUTH & THROAT
DIAGNOSES AGE 0-
17 \8\.
75.............. MAJOR CHEST 2.0841 40.0 33.3
PROCEDURES \5\.
76.............. OTHER RESP SYSTEM 2.4382 43.9 36.5
O.R. PROCEDURES W
CC.
77.............. OTHER RESP SYSTEM 2.0841 40.0 33.3
O.R. PROCEDURES W/
O CC \5\.
78.............. PULMONARY EMBOLISM 0.8896 24.2 20.1
79.............. RESPIRATORY 0.8985 22.6 18.8
INFECTIONS &
INFLAMMATIONS AGE
>17 W CC.
80.............. RESPIRATORY 0.7645 22.3 18.5
INFECTIONS &
INFLAMMATIONS AGE
>17 W/O CC.
81.............. RESPIRATORY 0.4964 18.5 15.4
INFECTIONS &
INFLAMMATIONS AGE
0-17 \8\.
82.............. RESPIRATORY 0.7480 20.3 16.9
NEOPLASMS.
83.............. MAJOR CHEST TRAUMA 0.9562 26.1 21.7
W CC \3\.
84.............. MAJOR CHEST TRAUMA 0.7372 23.5 19.5
W/O CC \2\.
85.............. PLEURAL EFFUSION W 0.8514 23.5 19.5
CC.

[[Page 25743]]

86.............. PLEURAL EFFUSION W/ 0.6540 22.4 18.6
O CC.
87.............. PULMONARY EDEMA & 1.6513 31.9 26.5
RESPIRATORY
FAILURE.
88.............. CHRONIC 0.7653 20.7 17.2
OBSTRUCTIVE
PULMONARY DISEASE.
89.............. SIMPLE PNEUMONIA & 0.8428 23.1 19.2
PLEURISY AGE >17
W CC.
90.............. SIMPLE PNEUMONIA & 0.7318 21.7 18.0
PLEURISY AGE >17
W/O CC.
91.............. SIMPLE PNEUMONIA & 0.7372 23.5 19.5
PLEURISY AGE 0-17
\8\.
92.............. INTERSTITIAL LUNG 0.7702 20.4 17.0
DISEASE W CC.
93.............. INTERSTITIAL LUNG 0.4964 18.5 15.4
DISEASE W/O CC
\1\.
94.............. PNEUMOTHORAX W CC. 0.6571 18.9 15.7
95.............. PNEUMOTHORAX W/O 0.4964 18.5 15.4
CC \1\.
96.............. BRONCHITIS & 0.7381 20.5 17.0
ASTHMA >17 W CC
AGE.
97.............. BRONCHITIS & 0.5296 18.7 15.5
ASTHMA AGE >17 W/
O CC.
98.............. BRONCHITIS & 0.4964 18.5 15.4
ASTHMA AGE 0-17
\8\.
99.............. RESPIRATORY SIGNS 1.0622 26.6 22.1
& SYMPTOMS W CC.
100............. RESPIRATORY SIGNS 1.0579 26.1 21.7
& SYMPTOMS W/O CC.
101............. OTHER RESPIRATORY 0.9009 22.6 18.8
SYSTEM DIAGNOSES
W CC.
102............. OTHER RESPIRATORY 0.7011 21.0 17.5
SYSTEM DIAGNOSES
W/O CC.
103............. HEART TRANSPLANT 0.0000 0.0 0.0
\6\.
104............. CARDIAC VALVE & 2.0841 40.0 33.3
OTHER MAJOR
CARDIOTHORACIC
PROC W CARDIAC
CATH \8\.
105............. CARDIAC VALVE & 2.0841 40.0 33.3
OTHER MAJOR
CARDIOTHORACIC
PROC W/O CARDIAC
CATH \8\.
106............. CORONARY BYPASS W 2.0841 40.0 33.3
PTCA \8\.
107............. CORONARY BYPASS W 2.0841 40.0 33.3
CARDIAC CATH \8\.
108............. OTHER 2.0841 40.0 33.3
CARDIOTHORACIC
PROCEDURES \5\.
109............. CORONARY BYPASS W/ 2.0841 40.0 33.3
O PTCA OR CARDIAC
CATH \8\.
110............. MAJOR 2.0841 40.0 33.3
CARDIOVASCULAR
PROCEDURES W CC
\5\.
111............. MAJOR 2.0841 40.0 33.3
CARDIOVASCULAR
PROCEDURES W/O CC
\8\.
113............. AMPUTATION FOR 1.5629 38.7 32.2
CIRC SYSTEM
DISORDERS EXCEPT
UPPER LIMB & TOE.
114............. UPPER LIMB & TOE 1.3604 38.3 31.9
AMPUTATION FOR
CIRC SYSTEM
DISORDERS.
115............. PRM CARD PACEM 2.0841 40.0 33.3
IMPL W AMI, HRT
FAIL OR SHK, OR
AICD LEAD OR
GNRTR P \5\.
116............. OTH PERM CARD 2.0841 40.0 33.3
PACEMAK IMPL OR
PTCA W CORONARY
ARTERY STENT
IMPLNT \5\.
117............. CARDIAC PACEMAKER 0.9562 26.1 21.7
REVISION EXCEPT
DEVICE
REPLACEMENT \3\.
118............. CARDIAC PACEMAKER 2.0841 40.0 33.3
DEVICE
REPLACEMENT \5\.
119............. VEIN LIGATION & 1.3569 32.5 27.0
STRIPPING \4\.
120............. OTHER CIRCULATORY 1.2435 34.4 28.6
SYSTEM O.R.
PROCEDURES.
121............. CIRCULATORY 0.7467 22.1 18.4
DISORDERS W AMI &
MAJOR COMP,
DISCHARGED ALIVE.
122............. CIRCULATORY 0.6440 18.8 15.6
DISORDERS W AMI W/
O MAJOR COMP,
DISCHARGED ALIVE.
123............. CIRCULATORY 0.8527 18.8 15.6
DISORDERS W AMI,
EXPIRED.
124............. CIRCULATORY 1.3569 32.5 27.0
DISORDERS EXCEPT
AMI, W CARD CATH
& COMPLEX DIAG
\4\.
125............. CIRCULATORY 1.3569 32.5 27.0
DISORDERS EXCEPT
AMI, W CARD CATH
W/O COMPLEX DIAG
\4\.
126............. ACUTE & SUBACUTE 0.8706 25.6 21.3
ENDOCARDITIS.
127............. HEART FAILURE & 0.7719 22.1 18.4
SHOCK.
128............. DEEP VEIN 0.7372 23.5 19.5
THROMBOPHLEBITIS
\2\.
129............. CARDIAC ARREST, 0.9562 26.1 21.7
UNEXPLAINED \3\.
130............. PERIPHERAL 0.7712 24.4 20.3
VASCULAR
DISORDERS W CC.
131............. DISORDERS W/O CC 0.6398 23.1 19.2
PERIPHERAL
VASCULAR.
132............. ATHEROSCLEROSIS W 0.8092 22.4 18.6
CC.
133............. ATHEROSCLEROSIS W/ 0.7044 21.9 18.2
O CC.
134............. HYPERTENSION...... 0.9154 27.9 23.2
135............. CARDIAC CONGENITAL 0.9039 23.1 19.2
& VALVULAR
DISORDERS AGE >17
W CC.
136............. CARDIAC CONGENITAL 0.7186 22.4 18.6
& VALVULAR
DISORDERS AGE >17
W/O CC.
137............. CARDIAC CONGENITAL 0.7372 23.5 19.5
& VALVULAR
DISORDERS AGE 0-
17 \8\.
138............. CARDIAC ARRHYTHMIA 0.7430 22.7 18.9
& CONDUCTION
DISORDERS W CC.
139............. CARDIAC ARRHYTHMIA 0.6032 20.3 16.9
& CONDUCTION
DISORDERS W/O CC.
140............. ANGINA PECTORIS... 0.6094 19.3 16.0
141............. SYNCOPE & COLLAPSE 0.6453 22.9 19.0
W CC.
142............. SYNCOPE & COLLAPSE 0.5041 20.3 16.9
W/O CC.
143............. CHEST PAIN........ 0.7314 21.8 18.1
144............. OTHER CIRCULATORY 0.7921 22.2 18.5
SYSTEM DIAGNOSES
W CC.
145............. OTHER CIRCULATORY 0.6983 20.7 17.2
SYSTEM DIAGNOSES
W/O CC.
146............. RECTAL RESECTION W 2.0841 40.0 33.3
CC \8\.
147............. RECTAL RESECTION W/ 2.0841 40.0 33.3
O CC \8\.
148............. MAJOR SMALL & 2.0841 40.0 33.3
LARGE BOWEL
PROCEDURES W CC
\5\.
149............. MAJOR SMALL & 0.4964 18.5 15.4
LARGE BOWEL
PROCEDURES W/O CC
\1\.
150............. PERITONEAL 1.3569 32.5 27.0
ADHESIOLYSIS W CC
\4\.
151............. PERITONEAL 1.3569 32.5 27.0
ADHESIOLYSIS W/O
CC \8\.
152............. MINOR SMALL & 1.3569 32.5 27.0
LARGE BOWEL
PROCEDURES W CC
\4\.

[[Page 25744]]

153............. MINOR SMALL & 1.3569 32.5 27.0
LARGE BOWEL
PROCEDURES W/O CC
\8\.
154............. STOMACH, 2.0841 40.0 33.3
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE
>17 W CC \5\.
155............. STOMACH, 1.3569 32.5 27.0
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE
>17 W/O CC \8\.
156............. STOMACH, 1.3569 32.5 27.0
ESOPHAGEAL &
DUODENAL
PROCEDURES AGE 0-
17 \8\.
157............. ANAL & STOMAL 1.3569 32.5 27.0
PROCEDURES W CC
\4\.
158............. ANAL & STOMAL 0.9562 26.1 21.7
PROCEDURES W/O CC
\3\.
159............. HERNIA PROCEDURES 1.3569 32.5 27.0
EXCEPT INGUINAL &
FEMORAL AGE >17 W
CC \8\.
160............. HERNIA PROCEDURES 1.3569 32.5 27.0
EXCEPT INGUINAL &
FEMORAL AGE >17 W/
O CC \8\.
161............. INGUINAL & FEMORAL 1.3569 32.5 27.0
HERNIA PROCEDURES
AGE >17 W CC \4\.
162............. INGUINAL & FEMORAL 0.4964 18.5 15.4
HERNIA PROCEDURES
AGE >17 W/O CC
\8\.
163............. HERNIA PROCEDURES 0.4964 18.5 15.4
AGE 0-17 \8\.
164............. APPENDECTOMY W 2.0841 40.0 33.3
COMPLICATED
PRINCIPAL DIAG W
CC \8\.
165............. APPENDECTOMY W 0.4964 18.5 15.4
COMPLICATED
PRINCIPAL DIAG W/
O CC \8\.
166............. APPENDECTOMY W/O 2.0841 40.0 33.3
COMPLICATED
PRINCIPAL DIAG W
CC \8\.
167............. APPENDECTOMY W/O 0.4964 18.5 15.4
COMPLICATED
PRINCIPAL DIAG W/
O CC \8\.
168............. MOUTH PROCEDURES W 2.0841 40.0 33.3
CC \5\.
169............. MOUTH PROCEDURES W/ 0.7372 23.5 19.5
O CC \8\.
170............. OTHER DIGESTIVE 1.7006 40.3 33.5
SYSTEM O.R.
PROCEDURES W CC.
171............. OTHER DIGESTIVE 1.3569 32.5 27.0
SYSTEM O.R.
PROCEDURES W/O CC
\4\.
172............. DIGESTIVE 0.8702 22.5 18.7
MALIGNANCY W CC.
173............. DIGESTIVE 0.7092 20.2 16.8
MALIGNANCY W/O CC.
174............. G.I. HEMORRHAGE W 0.7874 23.7 19.7
CC.
175............. G.I. HEMORRHAGE W/ 0.6345 21.1 17.5
O CC.
176............. COMPLICATED PEPTIC 0.7728 21.2 17.6
ULCER.
177............. UNCOMPLICATED 0.7372 23.5 19.5
PEPTIC ULCER W CC
\2\.
178............. UNCOMPLICATED 0.4964 18.5 15.4
PEPTIC ULCER W/O
CC \1\.
179............. INFLAMMATORY BOWEL 1.0023 25.2 21.0
DISEASE.
180............. G.I. OBSTRUCTION W 0.8222 22.9 19.0
CC \7\.
181............. G.I. OBSTRUCTION W/ 0.8222 22.9 19.0
O CC \7\.
182............. ESOPHAGITIS, 0.8449 23.5 19.5
GASTROENT & MISC
DIGEST DISORDERS
AGE >17 W CC.
183............. ESOPHAGITIS, 0.6362 20.3 16.9
GASTROENT & MISC
DIGEST DISORDERS
AGE >17 W/O CC.
184............. ESOPHAGITIS, 0.7372 23.5 19.5
GASTROENT & MISC
DIGEST DISORDERS
AGE 0-17 \8\.
185............. DENTAL & ORAL DIS 0.7372 23.5 19.5
EXCEPT
EXTRACTIONS &
RESTORATIONS, AGE
>17 \2\.
186............. DENTAL & ORAL DIS 0.7372 23.5 19.5
EXCEPT
EXTRACTIONS &
RESTORATIONS, AGE
0-17 \8\.
187............. DENTAL EXTRACTIONS 0.7372 23.5 19.5
& RESTORATIONS
\8\.
188............. OTHER DIGESTIVE 1.0308 25.3 21.0
SYSTEM DIAGNOSES
AGE >17 W CC.
189............. OTHER DIGESTIVE 0.7826 21.8 18.1
SYSTEM DIAGNOSES
AGE >17 W/O CC.
190............. OTHER DIGESTIVE 0.7372 23.5 19.5
SYSTEM DIAGNOSES
AGE 0-17 \8\.
191............. PANCREAS, LIVER & 1.3569 32.5 27.0
SHUNT PROCEDURES
W CC \4\.
192............. PANCREAS, LIVER & 0.4964 18.5 15.4
SHUNT PROCEDURES
W/O CC \1\.
193............. BILIARY TRACT PROC 0.7372 23.5 19.5
EXCEPT ONLY
CHOLECYST W OR W/
O C.D.E. W CC \2\.
194............. BILIARY TRACT PROC 0.7372 23.5 19.5
EXCEPT ONLY
CHOLECYST W OR W/
O C.D.E. W/O CC
\3\.
195............. CHOLECYSTECTOMY W 1.3569 32.5 27.0
C.D.E. W CC \4\.
196............. CHOLECYSTECTOMY W 0.9562 26.1 21.7
C.D.E. W/O CC \8\.
197............. CHOLECYSTECTOMY 0.9562 26.1 21.7
EXCEPT BY
LAPAROSCOPE W/O
C.D.E. W CC \3\.
198............. CHOLECYSTECTOMY 0.9562 26.1 21.7
EXCEPT BY
LAPAROSCOPE W/O
C.D.E. W/O CC \8\.
199............. HEPATOBILIARY 0.7372 23.5 19.5
DIAGNOSTIC
PROCEDURE FOR
MALIGNANCY \8\.
200............. HEPATOBILIARY 0.7372 23.5 19.5
DIAGNOSTIC
PROCEDURE FOR NON-
MALIGNANCY \2\.
201............. OTHER 2.0841 40.0 33.3
HEPATOBILIARY OR
PANCREAS O.R.
PROCEDURES \5\.
202............. CIRRHOSIS & 0.7254 22.3 18.5
ALCOHOLIC
HEPATITIS.
203............. MALIGNANCY OF 0.6758 18.9 15.7
HEPATOBILIARY
SYSTEM OR
PANCREAS.
204............. DISORDERS OF 0.9986 23.4 19.5
PANCREAS EXCEPT
MALIGNANCY.
205............. DISORDERS OF LIVER 0.7029 22.1 18.4
EXCEPT MALIG,
CIRR, ALC HEPA W
CC \7\.
206............. DISORDERS OF LIVER 0.7029 22.1 18.4
EXCEPT MALIG,
CIRR, ALC HEPA W/
O CC \7\.
207............. DISORDERS OF THE 0.6671 20.5 17.0
BILIARY TRACT W
CC \7\.
208............. DISORDERS OF THE 0.6671 20.5 17.0
BILIARY TRACT W/O
CC \7\.
209............. MAJOR JOINT & LIMB 1.3569 32.5 27.0
REATTACHMENT
PROCEDURES OF
LOWER EXTREMITY
\4\.
210............. HIP & FEMUR 1.3569 32.5 27.0
PROCEDURES EXCEPT
MAJOR JOINT AGE
>17 W CC \4\.
211............. HIP & FEMUR 0.7372 23.5 19.5
PROCEDURES EXCEPT
MAJOR JOINT AGE
>17 W/O CC \2\.
212............. HIP & FEMUR 0.7372 23.5 19.5
PROCEDURES EXCEPT
MAJOR JOINT AGE 0-
117 \8\.
213............. AMPUTATION FOR 1.3851 33.8 28.1
MUSCULOSKELETAL
SYSTEM & CONN
TISSUE DISORDERS.
216............. BIOPSIES OF 1.3569 32.5 27.0
MUSCULOSKELETAL
SYSTEM &
CONNECTIVE TISSUE
\4\.
217............. WND DEBRID & SKN 1.4038 39.3 32.7
GRFT EXCEPT HAND,
FOR MUSCSKELET &
CONN TISS DIS.
218............. LOWER EXTREM & 0.9562 26.1 21.7
HUMER PROC EXCEPT
HIP, FOOT, FEMUR
AGE >17 W CC \3\.
219............. LOWER EXTREM & 0.9562 26.1 21.7
HUMER PROC EXCEPT
HIP, FOOT, FEMUR
AGE >17 W/O CC
\8\.
220............. LOWER EXTREM & 0.9562 26.1 21.7
HUMER PROC EXCEPT
HIP, FOOT, FEMUR
AGE 0-17 \8\.
223............. MAJOR SHOULDER/ 0.9562 26.1 21.7
ELBOW PROC, OR
OTHER UPPER
EXTREMITY PROC W
CC \3\.

[[Page 25745]]

224............. SHOULDER, ELBOW OR 0.9562 26.1 21.7
FOREARM PROC, EXC
MAJOR JOINT PROC,
W/O CC \8\.
225............. FOOT PROCEDURES 0.9562 26.1 21.7
\3\.
226............. SOFT TISSUE 1.3569 32.5 27.0
PROCEDURES W CC
\7\.
227............. SOFT TISSUE 1.3569 32.5 27.0
PROCEDURES W/O CC
\7\.
228............. MAJOR THUMB OR 1.3569 32.5 27.0
JOINT PROC, OR
OTH HAND OR WRIST
PROC W CC \4\.
229............. HAND OR WRIST 0.9562 26.1 21.7
PROC, EXCEPT
MAJOR JOINT PROC,
W/O CC \8\.
230............. LOCAL EXCISION & 1.3569 32.5 27.0
REMOVAL OF INT
FIX DEVICES OF
HIP & FEMUR \4\.
232............. ARTHROSCOPY \2\... 0.7372 23.5 19.5
233............. OTHER 0.9562 26.1 21.7
MUSCULOSKELET SYS
& CONN TISS O.R.
PROC W CC \3\.
234............. OTHER 0.9562 26.1 21.7
MUSCULOSKELET SYS
& CONN TISS O.R.
PROC W/O CC \3\.
235............. FRACTURES OF FEMUR 0.8396 29.6 24.6
236............. FRACTURES OF HIP & 0.7368 27.1 22.5
PELVIS.
237............. SPRAINS, STRAINS, 0.7372 23.5 19.5
& ISLOCATIONS OF
HIP, PELVIS &
THIGH \2\.
238............. OSTEOMYELITIS..... 0.8432 27.9 23.2
239............. PATHOLOGICAL 0.6610 22.0 18.3
FRACTURES &
MUSCULOSKELETAL &
CONN TISS
MALIGNANCY.
240............. CONNECTIVE TISSUE 0.6685 21.2 17.6
DISORDERS W CC.
241............. CONNECTIVE TISSUE 0.4538 18.7 15.5
DISORDERS W/O CC.
242............. SEPTIC ARTHRITIS.. 0.7721 26.4 22.0
243............. MEDICAL BACK 0.6616 23.2 19.3
PROBLEMS.
244............. BONE DISEASES & 0.5563 20.0 16.6
SPECIFIC
ARTHROPATHIES W
CC.
245............. BONE DISEASES & 0.4721 18.5 15.4
SPECIFIC
ARTHROPATHIES W/O
CC.
246............. NON-SPECIFIC 0.5128 22.2 18.5
ARTHROPATHIES.
247............. SIGNS & SYMPTOMS 0.5536 20.2 16.8
OF
MUSCULOSKELETAL
SYSTEM & CONN
TISSUE.
248............. TENDONITIS, 0.7274 24.5 20.4
MYOSITIS &
BURSITIS.
249............. AFTERCARE, 0.7829 27.0 22.5
MUSCULOSKELETAL
SYSTEM &
CONNECTIVE TISSUE.
250............. FX, SPRN, STRN & 0.8206 29.9 24.9
DISL OF FOREARM,
HAND, FOOT AGE
>17 W CC.
251............. FX, SPRN, STRN & 0.6009 27.3 22.7
DISL OF FOREARM,
HAND, FOOT AGE
>17 W/O CC.
252............. FX, SPRN, STRN & 0.9562 26.1 21.7
DISL OF FOREARM,
HAND, FOOT AGE 0-
17 \8\.
253............. FX, SPRN, STRN & 0.8176 27.6 23.0
DISL OF UPARM,
LOWLEG EX FOOT
AGE >17 W CC.
254............. FX, SPRN, STRN & 0.6691 25.1 20.9
DISL OF UPARM,
LOWLEG EX FOOT
AGE >17 W/O CC.
255............. FX, SPRN, STRN & 0.9562 26.1 21.7
DISL OF UPARM,
LOWLEG EX FOOT
AGE 0-17 \8\.
256............. OTHER 0.8294 25.9 21.5
MUSCULOSKELETAL
SYSTEM &
CONNECTIVE TISSUE
DIAGNOSES.
257............. TOTAL MASTECTOMY 0.9562 26.1 21.7
FOR MALIGNANCY W
CC \3\.
258............. TOTAL MASTECTOMY 0.9562 26.1 21.7
FOR MALIGNANCY W/
O CC \8\.
259............. SUBTOTAL 0.9562 26.1 21.7
MASTECTOMY FOR
MALIGNANCY W CC
\8\.
260............. SUBTOTAL 0.9562 26.1 21.7
MASTECTOMY FOR
MALIGNANCY W/O CC
\8\.
261............. BREAST PROC FOR 2.0841 40.0 33.3
NON-MALIGNANCY
EXCEPT BIOPSY &
LOCAL EXCISION
\5\.
262............. BREAST BIOPSY & 0.9562 26.1 21.7
LOCAL EXCISION
FOR NON-
MALIGNANCY \3\.
263............. SKIN GRAFT &/OR 1.4522 42.4 35.3
DEBRID FOR SKN
ULCER OR
CELLULITIS W CC.
264............. SKIN GRAFT &/OR 1.2892 44.1 36.7
DEBRID FOR SKN
ULCER OR
CELLULITIS W/O CC.
265............. SKIN GRAFT &/OR 1.2215 34.8 29.0
DEBRID EXCEPT FOR
SKIN ULCER OR
CELLULITIS W CC
\7\.
266............. SKIN GRAFT &/OR 1.2215 34.8 29.0
DEBRID EXCEPT FOR
SKIN ULCER OR
CELLULITIS W/O CC
\7\.
267............. PERIANAL & 0.9562 26.1 21.7
PILONIDAL
PROCEDURES \8\.
268............. SKIN, SUBCUTANEOUS 2.0841 40.0 33.3
TISSUE & BREAST
PLASTIC
PROCEDURES \5\.
269............. OTHER SKIN, SUBCUT 1.4466 43.0 35.8
TISS & BREAST
PROC W CC.
270............. OTHER SKIN, SUBCUT 0.9916 33.9 28.2
TISS & BREAST
PROC W/O CC.
271............. SKIN ULCERS....... 0.9620 30.4 25.3
272............. MAJOR SKIN 0.7121 22.8 19.0
DISORDERS W CC.
273............. MAJOR SKIN 0.4964 18.5 15.4
DISORDERS W/O CC
\1\.
274............. MALIGNANT BREAST 0.9072 24.9 20.7
DISORDERS W CC.
275............. MALIGNANT BREAST 0.7372 23.5 19.5
DISORDERS W/O CC
\2\.
276............. NON-MALIGANT 0.4964 18.5 15.4
BREAST DISORDERS
\1\.
277............. CELLULITIS AGE >17 0.7409 23.6 19.6
W CC.
278............. CELLULITIS AGE >17 0.5982 20.7 17.2
W/O CC.
279............. CELLULITIS AGE 0- 0.9562 26.1 21.7
17 \8\.
280............. TRAUMA TO THE 0.9724 29.5 24.5
SKIN, SUBCUT TISS
& BREAST AGE >17
W CC.
281............. TRAUMA TO THE 0.7386 26.4 22.0
SKIN, SUBCUT TISS
& BREAST AGE >17
W/O CC.
282............. TRAUMA TO THE 0.7372 23.5 19.5
SKIN, SUBCUT TISS
& BREAST AGE 0-17
\8\.
283............. MINOR SKIN 0.6508 19.3 16.0
DISORDERS W CC.
284............. MINOR SKIN 0.4964 18.5 15.4
DISORDERS W/O CC
\1\.
285............. AMPUTAT OF LOWER 1.5176 37.4 31.1
LIMB FOR
ENDOCRINE,
NUTRIT, & METABOL
DISORDERS.
286............. ADRENAL & 0.7372 23.5 19.5
PITUITARY
PROCEDURES \8\.
287............. SKIN GRAFTS & 1.3982 39.7 33.0
WOUND DEBRID FOR
ENDOC, NUTRIT &
METAB DISORDERS.
288............. O.R. PROCEDURES 2.0841 40.0 33.3
FOR OBESITY \5\.
289............. PARATHYROID 0.7372 23.5 19.5
PROCEDURES \8\.
290............. THYROID PROCEDURES 0.7372 23.5 19.5
\8\.
291............. THYROGLOSSAL 0.7372 23.5 19.5
PROCEDURES \8\.

[[Page 25746]]

292............. OTHER ENDOCRINE, 1.3569 32.5 27.0
NUTRIT & METAB
O.R. PROC W CC
\4\.
293............. OTHER ENDOCRINE, 0.9562 26.1 21.7
NUTRIT & METAB
O.R. PROC W/O CC
\8\.
294............. DIABETES AGE >35.. 0.8061 25.9 21.5
295............. DIABETES AGE 0-35 0.9562 26.1 21.7
\3\.
296............. NUTRITIONAL & MISC 0.8207 24.1 20.0
METABOLIC
DISORDERS AGE >17
W CC.
297............. NUTRITIONAL & MISC 0.6524 24.5 20.4
METABOLIC
DISORDERS AGE >17
W/O CC.
298............. NUTRITIONAL & MISC 0.7372 23.5 19.5
METABOLIC
DISORDERS AGE 0-
17 \8\.
299............. INBORN ERRORS OF 0.9562 26.1 21.7
METABOLISM \3\.
300............. ENDOCRINE 0.7704 22.3 18.5
DISORDERS W CC.
301............. ENDOCRINE 0.7372 23.5 19.5
DISORDERS W/O CC
\2\.
302............. KIDNEY TRANSPLANT 0.0000 0.0 0.0
\6\.
303............. KIDNEY, URETER & 2.0841 40.0 33.3
MAJOR BLADDER
PROCEDURES FOR
NEOPLASM \8\.
304............. KIDNEY, URETER & 2.0841 40.0 33.3
MAJOR BLADDER
PROC FOR NON-
NEOPL W CC \5\.
305............. KIDNEY, URETER & 0.4964 18.5 15.4
MAJOR BLADDER
PROC FOR NON-
NEOPL W/O CC \1\.
306............. PROSTATECTOMY W CC 1.3569 32.5 27.0
\8\.
307............. PROSTATECTOMY W/O 1.3569 32.5 27.0
CC \8\.
308............. MINOR BLADDER 1.3569 32.5 27.0
PROCEDURES W CC
\4\.
309............. MINOR BLADDER 0.7372 23.5 19.5
PROCEDURES W/O CC
\2\.
310............. TRANSURETHRAL 1.3569 32.5 27.0
PROCEDURES W CC
\4\.
311............. TRANSURETHRAL 0.4964 18.5 15.4
PROCEDURES W/O CC
\1\.
312............. URETHRAL 1.3569 32.5 27.0
PROCEDURES, AGE
>17 W CC \4\.
313............. URETHRAL 0.4964 18.5 15.4
PROCEDURES, AGE
>17 W/O CC \8\.
314............. URETHRAL 0.4964 18.5 15.4
PROCEDURES, AGE 0-
17 \8\.
315............. OTHER KIDNEY & 1.5070 36.8 30.6
URINARY TRACT
O.R. PROCEDURES.
316............. RENAL FAILURE..... 0.9214 23.8 19.8
317............. ADMIT FOR RENAL 0.9562 26.1 21.7
DIALYSIS \3\.
318............. KIDNEY & URINARY 0.7048 21.1 17.5
TRACT NEOPLASMS W
CC.
319............. KIDNEY & URINARY 0.4964 18.5 15.4
TRACT NEOPLASMS W/
O CC \1\.
320............. KIDNEY & URINARY 0.7223 23.0 19.1
TRACT INFECTIONS
AGE >17 W CC.
321............. KIDNEY & URINARY 0.6260 23.2 19.3
TRACT INFECTIONS
AGE >17 W/O CC.
322............. KIDNEY & URINARY 0.4964 18.5 15.4
TRACT INFECTIONS
AGE 0-17 \8\.
323............. URINARY STONES W 0.7372 23.5 19.5
CC, &/OR ESW
LITHOTRIPSY \2\.
324............. URINARY STONES W/O 0.7372 23.5 19.5
CC \2\.
325............. KIDNEY & URINARY 0.9562 26.1 21.7
TRACT SIGNS &
SYMPTOMS AGE >17
W CC \3\.
326............. KIDNEY & URINARY 0.4964 18.5 15.4
TRACT SIGNS &
SYMPTOMS AGE >17
W/O CC \1\.
327............. KIDNEY & URINARY 0.4964 18.5 15.4
TRACT SIGNS &
SYMPTOMS AGE 0-17
\8\.
328............. URETHRAL STRICTURE 0.4964 18.5 15.4
AGE >17 W CC \8\.
329............. URETHRAL STRICTURE 0.4964 18.5 15.4
AGE >17 W/O CC
\8\.
330............. URETHRAL STRICTURE 0.4964 18.5 15.4
AGE 0-17 \8\.
331............. OTHER KIDNEY & 0.8473 23.2 19.3
URINARY TRACT
DIAGNOSES AGE >17
W CC.
332............. OTHER KIDNEY & 0.5722 21.1 17.5
URINARY TRACT
DIAGNOSES AGE >17
W/O CC.
333............. OTHER KIDNEY & 0.4964 18.5 15.4
URINARY TRACT
DIAGNOSES AGE 0-
17 \8\.
334............. MAJOR MALE PELVIC 2.0841 40.0 33.3
PROCEDURES W CC
\8\.
335............. MAJOR MALE PELVIC 2.0841 40.0 33.3
PROCEDURES W/O CC
\8\.
336............. TRANSURETHRAL 0.7372 23.5 19.5
PROSTATECTOMY W
CC \8\.
337............. TRANSURETHRAL 0.7372 23.5 19.5
PROSTATECTOMY W/O
CC \8\.
338............. TESTES PROCEDURES, 0.7372 23.5 19.5
FOR MALIGNANCY
\8\.
339............. TESTES PROCEDURES, 0.7372 23.5 19.5
NON-MALIGNANCY
AGE >17 \2\.
340............. TESTES PROCEDURES, 0.7372 23.5 19.5
NON-MALIGNANCY
AGE 0-17 \8\.
341............. PENIS PROCEDURES 0.7372 23.5 19.5
\2\.
342............. CIRCUMCISION AGE 0.4964 18.5 15.4
>17 \1\.
343............. CIRCUMCISION AGE 0- 0.7372 23.5 19.5
17 \8\.
344............. OTHER MALE 0.4964 18.5 15.4
REPRODUCTIVE
SYSTEM O.R.
PROCEDURES FOR
MALIGNANCY \1\.
345............. OTHER MALE 2.0841 40.0 33.3
REPRODUCTIVE
SYSTEM O.R. PROC
EXCEPT FOR
MALIGNANCY \5\.
346............. MALIGNANCY, MALE 0.7150 22.3 18.5
REPRODUCTIVE
SYSTEM, W CC \7\.
347............. MALIGNANCY, MALE 0.7150 22.3 18.5
REPRODUCTIVE
SYSTEM, W/O CC
\7\.
348............. BENIGN PROSTATIC 0.4964 18.5 15.4
HYPERTROPHY W CC
\1\.
349............. BENIGN PROSTATIC 0.4964 18.5 15.4
HYPERTROPHY W/O
CC \1\.
350............. INFLAMMATION OF 1.1820 26.6 22.1
THE MALE
REPRODUCTIVE
SYSTEM \1\.
351............. STERILIZATION, 0.7372 23.5 19.5
MALE \8\.
352............. OTHER MALE 0.9562 26.1 21.7
REPRODUCTIVE
SYSTEM DIAGNOSES
\3\.
353............. PELVIC 2.0841 40.0 33.3
EVISCERATION,
RADICAL
HYSTERECTOMY &
RADICAL
VULVECTOMY \8\.
354............. UTERINE, ADNEXA 2.0841 40.0 33.3
PROC FOR NON-
OVARIAN/ADNEXAL
MALIG W CC \8\.
355............. UTERINE, ADNEXA 2.0841 40.0 33.3
PROC FOR NON-
OVARIAN/ADNEXAL
MALIG W/O CC \8\.
356............. FEMALE 1.3569 32.5 27.0
REPRODUCTIVE
SYSTEM
RECONSTRUCTIVE
PROCEDURES \8\.
357............. UTERINE & ADNEXA 1.3569 32.5 27.0
PROC FOR OVARIAN
OR ADNEXAL
MALIGNANCY \8\.
358............. UTERINE & ADNEXA 1.3569 32.5 27.0
PROC FOR NON-
MALIGNANCY W CC
\8\.

[[Page 25747]]

359............. UTERINE & ADNEXA 1.3569 32.5 27.0
PROC FOR NON-
MALIGNANCY W/O CC
\8\.
360............. VAGINA, CERVIX & 1.3569 32.5 27.0
VULVA PROCEDURES
\4\.
361............. LAPAROSCOPY & 0.4964 18.5 15.4
INCISIONAL TUBAL
INTERRUPTION \8\.
362............. ENDOSCOPIC TUBAL 0.4964 18.5 15.4
INTERRUPTION \8\.
363............. D&C, CONIZATION & 0.4964 18.5 15.4
RADIO-IMPLANT,
FOR MALIGNANCY
\8\.
364............. D&C, CONIZATION 0.4964 18.5 15.4
EXCEPT FOR
MALIGNANCY \8\.
365............. OTHER FEMALE 2.0841 40.0 33.3
REPRODUCTIVE
SYSTEM O.R.
PROCEDURES \5\.
366............. MALIGNANCY, FEMALE 0.8139 23.1 19.2
REPRODUCTIVE
SYSTEM W CC.
367............. MALIGNANCY, FEMALE 0.4964 18.5 15.4
REPRODUCTIVE
SYSTEM W/O CC \1\.
368............. INFECTIONS, FEMALE 0.6963 19.3 16.0
REPRODUCTIVE
SYSTEM.
369............. MENSTRUAL & OTHER 0.9562 26.1 21.7
FEMALE
REPRODUCTIVE
SYSTEM DISORDERS
\3\.
370............. CESAREAN SECTION W 0.9562 26.1 21.7
CC \8\.
371............. CESAREAN SECTION W/ 0.4964 18.5 15.4
O CC \8\.
372............. VAGINAL DELIVERY W 0.4964 18.5 15.4
COMPLICATING
DIAGNOSES \8\.
373............. VAGINAL DELIVERY W/ 0.4964 18.5 15.4
O COMPLICATING
DIAGNOSES \8\.
374............. VAGINAL DELIVERY W 0.4964 18.5 15.4
STERILIZATION &/
OR D&C \8\.
375............. VAGINAL DELIVERY W 0.4964 18.5 15.4
O.R. PROC EXCEPT
STERIL &/OR D&C
\8\.
376............. POSTPARTUM & POST 0.4964 18.5 15.4
ABORTION
DIAGNOSES W/O
O.R. PROCEDURE
\1\.
377............. POSTPARTUM & POST 0.4964 18.5 15.4
ABORTION
DIAGNOSES W O.R.
PROCEDURE \8\.
378............. ECTOPIC PREGNANCY 0.9562 26.1 21.7
\8\.
379............. THREATENED 0.4964 18.5 15.4
ABORTION \8\.
380............. ABORTION W/O D&C 0.4964 18.5 15.4
\8\.
381............. ABORTION W D&C, 0.4964 18.5 15.4
ASPIRATION
CURETTAGE OR
HYSTEROTOMY \8\.
382............. FALSE LABOR \8\... 0.4964 18.5 15.4
383............. OTHER ANTEPARTUM 0.4964 18.5 15.4
DIAGNOSES W
MEDICAL
COMPLICATIONS \8\.
384............. OTHER ANTEPARTUM 0.4964 18.5 15.4
DIAGNOSES W/O
MEDICAL
COMPLICATIONS \8\.
385............. NEONATES, DIED OR 0.4964 18.5 15.4
TRANSFERRED TO
ANOTHER ACUTE
CARE FACILITY \8\.
386............. EXTREME IMMATURITY 0.4964 18.5 15.4
\8\.
387............. PREMATURITY W 0.4964 18.5 15.4
MAJOR PROBLEMS
\8\.
388............. PREMATURITY W/O 0.4964 18.5 15.4
MAJOR PROBLEMS
\8\.
389............. FULL TERM NEONATE 0.4964 18.5 15.4
W MAJOR PROBLEMS
\8\.
390............. NEONATE W OTHER 0.4964 18.5 15.4
SIGNIFICANT
PROBLEMS \8\.
391............. NORMAL NEWBORN \8\ 0.4964 18.5 15.4
392............. SPLENECTOMY AGE 0.7372 23.5 19.5
>17 \8\.
393............. SPLENECTOMY AGE 0- 0.7372 23.5 19.5
17 \8\.
394............. OTHER O.R. 0.9562 26.1 21.7
PROCEDURES OF THE
BLOOD AND BLOOD
FORMING ORGANS
\3\.
395............. RED BLOOD CELL 0.7782 24.0 20.0
DISORDERS AGE >17.
396............. RED BLOOD CELL