[Federal Register: February 13, 2004 (Volume 69, Number 30)]
[Notices]
[Page 7339-7345]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13fe04-156]
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Part VI
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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Medicare Program; Revisions to the One-Time Appeal Process for Hospital
Wage Index Classification; Notice
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-1373-N2]
RIN 0938-AN00
Medicare Program; Revisions to the One-Time Appeal Process for
Hospital Wage Index Classification
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice.
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SUMMARY: This notice revises, clarifies, and corrects technical errors
in the notice published in the January 6, 2004 Federal Register
entitled ``Medicare Program; Notice of One-Time Appeal Process for
Hospital Wage Index Classification.'' The January 6, 2004 notice, in
accordance with section 508(a) of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003, established a one-time
appeal process by which a hospital may appeal the wage index
classification otherwise applicable to the hospital.
DATES: Effective Date: This notice is effective February 13, 2004.
Deadline for Submission of Appeal Requests: Appeal requests will be
considered if the Medicare Geographic Classification Review Board
receives them, at the appropriate address, no later than 5 p.m. EST on
February 15, 2004.
Applicability: Geographic redesignations granted under this process
are applicable to discharges occurring during the 3-year period
beginning with discharges on or after April 1, 2004 and before April 1,
2007.
FOR FURTHER INFORMATION CONTACT: James Hart, (410) 786-4548.
SUPPLEMENTARY INFORMATION:
I. Background
Under section 1886(d)(10) of the Act, the Medicare Geographic
Classification Review Board (MGCRB) considers applications by hospitals
for geographic reclassification for purposes of payment under the
inpatient prospective payment system (IPPS). Hospitals can elect to
reclassify for the wage index or the standardized amount, or both, and
as individual hospitals or as groups. Generally, hospitals must be
proximate to the labor market area to which they are seeking
reclassification and must demonstrate characteristics similar to
hospitals located in that area. Hospitals must apply for
reclassification to the MGCRB. The MGCRB issues its decisions by the
end of February for reclassifications to become effective for the
following fiscal year (FY) (beginning October 1). The regulations
applicable to reclassifications by the MGCRB are located in 42 CFR
412.230 through 412.280.
Section 1886(d)(10)(D)(v) of the Act provides that, beginning with
FY 2001, an MGCRB decision on a hospital reclassification for purposes
of the wage index is effective for 3 FYs, unless the hospital elects to
terminate the reclassification. Section 1886(d)(10)(D)(vi) of the Act
provides that the MGCRB must use the 3 most recent years' average
hourly wage data in evaluating a hospital's reclassification
application for FY 2003 and any succeeding FY.
Section 304(b) of Public Law (Pub. L.) 106-554 provides that the
Secretary must establish a mechanism under which a statewide entity may
apply to have all of the geographic areas in the State treated as a
single geographic area for purposes of computing and applying a single
wage index, for reclassifications beginning in FY 2003. The
implementing regulations for this provision are located at Sec.
412.235.
Section 1886(d)(8)(B) of the Act permits a hospital located in a
rural county adjacent to one or more urban areas to be designated as
being located in the Metropolitan Statistical Areas (MSA) to which the
greatest number of workers in the county commute if--(1) The rural
county would otherwise be considered part of an urban area under the
standards published in the Federal Register for designating MSAs (and
for designating New England County Metropolitan Areas (NECMAs)); and
(2) if the commuting rates used in determining outlying counties (or,
for New England, similarly recognized areas) were determined on the
basis of the aggregate number of resident workers who commute to (and,
if applicable under the standards, from) the central county or counties
of all contiguous MSAs (or NECMAs). Hospitals that meet these criteria
are deemed urban for purposes of the standardized amounts and for
purposes of assigning the wage index.
On June 6, 2003, the Office of Management and Budget (OMB) issued
OMB Bulletin No. 03-04, announcing revised definitions of MSAs and new
definitions of Micropolitan Statistical Areas and Combined Statistical
Areas. The new definitions recognize 49 new Metropolitan Statistical
Areas and 565 new Micropolitan Statistical Areas, as well as
extensively revising the construct of many of the existing Metropolitan
Areas. We are in the process of evaluating these new MSA definitions.
At this time, however, we have not adopted these revised MSA
definitions for purposes of the wage index. Therefore, references to
MSAs (and, by inference, NECMAs) in this notice refer to the MSAs
currently used for the wage index; those in place before the new
definitions announced in June 2003 by OMB.
II. Summary of the Revisions to the January 6, 2004 Notice
Section 508(a) of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) provided that, by
January 1, 2004, the Secretary must establish by instruction or
otherwise, a process for hospitals to appeal their wage index
classification. Therefore, on December 31, 2003 we posted the process
on our Web site and it was placed on public display at the Office of
the Federal Register. On January 6, 2004, the process was published in
a Federal Register notice (69 FR 661).
In accordance with section 508(c)(2) of Public Law 108-173, which
allows the Secretary, ``by instruction or otherwise,'' to specify the
criteria for determining which hospitals will be considered
``qualifying hospitals'' for purposes of the appeal process, we are now
making technical corrections to and revising these criteria by--
Correcting the following errors in the January
6, 2004 notice:
++ In several sections of the document, the acronym ``EDT'' will be
corrected to read ``EST'';
++ A typographical error in the percentage decrease discussed in
criterion 2(e). In the first sentence of criterion 2(e), we will
correct the phrase ``that experiences at least a 6 percent'' to read
``that experiences at least a 5 percent'';
++ In section III.D (Appeal Request Procedure) the sentence ``The
request must be mailed.'' will be corrected to read ``The request must
be mailed or delivered.''
Clarifying the introductory paragraph of section
III.B. (One-Time Appeal Process Criteria) by adding the following
sentence ``For purposes of applying these criteria, the MGCRB will
employ only official data provided by the CMS''.
Revising criteria 2(a).
Revising criteria 2(c), 2(f), and 2(h) by adding
criterion 2(c)(2), 2(f)(3), and 2(h)(2), respectively.
Revising criteria 2, first sentence,
parenthetical phrase ``(except in the case of criteria 2(b) and 2(g)
below)'' to read ``(except in the case of criteria 2(a), 2(b), 2(f)(3)
and 2(g) below)''.
[[Page 7341]]
Revising criterion 2(h), the last bulleted item,
the date ``December 15, 2003'' will be revised to read ``December 30,
2003.'' In developing criterion 2(h), we estimated that we would have
to receive notification from hospitals of their intention to submit
performance data by December 15, 2003 in order to have enough time to
consider and rate the applications received in response to 2(h).
Subsequently, we have determined that we can accept the requested data
beyond December 15, 2003 date and still meet our obligations with
respect to the consideration and ranking of applications.
To aid the reader in reviewing our corrections, clarifications, and
revisions, we are republishing sections II through V of the January 6,
2004 Federal Register notice (now sections III through VI) with all of
the changes incorporated.
We believe hospitals have sufficient time to review these revised
criteria before the February 15, 2004 due date for submitting
applications. Hospitals that planned to apply under the January 6, 2004
Federal Register notice should not find it necessary to make any
significant revisions to their applications (in the event they have
begun their applications).
III. Provisions of the Notice
A. One-Time Appeal Process Requirements
Under this process, a qualifying hospital may appeal the wage index
classification otherwise applicable to the hospital and apply for
reclassification to another area of the State in which the hospital is
located (or, at the discretion of the Secretary, to an area within a
contiguous State). Such reclassifications are applicable to discharges
occurring during the 3-year period beginning April 1, 2004 and ending
March 31, 2007.
The process requirements under section 508(a)(2) and (a)(3) of
Public Law 108-173 are as follows:
A hospital must file an appeal request no later
than February 15, 2004.
The MGCRB will consider the request of any
qualifying hospital to change its geographic classification for
purposes of determining the hospital's area wage index. The MGCRB will
issue a decision on the requests. There shall be no further
administrative review or judicial appeal of the MGCRB's decision.
If the MGCRB determines that the hospital is a
qualifying hospital, the hospital shall be reclassified to the selected
area within the State where the hospital is located (or, at the
discretion of the Secretary, to an area within a contiguous State). The
approved reclassification will be effective for 3 years beginning with
discharges occurring on April 1, 2004.
Under section 508(c) of Public Law 108-173, a ``qualifying
hospital'' is defined as a subsection (d) hospital (as defined in
section 1886(d)(1)(B) of the Act) that--
Does not qualify for a change in wage index
classification under paragraphs (8) or (10) of section 1886(d) of the
Act on the basis of requirements relating to distance or commuting.
Current distance and commuting criteria for individual hospitals
seeking reclassification are set forth in Sec. 412.230(b) of the
regulations. Rural referral center and sole community hospital distance
requirements are at Sec. 412.230(a)(3)(ii). Generally, hospitals must
demonstrate a close proximity to the labor market area to which they
are seeking reclassification. The proximity criteria are met if--(1)
For an urban hospital the distance from the hospital to the area to
which the hospital is reclassifying is no more than 15 miles; and (2)
for a rural hospital, the distance from the hospital to the area to
which the hospital is reclassifying is no more than 35 miles (Sec.
412.230(b)(1)) or; at least 50 percent of the hospital's employees
reside in the area (Sec. 412.230(b)(2)). Rural referral centers and
sole community hospitals are required to reclassify to the urban or
another rural area closest to the hospital. (Sec. 412.230(a)(3)(ii));
and
Meets such other criteria, such as quality, as
the Secretary may specify by instruction or otherwise.
Section 508(b) of Public Law 108-173 specifies that approved
requests under this process must not affect the wage index computation
for any area or any other hospital and shall not be budget neutral. The
provisions of this section shall not affect payment for discharges
occurring after the end of the 3-year period, which ends March 31,
2007. Finally, as specified, the total additional expenditures of this
section shall not exceed $900 million.
Under Sec. 412.273(b), a hospital may terminate an approved 3-year
reclassification for purposes of the wage index within 45 days of
publication of CMS's annual notice of proposed rulemaking concerning
changes and updates to the IPPS for the FY for which the termination is
to apply. That is, a hospital may terminate its wage index
reclassification during the first, second, or third year of that
reclassification. In order to terminate a reclassification under this
one-time process, a hospital should follow the process at Sec.
412.273(b). Terminations will be effective with discharges during the
following FY (beginning October 1). Hospitals whose applications under
the one-time process are approved will not be able to terminate such a
reclassification before October 1, 2004.
B. One-Time Appeal Process Criteria
All hospitals seeking reclassification under this one-time process
must submit an application consistent with the process described in
section III.D. of this notice. Hospitals that have submitted an
application under the routine MGCRB application process must still
submit a separate application for consideration by the MGCRB under this
process. The MGCRB may only approve a request, from any subsection (d)
hospital, for geographic reclassification for purposes of wage index
under this process if both of the following criteria are met (see
section III.C. of this notice for a discussion of the rationale for the
criteria). For purposes of applying these criteria, the MGCRB will
employ only official data provided by CMS. For purposes of applying
these criteria, average hourly wages (AHWs) refers to the 3-year
average AHWs published in the August 1, 2003 final rule (68 FR 45345)
for hospitals (Table 2) and MSAs and rural areas (Tables 3A and 3B,
respectively), as corrected in the October 6, 2003 Federal Register (68
FR 57732). As noted above, references to MSAs refer to the MSA
definitions currently employed for the wage index, those in place
before OMB's announcement of revised MSAs in June 2003. Note that both
of the following criteria must be met in all reclassifications under
this process:
1. A hospital meets neither the distance requirement set forth in
Sec. 412.230(b)(1) nor the commuting requirement set forth in Sec.
412.230(b)(2) (or fails to meet the requirements in Sec.
412.230(a)(3)(ii) in the case of a rural referral center or sole
community hospital) to be reclassified into the MSA for which the
request under this process is submitted.
2. The hospital does not otherwise qualify for reclassification
effective for discharges on or after October 1, 2004 (except in the
case of criteria 2(a), 2(b), 2(f)(3), and 2(g) below), under the
reclassification process at 42 CFR part 412 subpart L, and one of the
following criteria is met:
a. The hospital is an urban hospital or a sole community hospital
located in a State with fewer than 10 people per square mile. The
hospital may only reclassify under this process to another MSA within
its State. (Based on the 2000 Census data, only urban hospitals or sole
community hospitals in the
[[Page 7342]]
States of Alaska, Montana, North Dakota, South Dakota, and Wyoming meet
this criterion.)
b. The hospital is currently (for FY 2004) reclassified into
another MSA and the hospital's 3-year AHW is at least 108 percent of
the AHW of the hospitals geographically located in the MSA to which the
hospital is currently reclassified. The hospital may only reclassify
under this process to an MSA within the hospital's State that has an
area AHW nearest to, but not less than, the hospital's AHW. If there is
no such MSA, the hospital will receive a wage index calculated based
upon its own AHW. If a hospital that otherwise would be reclassified
effective for discharges on or after October 1, 2004 is approved for
reclassification under this one-time appeal process based upon this
criterion, any other reclassifications will be considered to have been
terminated effective for discharges on or after April 1, 2004.
c. One of the following criteria is met:
(1) The hospital is currently (for FY 2004) reclassified by the
MGCRB to another MSA but, upon applying to the MGCRB for FY 2005, is
ineligible for reclassification because its AHW is now less than 84
percent (but greater than 82 percent) of the AHW of the hospitals
geographically located in the MSA to which the hospital applied for
reclassification for FY 2005. The hospital may only reclassify under
this process to an MSA within its State with an FY 2004 wage index
value that is nearest to the FY 2004 wage index the hospital currently
receives.
(2) The hospital had a dominance percentage in its area of at least
75 percent (where the dominance percentage is the percentage of the
hospital wages in the area that are paid by the hospital), and at least
50 percent of the hospital's discharges were Medicare beneficiaries.
(The MGCRB will employ data on total wages from the final FY 2004 wage
data public use file and the Medicare percentage from the final FY 2004
Medicare inpatient payment impact file to make these determinations.
The total wages are calculated in Steps 2 and 4 of the methodology used
to compute the wage index (see the August 1, 2003 final rule 68 FR
45398)). The hospital may only reclassify to an MSA within its State
that has the wage index nearest to, but not less than, the FY 2004 wage
index the hospital currently receives. The FY 2004 wage index of the
area to which the hospital is reclassifying must exceed the FY 2004
wage index the hospital currently receives and in determining the next
highest wage index, the wage index of any area to which the hospital is
precluded from reclassifying under criterion 1, is excluded.
d. The hospital was part of an urban county group reclassification
application to the MGCRB for FY 2004 or FY 2005 in accordance with Sec.
412.234, but the application did not meet the standardized amount
criteria set forth in Sec. 412.234(c). Individual hospitals that were
part of the urban county group reclassification application may
reclassify under this process only to the MSA specified in the group
application.
e. The hospital is located in an MSA that experiences at least a 5
percent decrease in its FY 2004 wage index compared to its FY 2003 wage
index; and a hospital with an AHW that is at least 10 percent higher
than the MSA's AHW that reclassified into the MSA during FY 2003 has
reclassified elsewhere for FY 2004. The hospital may reclassify under
this process only to an MSA within its State with an FY 2004 area wage
index value that is nearest to what it would have received if the
hospital that previously reclassified into the MSA had continued to
reclassify into the MSA for FY 2004.
f. One of the following criteria are met:
(1) The hospital is located in an MSA that is adjacent to an MSA
(or urban county) that was reclassified under section 152 of the
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999,
Public Law 106-113 and the hospital's FY 2004 wage index is at least 10
percent less than the FY 2004 wage index of the adjacent MSA (or urban
county) that was reclassified under section 152 of Public Law 106-113.
(2) The hospital is located in an MSA that is adjacent to an MSA
identified in sections 153 or 154(a) of Public Law 106-113, and the
hospitals' FY 2004 wage index is at least 10 percent less than the FY
2004 wage index of the adjacent MSA identified in section 153 or 154(a)
of Public Law 106-113.
(3) The hospital is located in (or reclassified in FY 2004 to for
wage index purposes) an MSA--
(a) In which the wage index decreased by at least 4.5 percent from
FY 2002 to FY 2003;
(b) In which a hospital that paid at least 30 percent of the
hospital wages paid by all the hospitals geographically located in such
hospitals' MSA experienced a decrease of at least 4.5 percent in the
AHW employed in the computation of the FY 2003 wage index compared to
the AHW employed in the computation of the FY 2002 wage index; and
(c) Which is contiguous to an MSA that has a wage index at least
9.5 percent higher in FY 2004.
Hospitals eligible under either of subsections (f)(1) or (f)(2) above
may reclassify under this process only to the adjacent MSA (or urban
county) identified in the applicable section of Public Law 106-113,
except that a hospital that fails to meet criterion 1 with respect to
an adjacent MSA may reclassify to an MSA within the State that has the
FY 2004 wage index that is nearest to the FY 2004 wage index value of
the MSA adjacent to the MSA in which the hospital is located. Hospitals
eligible under subsection (f)(3) above may reclassify under this
process only to an adjacent MSA for which the FY 2004 wage index is at
least 9.5 percent greater than the wage index for the MSA in which the
hospital is currently located or reclassified to, except that a
hospital that fails to meet criterion 1 with respect to an adjacent MSA
may reclassify to an MSA within the State that has the FY 2004 wage
index that is nearest to the FY 2004 wage index value of the MSA
adjacent to the MSA in which the hospital is located
g. The hospital received reclassification by an act of the Congress
that expired on September 30, 2003. The hospital may only reclassify
under this process to the MSA to which it was reclassified by an act of
the Congress, unless it would not qualify to reclassify under this
process into such MSA because it fails to meet criterion 1 above. If
the later situation applies, the hospital may reclassify to another MSA
in its State, when it would meet criterion 1 above, with a FY 2004 wage
index that most closely approximates the FY 2004 wage index of the area
to which the hospital was reclassified by statute. Nothing in this
criterion will be viewed as superseding the reclassifications extended
by section 508(f) of Public Law 108-173.
h. After decisions by the MGCRB based on hospitals meeting criteria
2(a) through 2(g) above, as well as our implementation of section
508(f) of Public Law 108-173, the MGCRB may approve--
(1) A hospital to be reclassified if the hospital's 3-year AHW is
at least 106 percent of the 3-year AHW of the hospitals geographically
located in the area in which the hospital is located.
(2) A dominant hospital (that is, a hospital that pays at least 40
percent of the wages paid by all hospitals geographically located in
the hospital's area) to be reclassified if the hospital's AHW exceeds
the AHW of the hospitals geographically located in the hospital's
[[Page 7343]]
area by the percentage determined using the following formula:
106 - [0.02 x (the hospital's dominance percentage)]
The dominance percentage is the percentage of the hospital wages in the
area that are paid by the hospital. (The MGCRB will employ data on
total wages from the final FY 2004 wage data public use file and the
Medicare percentage from the final FY 2004 Medicare inpatient payment
impact file to make these determinations. The total wages are
calculated in Steps 2 and 4 of the methodology used to compute the wage
index (see the August 1, 2003 final rule 68 FR 45398).)
Example: A hospital's dominance percentage is 60, that is, the
hospital pays 60 percent of the wages paid by all the hospitals
geographically located in the area in which the hospital is located.
Under the formula: 106 - [0.02 x 60] = 106 - 1.2 = 104.8
Therefore, a hospital with a dominance percentage of 60 percent can be
approved for reclassification if its AHW is at least 104.8 percent of
the AHW of the hospitals geographically located in the hospital's area
and it meets all other relevant criteria.
The MGCRB will reclassify a hospital under this process to the MSA
within the hospital's State (in the case of a rural hospital or the
nearest Statewide rural area of a contiguous State) that has an area 3-
year AHW nearest to the hospital's 3-year AHW. However, to be
classified to that area, the hospital's 3-year AHW must be at least 82
percent of the 3-year AHW of the area to which it would be
reclassified. The requests submitted under this criterion will be
considered and approved by the MGCRB in rank order. Ranking will be
based on the percentage difference between the hospital's 3-year AHW
and the 3-year AHW of the area where the hospital is geographically
located. A hospital application received under criterion 2(h) will
receive a 2.5 percentage point increase in its ranking for each of the
following two criteria that are met:
The hospital has either--
++ By January 23, 2004, submitted performance data on any of the 10
measures that were in the National Voluntary Hospital Reporting
Initiative on November 15, 2003 meeting the sample size specifications
of either the Joint Commission on Accreditation of Healthcare
Organizations or CMS; or
++ Pledged, in a form dated before December 30, 2003 to submit such
data; or
The hospital is a rural hospital.
For example, an urban hospital with a 3-year AHW that is 110 percent
higher than the 3-year AHW for the area where it is located would be
ranked as though its 3-year AHW were 112.5 percent if that hospital had
submitted quality data by January 23, 2004. If the hospital were a
rural hospital, it would be ranked as though its 3-year AHW were 115
percent of its area's 3-year AHW. Hospitals applying in accordance with
criterion 2(h) will only be approved after the MGCRB decides upon all
applications meeting the criteria specified in 2(a) through 2(g) and
section 508(f) of Public Law 108-173.
C. Rationale for Criteria
Criteria 2(a) through 2(g) above are designed to assist categories
of hospitals that fall just beyond the current reclassification
criteria. Although we generally believe our current reclassification
process appropriately balances the requirement at section 1886(d)(3)(E)
of the Act to adjust payments to reflect the ``relative hospital wage
level in the geographic area of the hospital compared to the national
average hospital wage level'' and the provisions for geographic
reclassification at section 1886(d)(8) and (10) of the Act, section 508
of Public Law 108-173 was intended to address, on a one-time basis,
situations that do not meet the established criteria. Specific
rationale for each criterion follows:
a. In States with low population densities, employees are likely to
commute greater distances to work. Dispersed urban areas are,
therefore, more likely to compete for employees than are urban areas in
more densely populated States. We established the population density
and number of MSAs based on our analysis indicating these criteria best
captured such a Statewide labor market situation. We did not include
all rural hospitals under this criterion because we already employ
Statewide rural labor markets. We included sole community hospitals out
of consideration for the special role of these facilities in the
program, especially in sparsely populated States. Sole community
hospitals are otherwise recognized as special hospitals under Public
Law 108-173 and other Medicare provisions; therefore, it is important
that we recognize them and accommodate their special circumstances
under this criterion.
b. This criterion recognizes that some reclassified hospitals have
an AHW much higher than a nearby MSA into which they have already been
reclassified. We believe it is appropriate to provide some relief for
these situations under this one-time appeal process. Because, in some
cases, the AHW of hospitals meeting this criterion are likely to exceed
those of any labor market area within the State, we are providing under
this one-time appeal process that a hospital qualifying under this
criterion may receive a wage index based on its own AHW if there is no
MSA AHW at least equal to the hospital's AHW.
c. This criterion recognizes two anomalous situations. The first
addresses situations when previously reclassified urban hospitals would
meet the lower criterion for rural hospitals to reclassify, but for FY
2005 fail to meet the urban hospital wage comparability criterion. The
second recognizes the unique position of hospitals that are heavily
dominant in their wage areas (and, thus, find it difficult to meet any
threshold requirement based on the ratio of the hospital's AHW to the
AHW of hospitals in the area) and that also have a high percentage of
Medicare discharges (and are thus financially vulnerable on the
Medicare side of their business).
d. This criterion recognizes situations where hospitals have been
denied reclassification because they failed to meet the standardized
amount criterion, even though the hospital would have received no
benefit from a standardized amount reclassification because section 401
of Public Law 108-173 eliminated the differential in the standardized
amounts between urban and rural areas.
e. This criterion would protect hospitals from the negative impact
on an MSA's wage index resulting from a hospital with a significantly
higher AHW that no longer reclassifies into the MSA. The wage index
decrease standard and the AHW difference standard are designed to focus
this criterion upon situations when the reclassification elsewhere of a
particular hospital has a truly negative impact on the MSA's wage
index.
f. The first two provisions of this criterion would alleviate large
disparities in wage indices resulting from statutory reclassifications.
They are limited to adjacent MSAs because these are the labor market
areas most impacted by the statutory reclassifications (that is, rather
than Statewide rural labor market areas). The third provision would
address the situation of hospitals that are affected by an abrupt and
substantial drop in the AHW of a hospital that pays a substantial
portion of hospital wages in an MSA and that are in an MSA adjacent to
an MSA that has a substantially higher wage index. In these situations,
hospitals that
[[Page 7344]]
experience a substantial decrease because of a decline in the AHWs of
one hospital in their wage index are placed at a competitive
disadvantage compared to other hospitals in their region. Temporarily
allowing these hospitals to receive the wage index of the contiguous
MSAs would alleviate this harm.
g. These statutory reclassifications would have expired on
September 30, 2003 but were extended by section 508(f) of Public Law
108-173 and would otherwise expire on September 30, 2004. Because of
the special circumstances of these hospitals as recognized by the
Congress, we believe it is appropriate to allow them to reclassify
under this one-time appeal process. However, like other hospitals,
these hospitals must meet criterion 1 in order to be considered
qualifying hospitals under the statute. Therefore, if a hospital would
not meet criterion 1 with regard to the MSA to which the Congress
reclassified it, the hospital must reclassify to another MSA in its
State where it would meet criterion 1 and with a FY 2004 wage index
that most closely approximates the FY 2004 wage index of the area to
which the Congress reclassified it.
h. This criterion would permit other hospitals that are not
currently reclassified to be reclassified based upon the relationship
between their AHW and the AHW of the area where they are geographically
located. We believe it is appropriate to give priority to hospitals
whose AHW exceeds the area's AHW by the largest percentage and
demonstrate a significant disparity (that is at least 106 percent of
the AHW of the area in which they are located) between the hospitals'
current AHW and the area AHW. Furthermore, rural hospitals tend to have
lower AHWs in general than urban hospitals. Therefore, we believe it is
appropriate to provide a bonus under this criterion to rural hospitals.
Finally, we believe in light of the Congress' mention of the submission
of quality data in section 508(c)(2) of Public Law 108-173, and the
importance for the future of health care quality to have performance
measures that allow us to evaluate quality, it is appropriate to give
preferential treatment to hospitals that have submitted these data. We
are providing a special threshold standard to accommodate the
circumstances of dominant hospitals. A dominant hospital, as described
in criterion (h)(2), is a hospital that pays 40 percent of the total
wages paid by all the hospitals in its area. It is mathematically more
difficult for a hospital to meet any threshold requirement the more
dominant it is in its area. Dominant hospitals may thus qualify for
consideration at a percentage threshold less than 106 percent. This
threshold is determined in relation to the hospital's dominance
percentage, that is, the percentage of the hospital wages in the area
that are paid by the hospital.
D. One-Time Appeal Request Procedure
We are providing that a hospital seeking reclassification under
section 508 of Public Law 108-173 must submit a request in writing by
February 15, 2004, to the MGCRB, with a copy to CMS. The request must
be mailed or delivered. Facsimile or other electronic means are not
acceptable.
The request must contain the following information:
The hospital's name and street address.
The hospital's Medicare provider number.
The name, title, and telephone of a contact
person for all communications regarding the appeal request.
The name of the area/county (include the MSA/
identification number) where the hospital is located.
The name of the area/county (refer to the
criteria) where the hospital wishes to be reclassified.
A statement certifying that the hospital meets
criterion 1.
A statement describing which criterion (that is,
criteria 2(a) through 2(h)) is applicable. If more than one criterion
is applicable, the hospital should list the applicable criteria in
order of preference.
A hospital's appeal request must be received no later than 5:00
p.m. EST on February 15, 2004. The request must be typed or clearly
printed in ink.
Hospitals may submit their applications in one of two ways. The
first option applies to applications submitted on or before February
13, 2004. Hospitals submitting an appeal under the first option must
mail or deliver an original copy of their appeal request to the MGCRB
at the following address: Medicare Geographic Classification Review
Board 2520 Lord Baltimore Drive, Suite L, Baltimore, Maryland 21244-
2670.
Hospitals submitting an appeal under the first option must
simultaneously send an informational copy of their completed appeal
request to the following address: Centers for Medicare & Medicaid
Services, Center for Medicare Management, Hospital and Ambulatory
Policy Group, Division of Acute Care, Attention: One-Time Appeal
Process, Mail Stop C4-08-06, 7500 Security Boulevard, Baltimore,
Maryland 21244-1850.
The second option is to arrange for delivery of the appeal on Saturday,
February 14, 2004, or Sunday, February 15, 2004. Delivery is not
possible on these days to the MGCRB address (that is, 2520 Lord
Baltimore Drive, Suite L, Baltimore, Maryland 21244-1850). Therefore,
we are providing special delivery arrangements for these 2 days only.
Deliveries may be made on February 14 and 15 between the hours of 9
a.m. and 5 p.m. to the CMS complex at the following address: 7500
Security Boulevard, Baltimore, Maryland 21244-1850.
Deliveries on these 2 days must include the original copy of the appeal
and an informational copy. In order to make delivery on February 14 or
February 15, visitors must report to the main gate of the CMS complex
and present photo identification in order to be admitted to the
complex. Security personnel will direct visitors to the appropriate
delivery site within the CMS complex.
Hospitals may want to send their application by a delivery method
that guarantees a signed receipt, which indicates delivery and date of
delivery of their appeal request to the MGCRB. The MGCRB and CMS
addresses listed above are applicable for both United States mail and
courier service delivery.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the OMB for review and approval. To fairly evaluate whether an
information collection should be approved by OMB, section 3506(c)(2)(A)
of the Paperwork Reduction Act of 1995 requires that we solicit
comments 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.
However, the collection requirements associated with section III.B.
of this notice are currently approved under OMB PRA approval number
0938-0573, ``Medicare Geographic Classification Review Board,'' with a
current expiration date of October 31, 2005. In addition, we believe
that any information collected subsequent to an administrative action,
such as an appeal
[[Page 7345]]
of a geographic classification, are exempt from the PRA as stipulated
under 5 CFR 1320.4(a)(2).
Consequently, this document does not impose any new information
collection and recordkeeping requirements that would require a review
by the OMB under the authority of the Paperwork Reduction Act of 1995
(44 U.S.C. 35).
V. Waiver of the Delay in Effective Date
Section 903 of Public Law 108-173 amended section 1871(e)(1) of the
Act to specify that a substantive change shall not become effective
before the end of the 30-day period that begins on the date that the
Secretary has issued or published the substantive change. Section 903
of Public Law 108-173 also states that the substantive change can take
effect on a date that precedes the 30-day period if the Secretary finds
that waiver of this period is necessary to comply with statutory
requirements, or is contrary to the public interest. In addition, it
specifies that the issuance or publication must include a brief
statement of the reasons for this finding.
This notice meets the waiver criteria described in section
1871(e)(1)(B)(ii) of the Act, because it revises the January 6, 2004
Federal Register notice developed in accordance with section 508 of
Public Law 108-173, which required the Secretary to establish a one-
time appeal process by January 1, 2004 and directed that the appeals be
``filed as soon as possible after the date of enactment of the Act.''
To ensure that appeals are filed as soon as possible, a revised process
must be in effect and there can be no delay in the effective date.
VI. Regulatory Impact Statement
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), and
Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This notice
would increase payments to hospitals by up to $900 million, and, thus,
is considered a major rule.
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. Since this notice does not impose any costs on State or
local governments, the requirements of E.O. 13132 are not applicable.
We estimate the impact of this provision will be to increase
payments to hospitals by up to $900 million. As noted above, section
508 of Public Law 108-173 specifies that the aggregate amount of
additional expenditures resulting from the application of this section
shall not exceed $900 million. Section 508(f) requires that hospitals
previously reclassified by an act of Congress, but such
reclassification expired effective with discharges on or after October
1, 2003, shall have their reclassifications reinstated effective April
1, 2004 through September 30, 2004. The extra payments for these
reclassification extensions under section 508(f) are also subject to
the $900 million limit.
We estimate the increased payments under section 508(f) will total
approximately $41 million. The higher payments associated with
reclassifications under this one-time appeal process are not expected
to exceed a total of $859 million (during the 3-year period covered by
the provision).
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.
Authority: Section 508(a) of the Public Law 108-173.
(Catalog of Federal Domestic Assistance Program No. 93.773 Medicare-
-Hospital Insurance Program; and No. 93.774, Medicare--Supplementary
Medical Insurance Program)
Dated: February 5, 2004.
Dennis G. Smith,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: February 6, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-3377 Filed 2-11-04; 1:36 pm]
BILLING CODE 4120-01-P