FR Doc 08-297

[Federal Register: January 29, 2008 (Volume 73, Number 19)]
[Proposed Rules]
[Page 5341-5419]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29ja08-24]

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Part III

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 RY 2009: Proposed Annual Payment Rate Updates, Policy
Changes, and Clarifications; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1393-P]
RIN 0938-AO94

Medicare Program; Prospective Payment System for Long-Term Care
Hospitals RY 2009: Proposed Annual Payment Rate Updates, Policy
Changes, and Clarifications

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the annual payment rates for
the Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs). In addition, we
are proposing to consolidate the annual July 1 update for payment rates
and the October 1 update for Medicare severity long-term care diagnosis
related group (MS-LTC-DRG) weights to a single fiscal year (FY) update.
In this proposed rule, we are also clarifying various policy
issues.
This proposed rule would also describe our evaluation of the
possible one-time adjustment to the Federal payment rate.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on March 24, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1393-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.regulations.gov/. Follow the

instructions for ``Comment or Submission'' and enter the filecode to
find the document accepting comment.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1393-P, P.O. Box 8013, Baltimore, MD
21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1393-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members.
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD
21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by mailing your
comments to the addresses provided at the end of the ``Collection of
Information Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487 (General information).
Judy Richter, (410) 786-2590 (General information, payment
adjustments for special cases, onsite discharges and readmissions,
interrupted stays, co-located providers, and short-stay outliers).
Michele Hudson, (410) 786-5490 (Calculation of the payment rates,
MS-LTC-DRGs, relative weights and case-mix index, market basket, wage
index, budget neutrality, and other payment adjustments).
Ann Fagan, (410) 786-5662 (Patient classification system).
Linda McKenna, (410) 786-4537 (Payment adjustments and interrupted
stay).
Elizabeth Truong, (410) 786-6005 (Federal rate update, budget
neutrality, other adjustments, and calculation of the payment rates).
Michael Treitel, (410) 786-4552 (High cost outliers and cost-to-
charge ratios).

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. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
II. Summary of the Provisions of This Proposed Rule
III. Medicare Severity Long-Term Care Diagnosis-Related Group (LTC-
DRG) Classifications and Relative Weights
A. Background
B. Patient Classifications into MS-LTC-DRGs
C. Organization of MS-LTC-DRGs
D. Method for Updating the MS-LTC-DRG Classifications and
Relative Weights
1. Background
2. FY 2008 MS-LTC-DRG Relative Weights
IV. Proposed Changes to the LTCH PPS Payment Rates and other
Proposed Changes for the 2009 LTCH PPS Rate Year
A. Overview of the Development of the Payment Rates
B. Proposed Consolidation of the Annual Updates for Payment and
MS-LTC-DRG Weights to One Annual Update
C. LTCH PPS Market Basket
1. Overview of the RPL Market Basket
2. Market Basket Estimate for the 2009 LTCH PPS Rate Year
D. Discussion of a One-time Prospective Adjustment to the
Standard Federal Rate
E. Proposed Standard Federal Rate for the 2009 LTCH PPS Rate
Year
1. Background
2. Proposed Standard Federal Rate for the 2009 LTCH PPS Rate
Year
F. Calculation of Proposed LTCH Prospective Payments for the
2009 LTCH PPS Rate Year
1. Proposed Adjustment for Area Wage Levels
a. Background
b. Proposed Updates to the Geographic Classifications/Labor
Market Area Definitions
(1) Background
(2) Proposed Update to the CBSA-based Labor Market Area
Definitions
(3) New England Deemed Counties
(4) Proposed Codification of the Definitions of urban and rural
under 42 CFR Part 412, subpart O
c. Proposed Labor-Related Share
d. Proposed Wage Index Data
2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii

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3. Proposed Adjustment for High-Cost Outliers (HCOs)
a. Background
b. Cost-to-Charge Ratios (CCRs)
c. Establishment of the Fixed-Loss Amount
d. Application of Outlier Policy to Short-Stay Outlier (SSO)
Cases
4. Other Proposed Payment Adjustments
5. Technical Correction to the Budget Neutrality Requirement at
Sec. 412.523(d)(2)
G. Proposed Conforming Changes
V. Computing the Proposed Adjusted Federal Prospective Payments for
the 2009 LTCH PPS Rate Year
VI. Monitoring
VII. Method of Payment
VIII. RTIs Research
IX. Collection of Information Requirements
X. Regulatory Impact Analysis
A. Introduction
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Impact on Rural Hospitals
4. Unfunded Mandates
5. Federalism
6. Alternatives Considered
B. Anticipated Effects of Proposed Payment Rate Changes
1. Budgetary Impact
2. Impact on Providers
3. Calculation of Prospective Payments
4. Results
a. Location
b. Participation Date
c. Ownership Control
d. Census Region
e. Bed size
5. Effects on the Medicare Program
6. Effects on Medicare Beneficiaries
C. Accounting Statement
Regulations Text
Addendum

Table 1: Proposed Long-Term Care Hospital Wage Index for Urban
Areas for Discharges Occurring from July 1, 2008 through September
30, 2009.
Table 2: Proposed Long-Term Care Hospital Wage Index for Rural
Areas for Discharges Occurring from July 1, 2008 through September
30, 2009.
Table 3: FY 2008 MS-LTC-DRG Relative Weights, Geometric Average
Length of Stay, Short-Stay Outlier Threshold and IPPS-Comparable
Threshold (for Short-Stay Outlier Cases).

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:

3M 3M Health Information System
AHA American Hospital Association
AHIMA American Health Information Management Association
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
ASCA Administrative Simplification Compliance Act of 2002 (Pub. L.
107-105)
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)
BLS Bureau of Labor Statistics
BN Budget neutrality
CBSA Core-based statistical area
CC Complications and comorbidities
CCR Cost-to-charge ratio
C&M Coordination and maintenance
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
COLA Cost of living adjustment
COP Condition of participation
CPI Consumer Price Index
CY Calendar year
DSH Disproportionate share of low-income patients
DRGs Diagnosis-related groups
ECI Employment Cost Index
FI Fiscal intermediary
FY Fiscal year
FFY Federal fiscal year
HCO High-cost outlier
HCRIS Hospital cost report information system
HHA Home health agency
HHS (Department of) Health and Human Services
HIPAA Health Insurance Portability and Accountability Act (Pub. L.
104-191)
HIPC Health Information Policy Council
HwHs Hospitals within hospitals
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification (codes)
IME Indirect medical education
I-O Input-Output
IPF Inpatient psychiatric facility
IPPS [Acute Care Hospital] Inpatient Prospective Payment System
IRF Inpatient rehabilitation facility
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MCE Medicare code editor
MDC Major diagnostic categories
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare provider analysis and review
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L.
110-173)
MSA Metropolitan statistical area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCHS National Center for Health Statistics
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99-509)
OMB Office of Management and Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and Reporting (System)
PIP Periodic interim payment
PLI Professional liability insurance
PMSA Primary metropolitan statistical area
PPI Producer Price Indexes
PPS Prospective payment system
PSF Provider specific file
QIO Quality Improvement Organization (formerly Peer Review
organization (PRO))
RIA Regulatory impact analysis
RPL Rehabilitation psychiatric long-term care (hospital)
RTI Research Triangle Institute, International
RY Rate year (begins July 1 and ends June 30)
SIC Standard industrial code
SNF Skilled nursing facility
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-
248)
TEP Technical expert panel
UHDDS Uniform hospital discharge data set

I. Background

A. Legislative and Regulatory Authority

Section 123 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113) as amended by section 307(b) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554) provides 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 (LOS) (as determined by the Secretary of
Health and Human Services (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 fiscal year (FY) 1997.
Section 123 of the BBRA requires the PPS for LTCHs to be a ``per
discharge''

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system with a diagnosis-related group (DRG) based patient
classification system that reflects the differences in patient
resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, 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 the August 30, 2002 Federal Register, we issued a final rule
that implemented the LTCH PPS authorized under BBRA and BIPA (67 FR
55954). This system uses information from LTCH patient records to
classify patients into distinct MS-long-term care diagnosis-related
groups (MS-LTC-DRGs) based on clinical characteristics and expected
resource needs. Payments are calculated for each MS-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)
(Pub. L. 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 PPS for acute care hospitals authorized by the Social Security
Amendments of 1983 (Pub. L. 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. (Generally, in this document when we refer to discharges,
the intent is to describe Medicare discharges.) The August 30, 2002
final rule further details the payment policy under the TEFRA system
(67 FR 55954).
In the August 30, 2002 final rule, we also presented an in-depth
discussion of the LTCH PPS, including the patient classification
system, relative weights, payment rates, additional payments, and the
BN requirements mandated by section 123 of the BBRA. The same final
rule that established regulations for the LTCH PPS under 42 CFR part
412, subpart O, also contained LTCH 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 rule for a comprehensive
discussion of the research and data that supported the establishment of
the LTCH PPS (67 FR 55954).
In the June 6, 2003 Federal Register, we published a final rule
that set forth the FY 2004 annual update of the payment rates for the
Medicare PPS for inpatient hospital services furnished by LTCHs (68 FR
34122). It also changed the annual period for which the payment rates
are effective. The annual updated rates are now effective from July 1
through June 30 instead of from October 1 through September 30. We
refer to the July through June time period as a ``long-term care
hospital rate year'' (LTCH PPS rate year). In addition, we changed the
publication schedule for the annual update to allow for an effective
date of July 1. The payment amounts and factors used to determine the
annual update of the LTCH PPS Federal rate are based on a LTCH PPS rate
year. While the LTCH payment rate update is effective July 1, the
annual update of the DRG classifications and relative weights for LTCHs
are linked to the annual adjustments of the acute care hospital
inpatient DRGs and are effective each October 1.
In the Prospective Payment System for Long-Term Care Hospitals RY
2007: Annual Payment Rate Updates, Policy Changes, and Clarifications
final rule (71 FR 27798) (hereinafter referred to as the RY 2007 LTCH
PPS final rule), we set forth the 2007 LTCH PPS rate year annual update
of the payment rates for the Medicare PPS for inpatient hospital
services provided by LTCHs. We also adopted the ``Rehabilitation,
Psychiatric, Long-Term Care (RPL)'' market basket under the LTCH PPS in
place of the excluded hospital with capital market basket. In addition,
we implemented a zero percent update to the LTCH PPS Federal rate for
RY 2007. We also revised the existing payment adjustment for short stay
outlier (SSO) cases by reducing part of the existing payment formula
and adding a fourth component to that payment formula. We also
sunsetted the surgical DRG exception to the payment policy established
under the 3-day or less interruption of stay policy. Finally, we
clarified the policy at Sec. 412.534(c) for adjusting the LTCH PPS
payment so that the LTCH PPS payment is equivalent to what would
otherwise be payable under Sec. 412.1(a).
The Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA)
(Pub.L. 110-173) was enacted on December 29, 2007 and has various
effects on the LTCH PPS. The new law's provisions also have varying
time frames of applicability. First, we note that certain provisions of
the MMSEA provided that Secretary shall not apply, for cost reporting
periods beginning on or after the date of the enactment of the Act
(December 29, 2007) for a 3-year period: the extension of payment
adjustments at Sec. 412.534 to ``grandfathered LTCHs'' (a long term
care hospital identified by the amendment made by section 4417(a) of
Pub. L. 105-33); and the payment adjustment at Sec. 412.536 to
``freestanding'' LTCHs. In addition, the new law provides that the
Secretary shall not apply, for the 3-year period beginning on the date
of enactment of the Act the revision to the SSO policy at Sec.
412.529(c)(3)(i) that was finalized in 72 FR 26904 and 26992 and the
one-time adjustment to the payment rates provided for in Sec.
412.523(d)(3). The statute also provides that the base rate for RY 2008
be the same as the base rate for RY 2007 (the revised base rate,
however, does not apply to discharges occurring on or after July 1,
2007 and before April 1, 2008); for a 3-year moratorium (with specified
exceptions) on the establishment of new LTCHs, LTCH satellites, and on
the increase in the number of LTCH beds. The new law also revises in
the threshold percentages for certain co-located LTCHs and LTCH
satellites governed under Sec. 412.534. Finally, the Act provides for
an expanded review of medical necessity for admission and continued
stay at LTCHs. In this proposed rule we are proposing to establish the
applicable Federal rates for RY 2009 consistent with section 1886(m)(2)
of the Act as amended by MMSEA. We are also proposing to amend our
regulations at Sec. 412.523(d)(3) to change the methodology for the
one-time budget neutrality adjustment and to comply with section
114(c)(4) of Pub. L. 110-173. We intend to address all other policy
revisions necessitated by the statutory changes of the new law in the
future.

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 implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to
be paid under the

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LTCH PPS, a hospital must have a provider agreement with Medicare and
must have an average Medicare inpatient LOS of greater than 25 days.
Alternatively, Sec. 412.23(e)(2)(ii) states that 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
LOS for all patients, including both Medicare and non-Medicare
inpatients, of greater than 20 days.
Section 412.23(e)(3) provides that, subject to the provisions of
paragraphs (e)(3)(ii) through (e)(3)(iv) of this section, the average
Medicare inpatient LOS, specified under Sec. 412.23(e)(2)(i) is
calculated by dividing the total number of covered and noncovered days
of stay for Medicare inpatients (less leave or pass days) by the number
of total Medicare discharges for the hospital's most recent complete
cost reporting period. Section 412.23 also provides that subject to the
provisions of paragraphs (e)(3)(ii) through (e)(3)(iv) of this section,
the average inpatient LOS specified under Sec. 412.23(e)(2)(ii) 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.
In the RY 2005 LTCH PPS final rule (69 FR 25674), we specified the
procedure for calculating a hospital's inpatient average length of stay
(ALOS) for purposes of classification as a LTCH. That is, 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 (69 FR 25705). Therefore, we revised
Sec. 412.23(e)(3)(ii) to specify that, effective for cost reporting
periods beginning on or after July 1, 2004, in calculating a hospital's
ALOS, if the days of an inpatient stay involve days of care furnished
during two or more separate consecutive cost reporting periods, the
total number of days of the stay are considered to have occurred in the
cost reporting period during which the inpatient was discharged.
Fiscal intermediaries (FIs) verify that LTCHs meet the ALOS
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, 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, a patient admitted to the LTCH must have at least 1
remaining benefit day (68 FR 34123).
The FI's determination of whether or not a hospital qualifies as an
LTCH is based on the hospital's discharge data from the hospital's most
recent complete cost reporting period as specified in Sec.
412.23(e)(3) and is effective at the start of the hospital's next cost
reporting period as specified in Sec. 412.22(d). However, if the
hospital does not meet the ALOS requirement as specified in Sec.
412.23(e)(2)(i) or (ii), the hospital may provide the FI with data
indicating a change in the ALOS by the same method for the period of at
least 5 months of the immediately preceding 6-month period (69 FR
25676). Our interpretation of Sec. 412.23(e)(3) was to allow hospitals
to submit data using a period of at least 5 months of the most recent
data from the immediately preceding 6-month period.
As we stated in the FY 2004 Hospital Inpatient Prospective Payment
System (IPPS) final rule, published in the August 1, 2003 Federal
Register, prior to the implementation of the LTCH PPS, we did rely on
data from the most recently submitted cost report for purposes of
calculating the ALOS (68 FR 45464). The calculation to determine
whether an acute care hospital qualifies for LTCH status was based on
total days and discharges for LTCH inpatients. However, with the
implementation of the LTCH PPS, for the ALOS specified under Sec.
412.23(e)(2)(i), we revised Sec. 412.23(e)(3)(i) to only count total
days and discharges for Medicare inpatients (67 FR 55970 through
55974). In addition, the ALOS specified under Sec. 412.23(e)(2)(ii) 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. As we discussed in the FY 2004 IPPS
final rule, we are unable to capture the necessary data from our
existing cost reporting forms (68 FR 45464). Therefore, we notified FIs
and LTCHs that until the cost reporting forms are revised, for purposes
of calculating the ALOS, we will be relying upon census data extracted
from Medicare Provider Analysis and Review (MedPAR) files that reflect
each LTCH's cost reporting period (68 FR 45464). 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)(iv).
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 the Social
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 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 (67 FR 55954), we provided for a
5-year transition period. During this 5-year transition period, a
LTCH's total payment under the PPS was based on an increasing
percentage of the Federal rate with a corresponding decrease in the
percentage of the LTCH PPS payment that is based on reasonable cost
concepts. However, effective for cost reporting periods beginning on or
after October 1, 2006, total LTCH PPS payments are based on 100 percent
of the Federal rate.

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 PPS (67 FR 55974
through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we
clarified that the discussion of beneficiary liability in the August
30, 2002 final rule was not meant to establish rates or payments for,
or define Medicare-eligible expenses. Under Sec. 412.507, if the
Medicare payment to the LTCH is the full LTC-DRG payment amount, 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

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specified under Sec. 409.82, Sec. 409.83, and Sec. 409.87 and for
items and services as specified under Sec. 489.30(a). However, under
the LTCH PPS, Medicare will only pay for days for which the beneficiary
has coverage until the SSO threshold is exceeded. Therefore, if the
Medicare payment was for a SSO 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).

E. Administrative Simplification Compliance Act (ASCA) and Health
Insurance Portability and Accountability Act (HIPAA) Compliance

Claims submitted to Medicare must comply with both the
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105),
and Health Insurance Portability and Accountability Act of 1996 (HIPAA)
(Pub. L. 104-191). Section 3 of the ASCA requires that the Medicare
Program deny payment under Part A or Part B for any expenses incurred
for items or services ``for which a claim is submitted other than in an
electronic form specified by the Secretary.'' Section 1862(h) of the
Act (as added by section 3(a) of the ASCA) provides that the Secretary
shall waive such denial in two specific types of cases and may also
waive such denial ``in such unusual cases as the Secretary finds
appropriate'' (68 FR 48805). Section 3 of the ASCA operates in the
context of the HIPAA regulations, which include, among other
provisions, the transactions and code sets standards requirements
codified as 45 CFR parts 160 and 162, subparts A and I through R
(generally known as the Transactions Rule). The Transactions Rule
requires covered entities, including covered health care providers, to
conduct certain electronic healthcare transactions according to the
applicable transactions and code sets standards.

II. Summary of the Provisions of This Proposed Rule

In this proposed rule, we propose to revise the LTCH PPS payment
rate update cycle and make other policy changes and clarifications. The
following is a summary of the major areas that we are addressing in
this proposed rule.
In section III. of this proposed rule, we discuss the LTCH PPS
patient classification and the relative weights which are linked to the
annual adjustments of the acute care hospital inpatient DRG system, and
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 this section, we also summarize the
severity adjusted MS-LTC-DRGs and the development of the relative
weights for FY 2008 as established in the FY 2008 IPPS final rule with
comment period.
In section IV.B. of this proposed rule, we are proposing to extend
the rate year cycle for RY 2009 to a 15-month period, from July 1, 2008
through September 30, 2009. We would continue to have an update to the
MS-LTC-DRG classifications and weights effective for October 1, 2008.
We are proposing to have one consolidated annual update to both the
rates and the classifications and weights beginning October 1, 2009.
As discussed in section IV.E.2. of this proposed rule, we are
proposing a 3.5 percent market basket update to the LTCH PPS Federal
rate for the 2009 LTCH PPS rate year based on the most recent market
basket estimate for the proposed 15-month 2009 LTCH PPS rate year. Also
in section IV. of this proposed rule, we discuss the prospective
payment rate for RY 2009.
In section IV. D. of this proposed rule, we discuss the possible
one-time adjustment to the Federal payment rate under Sec.
412.523(d)(3). Consistent with section 114(c)(4) of Public Law 110-173,
we are not proposing any adjustment under Sec. 412.523(d)(3). However,
at this time, we are proposing to make a change to the methodology and
changes reflecting the requirements of section 114(c)(4) of Public Law
110-173 to the regulatory text.
In section VI. of this proposed rule, we discuss the proposed
updates to the payment rates, including the proposed revisions to the
wage index, the labor-related share, the cost-of-living adjustment
(COLA) factors, and the outlier threshold, for the 2009 LTCH PPS rate
year.
In section IX. of this proposed rule, we discuss our on-going
monitoring protocols under the LTCH PPS.
In section X. of this proposed rule, we present an update of
Research Triangle Institute's (RTI) analysis relating to the
development of LTCH patient- and facility-level criteria.
In section XII. of this proposed rule, we analyze the impact of the
proposed changes presented in this proposed rule on Medicare
expenditures, Medicare-participating LTCHs, and Medicare beneficiaries.

III. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights

[If you choose to comment on issues in this section, please include the
caption ``MS-LTC-DRG CLASSIFICATIONS AND RELATIVE WEIGHTS'' at the
beginning of your comments.]

A. Background

Section 123 of the BBRA requires that the Secretary implement a PPS
for LTCHs (that is, a per discharge system with a DRG-based patient
classification system reflecting the differences in patient resources
and costs). Section 307(b)(1) of the BIPA modified the requirements of
section 123 of the BBRA by 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.''
When the LTCH PPS was implemented for cost reporting periods
beginning on or after October 1, 2002, we adopted the same DRG patient
classification system (that is, the CMS DRGs) that was utilized at that
time under the hospital inpatient prospective payment system (IPPS). As
a component of the LTCH PPS, we refer to the patient classification
system as the ``LTC-DRGs.'' As discussed in greater detail below,
although the patient classification system used under both the LTCH PPS
and the IPPS are the same, the relative weights are different. The
established relative weight methodology and data used under the LTCH
PPS result in LTC-DRG relative weights that reflect ``the different
resource use of long-term care hospital patients consistent with the
statute''.
As part of our efforts to better recognize severity of illness
among patients, in the FY 2008 IPPS final rule with comment period (72
FR 47130), the Medicare Severity diagnosis related groups (MS-DRGs) and
the Medicare Severity long-term care diagnosis related groups (MS-LTC-
DRGs) were adopted for the IPPS and the LTCH PPS, respectively,
effective October 1, 2007 (FY 2008). For a full description of the
development and implementation of the MS-DRGs and MS-LTC-DRGs, see the
FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175
and 47277 through 47299). (We note that in that same final rule, we
revised the regulations at Sec. 412.503 to specify that for LTCH
discharges occurring on or

[[Page 5347]]

after October 1, 2007, when applying the provisions of this subpart for
policy descriptions and payment calculations, all references to LTC-
DRGs would be considered a reference to MS-LTC-DRGs. For the remainder
of this section, we present the discussion in terms of the current MS-
LTC-DRG patient classification unless specifically referring to the
previous LTC-DRG patient classification system (that was in effect
before October 1, 2007).) We believe the MS-DRGs (and by extension, the
MS-LTC-DRGs) represent a substantial improvement over the previous CMS
DRGs in their ability to differentiate cases based on severity of
illness and resource consumption.
The MS-DRGs represent an increase in the number of DRGs by 207
(that is, from 538 to 745) (72 FR 47171). In addition to improving the
DRG system's recognition of severity of illness, we believe the MS-DRGs
are responsive to the public comments that were made on the FY 2007
IPPS proposed rule with respect to how we should undertake further DRG
reform. The MS-DRGs use the CMS DRGs as the starting point for revising
the DRG system to better recognize resource complexity and severity of
illness. We have generally retained all of the refinements and
improvements that have been made to the base DRGs over the years that
recognize the significant advancements in medical technology and
changes to medical practice.
In accordance with section 123 of the BBRA as amended by section
307(b)(1) of the BIPA and Sec. 412.515, we use information derived
from LTCH PPS patient records to classify LTCH discharges into distinct
MS-LTC-DRGs based on clinical characteristics and estimated resource
needs. As stated above, the MS-LTC-DRGs used as the patient
classification component of the LTCH PPS correspond to the hospital
inpatient MS-DRGs in the IPPS. We assign an appropriate weight to the
MS-LTC-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 MS-LTC-DRGs (less
than 25 LTCH cases) in determining the MS-LTC-DRG relative weights,
since LTCHs do not typically treat the full range of diagnoses as do
acute care hospitals. To manage the large number of low volume MS-LTC-
DRGs (all MS-LTC-DRGs with fewer than 25 LTCH cases), for purposes of
determining the relative weights, we group low volume MS-LTC-DRGs into
5 quintiles based on average charge per discharge. (A detailed
discussion of the application of the Lewin Group ``quintile'' model
that was used to develop the LTC-DRGs appears in the August 30, 2002
LTCH PPS final rule (67 FR 55978).) We also account for adjustments to
payments for short-stay outlier (SSO) cases (that is, cases where the
covered length of stay (LOS) at the LTCH is less than or equal to five-
sixths of the geometric ALOS for the MS-LTC-DRG), and we make
adjustments to account for nonmonotonicity, when necessary (as
described below in this section).

B. Patient Classifications Into MS-LTC-DRGs

Generally, under the LTCH PPS, a Medicare payment is made at a
predetermined specific rate for each discharge; that payment varies by
the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are
classified into MS-LTC-DRGs for payment based on the following six data
elements:
Principal diagnosis.
Up to eight additional diagnoses.
Up to six procedures performed.
Age.
Sex.
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 most current version
of the International Classification of Diseases, Ninth Revision,
Clinical Modification (ICD-9-CM). HIPAA Transactions and Code Sets
Standards regulations at 45 CFR parts 160 and 162 require that no later
than October 16, 2003, all covered entities must comply with the
applicable requirements of subparts A and I through R of part 162.
Among other requirements, those provisions direct covered entities to
use the ASC X12N 837 Health Care Claim: Institutional, Volumes 1 and 2,
version 4010, and the applicable standard medical data code sets for
the institutional health care claim or equivalent encounter information
transaction (see 45 CFR 162.1002 and 45 CFR 162.1102). For additional
information on the ICD-9-CM Coding System, refer to the FY 2008 IPPS
final rule with comment period (72 FR 47241 through 47243 and 47277
through 47281). We also refer readers to the detailed discussion on
correct coding practices in the August 30, 2002 LTCH PPS final rule (67
FR 55981 through 55983). Additional coding instructions and examples
are published in the Coding Clinic for ICD-9-CM.
Medicare contractors (that is, fiscal intermediaries (FIs), now
called Medicare Administrative Contractors (MACs)) 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 MS-
LTC-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
68.69, Other and unspecified 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 non-approved 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 262,
Other severe protein-calorie malnutrition, contains all appropriate
digits, but if it is reported with either fewer or more than 3 digits,
the claim will be rejected by the MCE as invalid.)
After screening through the MCE, each claim is classified into the
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software. The
Medicare GROUPER software, which is used under the LTCH PPS, is
specialized computer software, and is the same GROUPER software program
used under the IPPS. The GROUPER software was developed as a means of
classifying each case into a MS-LTC-DRG on the basis of diagnosis and
procedure codes and other demographic information (age, sex, and
discharge status). Following the MS-LTC-DRG assignment, the Medicare
contractor (FI or MAC) determines the prospective payment amount by
using the Medicare PRICER program, which accounts for hospital-specific
adjustments. Under the LTCH PPS, we provide an opportunity for the LTCH
to review the MS-LTC-DRG assignments made by the Medicare contractor
and to submit additional information within a specified timeframe as
specified in Sec. 412.513(c).
The GROUPER software is used both to classify past cases 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
MS-DRG classification changes and to recalibrate the MS-DRG and MS-LTC-
DRG relative

[[Page 5348]]

weights during CMS' annual update under both the IPPS (Sec. 412.60(e))
and the LTCH PPS (Sec. 412.517), respectively. As discussed in greater
detail in section III.D. of this preamble, with the implementation of
section 503(a) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173), there is the
possibility that one feature of the GROUPER software program may be
updated twice during a Federal FY (FFY) (October 1 and April 1) as
required by the statute for the IPPS (69 FR 48954 through 48957).
Specifically, as we discussed in the FY 2008 IPPS final rule with
comment period (72 FR 47227 through 47278), diagnosis and procedure
codes for new medical technology have the potential to be created and
added to existing MS-DRGs (and MS-LTC-DRGs) in the middle of the FFY on
April 1. New codes would be added to their predecessor MS-DRGs and MS-
LTC-DRGs; no new MS-DRGs would be created. Additionally, this policy
change will have no effect on the MS-LTC-DRG relative weights (during
the FY), which will continue to be updated only once a year (October
1), nor will there be any impact on Medicare payments under the LTCH
PPS during the FY as result of this policy. The use of the ICD-9-CM
code set is also compliant with the current requirements of the
Transactions and Code Sets Standards regulations at 45 CFR parts 160
and 162, published in accordance with HIPAA.

C. Organization of the MS-LTC-DRGs

The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under
the LTCH PPS) are based on the CMS DRG structure. As noted above in
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs
although they are structurally identical to the DRGs used under the
IPPS. The MS-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). 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 software program does not
recognize all ICD-9-CM procedure codes as procedures affecting 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).
In developing Version 25.0 of the GROUPER program (the FY 2008 MS-
DRGs), the diagnoses comprising the CC list were completely redefined.
The revised CC list is primarily comprised of significant acute
disease, acute exacerbations of significant chronic diseases, advanced
or end stage chronic diseases, and chronic diseases associated with
extensive debility. In general, most chronic diseases were not included
on the revised CC list. For a patient with a chronic disease, a
significant acute manifestation of the chronic disease was required to
be present and coded for the patient to be assigned a CC.
In addition to the revision of the CC list, each CC was also
categorized as a major CC (MCC) or a CC based on relative resource use.
Approximately 12 percent of all diagnoses codes were classified as a
major CC (MCC), 24 percent as a CC, and 64 percent as a non CC.
Diagnoses closely associated with mortality (ventricular fibrillation,
cardiac arrest, shock, and respiratory arrest) were assigned as an MCC
if the patient lived but as a non CC if the patient died.
The MCC, CC, and non CC categorization was used to subdivide the
surgical and medical DRGs into up to three levels, with a case being
assigned to the most resource intensive level (for example, a case with
two secondary diagnoses that are categorized as an MCC and a CC is
assigned to the MCC level). To create the MS-DRGs (and by extension,
the MS-LTC-DRGs) individual DRGs were subdivided into three, two, or
one level, depending on the CC impact on resources used for those
cases.
As noted above in this section, further information on the
development and implementation of the MS-DRGs and MS-LTC-DRGs can be
found in the FY 2008 IPPS final rule with comment period (72 FR 47138
through 47175 and 47277 through 47299).

D. Method for Updating the MS-LTC-DRG Classifications and Relative
Weights

1. Background
Under the LTCH PPS, relative weights for each MS-LTC-DRG are a
primary element used to account for the variations in cost per
discharge and resource utilization among the payment groups (that is,
the MS-LTC-DRGs). To ensure that Medicare patients classified to each
MS-LTC-DRG have access to an appropriate level of services and to
encourage efficiency, each year based on the best available data, we
calculate a relative weight for each MS-LTC-DRG that represents the
resources needed by an average inpatient LTCH case in that MS-LTC-DRG.
For example, cases in a MS-LTC-DRG with a relative weight of 2 will, on
average, cost twice as much as cases in a MS-LTC-DRG with a relative
weight of 1. Under Sec. 412.517, the MS-LTC-DRG classifications and
weighting factors (that is, relative weights) are adjusted annually to
reflect changes in factors affecting the relative use of LTCH
resources, including treatment patterns, technology and number of
discharges.
In the June 6, 2003 LTCH PPS final rule (68 FR 34122 through
34125), we changed the LTCH PPS annual payment rate update cycle to be
effective July 1 through June 30 instead of October 1 through September
30. In addition, because the patient classification system utilized
under the LTCH PPS is the same DRG system that is used under the IPPS,
in that same final rule, we explained that the annual update of the
LTC-DRG classifications and relative weights will continue to remain
linked to the annual reclassification and recalibration of the CMS DRGs
used under the IPPS (as is the case with the MS-DRGs effective for
discharges occurring on or after October 1, 2007 (see Sec. 412.503)).
Therefore, we specified that we will continue to update the LTC-DRG
classifications and relative weights to be effective for discharges
occurring on or after October 1 through September 30 each year. We
further stated at that time that we will publish the annual proposed
and final update of the LTC-DRGs in same notice as the proposed and
final update for the IPPS (69 FR 34125). (We note that in section IV.B.
of this preamble, we are proposing to revise Sec. 412.535 in order to
consolidate the annual July 1 and October 1 LTCH PPS update cycles, so
that beginning with FY 2010, both the annual update to the standard
Federal rate (and other rate and policy changes) and the annual update
to the MS-LTC-DRGs would be presented in a single Federal Register
publication to be effective on October 1 each year.) Under existing
Sec. 412.535(b), the FY 2008 update of the LTCH PPS patient
classification system and relative weights was presented in the FY 2008
IPPS final rule with comment (72 FR 47277 through 47299). For the
reader's benefit, we are providing a summary of the discussion
presented in that final rule with comment in section III.D.2. of this
preamble.
For FY 2008, the MS-LTC-DRG classifications and relative weights
were updated based on LTCH data from the FY 2006 MedPAR file, which
contained hospital bills data from the March 2007

[[Page 5349]]

update. The MS-LTC-DRG patient classification system for FY 2008
consists of 745 DRGs that formed the basis of the Version 25.0 GROUPER
program utilized under the LTCH PPS. The 745 MS-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 MS-LTC-DRG 998 (Principal Diagnosis Invalid as a
Discharge Diagnosis) and MS-LTC-DRG 999 (Ungroupable). The other 743
MS-LTC-DRGs are the same DRGs used in the IPPS GROUPER program for FY
2008 (Version 25.0).
In the past, the annual update to the CMS DRGs was based on the
annual revisions to the ICD-9-CM codes and was effective each October
1. The ICD-9-CM coding update process was revised as discussed in
greater detail in the FY 2005 IPPS final rule (69 FR 48953 through
48957). Specifically, section 503(a) of the MMA includes a requirement
for updating diagnosis and procedure codes twice a year instead of the
former process of annual updates on October 1 of each year. This
requirement is included as part of the amendments to the Act relating
to recognition of new medical technology under the IPPS. (For
additional information on this provision, including its implementation
and its impact on the LTCH PPS, refer to the FY 2005 IPPS final rule
(69 FR 48953 through 48957) and the RY 2006 LTCH PPS final rule (70 FR
24172 through 24177).) As noted above in this section, with the
implementation of section 503(a) of the MMA, there is the possibility
that one feature of the GROUPER software program may be updated twice
during a FFY (October 1 and April 1) as required by the statute for the
IPPS. Specifically, diagnosis and procedure codes for new medical
technology may be created and added to existing DRGs in the middle of
the FFY on April 1. No new MS-LTC-DRGs will be created or deleted.
Consistent with our current practice, any changes to the MS-DRGs or
relative weights will be made at the beginning of the next FFY (October
1). Therefore, there will not be any impact on MS-LTC-DRG payments
under the LTCH PPS until the following October 1 (although the new ICD-
9-CM diagnosis and procedure codes would be recognized April 1).
As we explained in the FY 2008 IPPS final rule with comment period
(72 FR 47277), annual changes to the ICD-9-CM codes historically were
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, were also revised annually and
effective for discharges occurring on or after October 1 each year. The
patient classification system used under the LTCH PPS (MS-LTC-DRGs) is
the same DRG patient classification system used under the IPPS, which
historically had been updated annually and was effective for discharges
occurring on or after October 1 through September 30 each year. We have
also explained that since we do not publish a mid-year IPPS rule, we
will assign any new diagnosis or procedure codes implemented on April 1
to the same DRG in which its predecessor code was assigned, so that
there will be no impact on the DRG assignments until the following
October 1. Any coding updates will be available through the Web sites
provided in section II.G.10. of the preamble of the FY 2008 IPPS final
rule with comment period (72 FR 47241 through 47243) and through the
Coding Clinic for ICD-9-CM. Publishers and software vendors currently
obtain code changes through these sources to update their code books
and software system. If new codes are implemented on April 1, revised
code books and software systems, including the GROUPER software
program, will be necessary because we must use current ICD-9-CM codes.
Therefore, for purposes of the LTCH PPS, because each ICD-9-CM code
must be included in the GROUPER algorithm to classify each case into a
MS-LTC-DRG, the GROUPER software program used under the LTCH PPS would
need to be revised to accommodate any new codes.
At the September 2007 ICD-9-CM C&M Committee meeting, there were no
compelling requests for an April 1, 2008 implementation of new ICD-9-CM
codes, and therefore, we expect that the next update to the ICD-9-CM
coding system will not occur until October 1, 2008 (FY 2009).
Therefore, we expect that the ICD-9-CM coding set implemented on
October 1, 2007, will continue through September 30, 2008 (FY 2008).
The next update to the MS-LTC-DRGs and relative weights for FY 2009
will be presented in the FY 2009 IPPS proposed and final rules.
2. FY 2008 MS-LTC-DRG Relative Weights
In accordance with Sec. 412.523(c), we adjust the LTCH PPS
standard Federal rate by the MS-LTC-DRG relative weights in determining
payment to LTCHs for each case. Relative weights for each MS-LTC-DRG
are a primary element used to account for the variations in cost per
discharge and resource utilization among the payment groups as
described in Sec. 412.515. To ensure that Medicare patients who are
classified to each MS-LTC-DRG have access to services and to encourage
efficiency, we calculate a relative weight for each MS-LTC-DRG that
represents the resources needed by an average inpatient LTCH case in
that MS-LTC-DRG. For example, cases in a MS-LTC-DRG with a relative
weight of 2 will, on average, cost twice as much as cases in a MS-LTC-
DRG with a weight of 1.
As we discussed in the FY 2008 IPPS final rule with comment period
(72 FR 47282), the MS-LTC-DRG relative weights effective under the LTCH
PPS for Federal FY 2008 were calculated using the March 2007 update of
FY 2006 MedPAR data and Version 25.0 of the GROUPER software.
LTCHs often specialize in certain areas, such as ventilator-
dependent patients and rehabilitation or 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.
Distribution of cases with relatively high (or low) charges in specific
MS-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
(HSRV) 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 MS-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 FY 2008 IPPS final rule with
comment period for further information on the application of the HSRV
methodology under the LTCH PPS (72 FR 47282).)
To account for MS-LTC-DRGs with low volume (that is, with fewer
than 25 LTCH cases), we grouped those ``low volume'' MS-LTC-DRGs into 1
of 5 categories (quintiles) based on average charges for the purposes
of determining relative weights. Each of the low volume MS-LTC-DRGs
grouped to a specific quintile received the same relative weight and
ALOS using the formula applied to the regular MS-LTC-DRGs (25 or more
cases). (See the FY 2008 IPPS final rule with comment period for
further explanation of the development and composition of each of the 5
low volume quintiles for FY 2008 (72 FR 47283 through 47288).)
After grouping the cases in the appropriate MS-LTC-DRG, generally,
we calculated the relative weights by

[[Page 5350]]

first removing statistical outliers and cases with a LOS of 7 days or
less. Next, we adjusted the number of cases remaining in each MS-LTC-
DRG for the effect of SSO cases under Sec. 412.529. The short-stay
adjusted discharges and corresponding charges were used to calculate
``relative adjusted weights'' in each MS-LTC-DRG using the HSRV method.
In determining the FY 2008 MS-LTC-DRG relative weights, we also made
adjustments, as necessary, to adjust for nonmonotonicity for the
severity levels within a specific base MS-LTC-DRG. (Refer to the FY
2008 IPPS final rule with comment period for further information on the
treatment of severity levels and adjustments for nonmonotically
increasing relative weights for FY 2008 (72 FR 47282 through 47283 and
47293 through 47295).) Furthermore, we determined FY 2008 MS-LTC-DRG
relative weights for the 185 MS-LTC-DRGs for which there were no LTCH
cases in the database (that is, LTCH claims from the FY 2006 LTCH
MedPAR files). (A list of the FY 2008 ``no-volume'' MS-LTC-DRGs and
further explanation of their FY 2008 relative weight assignment can be
found in the FY 2008 IPPS final rule with comment period (72 FR 47289
through 47293).)
In adopting the MS-LTC-DRGs beginning in FY 2008, we established a
2-year transition. Specifically, for FY 2008, the first year of the
transition, 50 percent of the relative weight for a MS-LTC-DRG is based
on the average LTC-DRG relative weight under Version 24.0 of the LTC-
DRG GROUPER. The remaining 50 percent of the relative weight is based
on the MS-LTC-DRG relative weight under Version 25.0 of the MS-LTC-DRG
GROUPER. (See the FY 2008 IPPS final rule with comment period (72 FR
47295) for additional details on the methodology used to determine the
transition blended MS-LTC-DRG relative weights for FY 2008.)
In the RY 2008 LTCH PPS final rule (72 FR 26882), under the broad
authority conferred upon the Secretary under section 123 of Public Law
106-113 as amended by section 307(b) of Public Law 106-554 to develop
the LTCH PPS, we established that beginning with the update for FY
2008, the annual update to the MS-LTC-DRG classifications and relative
weights will be done in a budget neutral manner such that estimated
aggregate LTCH PPS payments would be unaffected, that is, would be
neither greater than nor less than the estimated aggregate LTCH PPS
payments that would have been made without the MS-LTC-DRG
classification and relative weight changes. Historically, we had not
updated the LTC-DRGs in a budget neutral manner because we believed
that past fluctuations in the relative weights were primarily due to
changes in LTCH coding practices rather than changes in patient
severity. In light of the most recently available LTCH claims data at
that time, which indicated that LTCH claims data no longer appeared to
significantly reflect changes in LTCH coding practices in response to
the implementation of the LTCH PPS, we believed that, beginning with FY
2008, it is appropriate to update the MS-LTC-DRGs in a budget neutral
manner (that is, so that estimated aggregate LTCH PPS payments will
neither increase nor decrease). Accordingly, in that same final rule
with comment period, we established under Sec. 412.517(b) that the
annual update to the MS-LTC-DRG classifications and relative weights be
done in a budget neutral manner. (As noted above in section III.A. of
this preamble, we revised the regulations at Sec. 412.503 to specify
that ``MS-LTC-DRG'' is used in place of ``LTC-DRG'' for discharges
occurring on or after October 1, 2007.) Consistent with that provision,
we updated the MS-LTC-DRG classifications and relative weights for FY
2008 based on the most recent available data and included a budget
neutrality adjustment. For further details on the methodology and
calculation of the FY 2008 MS-LTC-DRG budget neutrality factor, refer
to the FY 2008 IPPS final rule with comment period (72 FR 47295 through
47296).
Table 11 of the Addendum to the FY 2008 IPPS final rule with
comment period lists the MS-LTC-DRGs and their respective transition
blended budget neutral relative weights, geometric mean LOS, ``short-
stay outlier threshold'' (that is, five-sixths of the geometric mean
LOS), and the ``IPPS Comparable Threshold'' (that is, the IPPS
geometric average length of stay plus one standard deviation) for each
MS-LTC-DRG for FY 2008 (see (72 FR 48143 through 48157), and the
technical correction made in the October 10, 2007 correction notice (72
FR 57733), which has been reprinted in Table 3 of the Addendum of this
proposed rule for convenience).
As we noted previously in this section, there were no new ICD-9-CM
code requests for an April 1, 2008 update. Therefore, we expect that
Version 25.0 of the MS-DRG GROUPER software established in the FY 2008
IPPS final rule with comment period will continue to be effective until
October 1, 2008. Moreover, the MS-LTC-DRGs and relative weights for FY
2008 established in Table 11 of that same IPPS final rule with comment
period (78 FR 48143 through 48157) will continue to be effective until
October 1, 2008, (just as they would have been even if there had been
any new ICD-9-CM code requests for an April 1, 2008 update). We note
that Table 11 was corrected in the FY 2008 IPPS correction notice that
appeared in the October 10, 2007 Federal Register (72 FR 57733) and is
hereinafter referred to as the second FY 2008 IPPS correction notice.
Accordingly, Table 3 in the Addendum of this proposed rule lists the
MS-LTC-RGs and their respective relative weights, geometric ALOS,
``Short-Stay Outlier Threshold'' and ``IPPS Comparable Threshold'' that
we will continue to use for the period of July 1, 2008 through
September 30, 2009. (As noted above, this table is the same as Table 11
of the Addendum to the FY 2008 IPPS final rule with comment period,
including the technical correction made in the second FY 2008 IPPS
correction notice (72 FR 57733), which has been reprinted in Table 3 of
the Addendum of this proposed rule for the reader's convenience.) We
expect the next update to the ICD-9-CM coding system to be presented in
the FY 2009 IPPS proposed rule (since we expect that there will be no
April 1, 2008 updates to the ICD-9-CM coding system). In addition, the
proposed MS-DRGs and GROUPER for FY 2009 that would be used for the
IPPS and the LTCH PPS, effective October 1, 2008, and the proposed
update to the MS-LTC-DRG relative weights for FY 2009 will be presented
in the IPPS FY 2009 proposed rule that will be published in the Federal
Register.

IV. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed
Changes for the 2009 LTCH PPS Rate Year

[If you choose to comment on issues in this section, please include
the caption ``PROPOSED CHANGES TO LTCH PPS PAYMENT RATES FOR THE 2009
LTCH PPS RATE YEAR'' at the beginning of your comments.]

A. Overview of the Development of the Payment Rates

The LTCH PPS was effective beginning with 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, a total LTCH prospective payment that is comprised of an
increasing proportion of the LTCH PPS Federal rate and a decreasing
proportion based on reasonable cost-based principles, unless

[[Page 5351]]

the hospital makes a one-time election to receive payment based on 100
percent of the Federal rate, as specified in 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 at Sec. 412.515 through Sec. 412.536. In
this section, we discuss the proposed factors that would be used to
update the LTCH PPS standard Federal rate for the 2009 LTCH PPS rate
year that would be effective for LTCH discharges occurring on or after
July 1, 2008 through September 30, 2009. When we implemented the LTCH
PPS in the August 30, 2002 LTCH PPS final rule (67 FR 56029 through
56031), we computed the LTCH PPS standard Federal payment rate for FY
2003 by updating the best latest available (FY 1998 or FY 1999)
Medicare inpatient operating and capital cost data, using the excluded
hospital market basket.
Section 123(a)(1) of the BBRA requires that the PPS developed for
LTCHs be budget neutral for the initial year of implementation.
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 LTCH PPS not been implemented.
Section 307(a)(2) of the BIPA specified that the increases to the
target amounts and the cap on the target amounts for LTCHs for FY 2002
provided for by section 307(a)(1) of the BIPA shall not be considered
in the development and implementation of the LTCH PPS. Section
307(a)(2) of the BIPA also specified that enhanced bonus payments for
LTCHs provided for by section 122 of Public Law 106-113 were not to 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
estimated LTCH PPS payments (8 percent). For further details on the
development of the FY 2003 standard Federal rate, see the August 30,
2002 LTCH PPS final rule (67 FR 56027 through 56037), and for
subsequent updates to the LTCH PPS Federal rate, refer to the following
final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through 34140),
RY 2005 LTCH PPS final rule (69 FR 25682 through 25684), RY 2006 LTCH
PPS final rule (70 FR 24179 through 24180), RY 2007 LTCH PPS final rule
(71 FR 27819 through 27827), and RY 2008 LTCH PPS final rule (72 FR
26870 through 27029).

B. Proposed Consolidation of the Annual Updates for Payment and MS-LTC-
DRG Relative Weights to One Annual Update

In the August 30, 2002 final rule for the implementation of the
LTCH PPS, we established a publication schedule at Sec. 412.535 for
publishing information pertaining to the LTCH PPS. That schedule set a
publication date of on or before August 1 prior to the beginning of
each FFY, which coincided with the statutorily mandated publication
schedule for the IPPS (67 FR 55954). In the June 6, 2003 LTCH PPS final
rule, we amended Sec. 412.535 to provide that ``(a) Information on the
unadjusted Federal payment rates and a description of the methodology
and data used to calculate the payment rates are published on or before
May 1 prior to the start of each long-term care hospital prospective
payment system rate year which begins July 1, unless for good cause it
is published after May 1, but before June 1. (b) Information on the
LTC-DRG classification and associated weighting factors is published on
or before August 1 prior to the beginning of each Federal fiscal
year.'' At the time, we explained that the LTC-DRG patient
classifications used by the LTCH PPS for FY 2003 are based directly on
the same version of DRGs used by the IPPS, that is, Grouper 20 (68 FR
34126). (We note, as discussed above in section III of this proposed
rule, effective for LTCH PPS discharges occurring on or after October
1, 2007, all references to LTC-DRGs and DRGs in the existing
regulations are understood to represent MS-LTC-DRGs. (See Sec.
412.503.)) Therefore, we did not make any changes to the timing for the
annual update for LTC-DRG classifications and relative weights. The
annual update to the DRG classifications and relative weights continues
to be published on a FFY cycle, as is the update of the acute care
hospital IPPS DRG system. Our intent in making the change in the
payment rate update schedule for the LTCH PPS was to avoid concurrent
publications of the annual updates for these two significant payment
systems for purposes of administrative feasibility and efficiency. With
this in mind, we changed the effective date for the annual update of
the LTCH PPS payment rate from October 1 to July 1 of each year
beginning with July 1, 2003. We believed this change would help use our
limited resources effectively and facilitate a timely publication of
both the IPPS and LTCH PPS proposed and final rules. Thus, currently
the annual update of the LTCH PPS Federal rates do not coincide with
the start of the FFY, but rather, are effective prior to the FFY.
In this proposed rule, we are proposing a change to the current
schedule for the annual updates of the LTCH PPS Federal payment rates.
We propose to consolidate the rulemaking cycle for the annual update of
the LTCH PPS Federal payment rates and description of the methodology
and data used to calculate these payment rates, with the annual
updating of the MS-LTC-DRG classifications and associated weighting
factors for LTCHs so that the updates to the rates and the weights
would both be effective on October 1 each FFY. Under this proposal, the
annual updates to the LTCH PPS Federal rates would no longer be
published with a July 1 effective date.
In proposing this change to the LTCH PPS rulemaking schedule, we
took into account comments on prior rules as well as recent input from
the LTCH industry. After further considering those comments and
concerns, we agree that having the effective date of the annual update
of the LTCH PPS Federal payment rates on July 1 of each year while
retaining the October 1 effective date for updating LTC-DRG
classifications and weights has proved both burdensome and time-
consuming for all parties involved. Although a consolidated update may
also be resource intensive, it would eliminate some duplicative
resource use. For example, some of our resources used for the payment
simulations that are used to estimate LTCH PPS payments for purposes of
the respective impact analyses are duplicated for the annual LTCH PPS
rate update and the annual MS-LTC-DRG update. Moreover, we understand
the concern that there are increased costs involved in updating the
billing systems of LTCHs to accommodate two separate updates, one for
the Federal rate and one for the DRG weights, in the same cost
reporting period.
We also considered the possibility that two separate updates could
increase the potential for calculating payment errors under the LTCH
PPS.
In order to revise the payment rate update to an October 1 through
September 30 period, we propose to first extend the 2009 rate period to
September 30, 2009 such that RY 2009 would be 15 months. This proposed
15-month rate period would extend from July 1, 2008 through September
30, 2009. We believe that the additional 3 months to RY 2009 (July,
August and

[[Page 5352]]

September), would provide for a smooth transition to a consolidated
annual update for both the LTCH PPS payment rates and the LTCH PPS MS-
LTC-DRG classifications and weighting factors. (We believe that
proposing to revise the payment rate update to an October 1 through
September 30 period by proposing to shorten RY 2009 such that it would
only be 3 months (that is, July 1, 2008 through September 30, 2008),
would exacerbate the current burdensome and time-consuming biannual
update process by resulting in two payment rate changes within a very
short (3 month) period of time.) Under this proposal, after the 2009
rate period, the rate period for the LTCH PPS payment rate and other
policy changes would be October 1 through September 30. (The annual
update to the MS-LTC-DRG classifications and relative weights would
continue to be effective on October 1.) The October through September
rate period would first begin with October 1, 2009. The next update to
the LTCH PPS Federal rates after RY 2009 would be for RY 2010. (We note
that if we finalize this proposal to move the annual LTCH PPS rate
update cycle to October 1 effective October 1, 2009, the LTCH PPS rate
year would coincide with Federal FY beginning in 2010.) We are
proposing to make a change to the regulations at Sec. 412.503 to
redefine the LTCH PPS' rate year to mean October 1 through September
30. We are also proposing to revise Sec. 412.535 to reflect the
proposed change to the annual payment rate update cycle described
above. The discussion of the proposed 15-month market basket update for
the proposed 2009 rate year can be found below in sections IV.D.2. and
3. of this proposed rule.

C. LTCH PPS Market Basket

1. Overview of the RPL Market Basket
Historically, the Medicare program has used a market basket to
account for price increases in 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 initial LTCH PPS standard Federal rate for FY 2003,
using the excluded hospital with capital market basket, is discussed in
further detail in the August 30, 2002 LTCH PPS final rule (67 FR 56027
through 56033).
In the August 30, 2002 final rule (67 FR 56016 through 56017 and
56030), which implemented the LTCH PPS, we established the use of the
excluded hospital with capital market basket as the LTCH PPS market
basket. The excluded hospital with capital market basket was also used
to update the limits on LTCHs' operating costs for inflation under the
TEFRA reasonable cost-based payment system. We explained that we
believe the use of the excluded hospital with capital market basket to
update LTCHs' costs for inflation was appropriate because the excluded
hospital market basket (with a capital component) measures price
increases of the services furnished by excluded hospitals, including
LTCHs. For further details on the development of the excluded hospital
with capital market basket, see the RY 2004 LTCH PPS final rule (68 FR
34134 through 34137).
In the RY 2007 LTCH PPS final rule (71 FR 27810), we noted that
based on our research, we did not develop a market basket specific to
LTCH services. We are still unable to create a separate market basket
specifically for LTCHs due to the small number of facilities and the
limited amount of data that is reported (for instance, only
approximately 15 percent of LTCHs reported contract labor cost data for
2002). In that same final rule, under the broad authority conferred
upon the Secretary by section 123 of the BBRA as amended by section
307(b) of the BIPA, we adopted the ``Rehabilitation, Psychiatric and
Long-Term Care (RPL) market basket'' as the appropriate market basket
of goods and services under the LTCH PPS for discharges occurring on or
after July 1, 2006. Specifically, beginning with the 2007 LTCH PPS rate
year, for the LTCH PPS, we adopted the use of the RPL market basket
based on FY 2002 cost report data. We choose to use the FY 2002
Medicare cost report data because it was the most recent, relatively
complete cost data for inpatient rehabilitation facilities (IRFs),
inpatient psychiatric facilities (IPF), and LTCHs available at the time
of rebasing.
The RPL market basket is determined based on the operating and
capital costs of IRFs, IPFs and LTCHs. All IRFs are now paid under the
IRF PPS Federal payment rate, all LTCHs are now paid 100 percent of the
Federal rate under the LTCH PPS, and most IPFs are transitioning to
payment based on 100 percent of the Federal per diem payment amount
under the IPF PPS (payments to IPFs will be based exclusively on 100
percent of the Federal rate for cost reporting periods beginning on or
after January 1, 2008). As we explained in that same final rule, we
believe a market basket based on the data of IRFs, IPFs and LTCHs is
appropriate to use under the LTCH PPS since it is the best available
data that reflects the cost structures of LTCHs.
For further details on the development of the RPL market basket,
including the methodology for determining the operating and capital
portions of the RPL market basket, see the RY 2007 LTCH PPS final rule
(71 FR 27810 through 27817).
2. Proposed Market Basket Estimate for the 2009 LTCH PPS Rate Year
As discussed in greater detail above in this section, for the 2009
LTCH PPS rate year, we are proposing to consolidate the current LTCH
PPS rate year (payment rates and other policy changes) update and
fiscal year MS-LTC-DRG update into one annual update cycle. Presently,
the next payment rate update cycle would be effective July 1, 2008
through June 30, 2009. In proposing to consolidate the annual payment
rate and MS-LTC-DRG updates to be effective October 1 each year, we
would extend the next rate year update by 3 months (through September
30, 2009), which would make the RY 2009 rate effective for a 15-month
period. Accordingly, for the proposed 2009 LTCH PPS rate year, we are
proposing to use a 15-month (that is, July 1, 2008 through September
30, 2009) estimate of the RPL market basket based on the best available
data.
Consistent with our historical practice, we estimate the RPL market
basket update based on Global Insight, Inc.'s forecast using the most
recent available data. Global Insight, Inc. is a nationally recognized
economic and financial forecasting firm that contracts with CMS to
forecast the components of CMS' market baskets. To determine a 15-month
market basket update for RY 2009, we calculate the 5-quarter moving
average index level for July 1, 2008 through September 30, 2009 and the
4-quarter moving average index level for July 1, 2007 through June 30,
2008. The percent change in these two values represents the proposed
15-month market basket update.
Based on Global Insight's 4th quarter 2007 forecast with history
through the 3rd quarter of 2007, the projected 15-month market basket
estimate for the proposed 15-month 2009 LTCH PPS rate year is 3.5
percent. Therefore, consistent with our historical practice of
estimating market basket increases based on the best available data, we
are proposing a market basket update of 3.5 percent for the proposed
15-month 2009 rate year based on the proposed consolidation of the
annual updates for payment rates and MS-LTC-DRGs. Furthermore, because
the proposed RY 2009 update is based on the most recent

[[Page 5353]]

market basket estimate for the 15-month period (currently 3.5 percent),
we are also proposing that if more recent data are subsequently
available (for example, a more recent estimate of the market basket),
we would use such data, if appropriate, to determine the RY 2009 update
in the final rule. (The proposed update to the standard Federal rate
for RY 2009 is discussed below in section IV.E. of this preamble.)
We note that the most recent estimate of the RPL market basket for
July 1, 2008 through June 30, 2009, based on Global Insight's 4th
quarter 2007 forecast with history through the 3rd quarter of 2007, is
3.1 percent. We determine this 12-month market basket update by
calculating the 4-quarter moving average index level for July 1, 2008
through June 30, 2009 and the 4-quarter moving average index level for
July 1, 2007 through June 30, 2008. The percent change in these two
values represents the proposed 12-month market basket update.
Consistent with our historical practice of using market basket
estimates based on the most recent available data, if we were not
proposing to consolidate the two annual LTCH PPS payment system updates
by proposing to extend the 2009 LTCH PPS rate year by 3 months, we
would have proposed a market basket update for a 12 month RY 2009 of
3.1 percent, based on the most recent estimate of the 12-month RPL
market basket for July 1, 2008 through June 30, 2009.

D. One-time Prospective Adjustment to the Standard Federal Rate

As we discussed in the August 30, 2002 LTCH PPS final rule (67 FR
56027), consistent with the statutory requirement for budget neutrality
in section 123(a)(1) of the BBRA, we estimated aggregate payments under
the LTCH PPS for FY 2003 to be equal to 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 used the best available data at the time and
necessarily reflected several assumptions (for example, costs,
inflation factors and intensity of services provided). In conducting
our budget neutrality calculations, we took into account the statutory
requirement that certain statutory provisions that affect the level of
payments to LTCHs in years prior to the implementation of the LTCH PPS
shall not be taken into account in the development and implementation
of the LTCH PPS. Specifically, section 307(a)(2) of the BIPA requires
that the increases to the target amounts and the increases to the cap
on the target amounts for LTCHs provided for by section 307(a)(1) of
the BIPA (as set forth in section 1886(b)(3)(J) of the Act) and the
enhanced bonus payments for LTCHs provided for by section 122 of the
BBRA (as set forth in section 1886(b)(2)(E) of the Act) are not to be
taken into account in the development and implementation of the LTCH
PPS.
As the LTCH PPS has progressed, we have been monitoring payment
data in order to evaluate whether there is a significant difference
between the payments estimated on the basis of the data available at
the time of the August 30, 2002 LTCH PPS final rule (67 FR 56027
through 56037) and payment estimates based on more complete data that
have become available since that time. We indicated from the inception
of the LTCH PPS that it was possible for the aggregate amount of actual
payments in FY 2003 to be significantly higher or lower than the
estimates on which the budget neutrality calculations were based to the
extent that later, more complete data differ significantly from the
data that were available at the time of the original calculations.
Section 123(a)(1) of the BBRA, as amended by section 307(b) of
BIPA, provides broad authority to the Secretary in developing the LTCH
PPS, including the authority for establishing appropriate adjustments.
Under this broad authority to make appropriate adjustments, we provided
in Sec. 412.523(d)(3) of the regulations, for the possibility of
making a one-time prospective adjustment to the LTCH PPS rates by July
1, 2008, 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 RY 2008 LTCH PPS final rule (72 FR 26902), 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
$4.65 billion for the 2008 LTCH PPS rate year; $4.85 billion for the
2009 LTCH PPS rate year; $5.04 billion for the 2010 LTCH PPS rate year;
$5.25 billion for the 2011 LTCH PPS rate year; and $5.50 billion for
the 2012 LTCH PPS rate year.
In this proposed rule, consistent with the methodology established
in the August 30, 2002 final rule (67 FR 56036), and 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 would be as shown
in Table 4.

Table 4
------------------------------------------------------------------------
Estimated
LTCH PPS rate year payments ($ in
billions)
------------------------------------------------------------------------
2009.................................................... 4.67
2010.................................................... 4.82
2011.................................................... 5.06
2012.................................................... 5.36
2013.................................................... 5.73
------------------------------------------------------------------------

In accordance with the methodology established in the August 30,
2002 LTCH PPS final rule (67 FR 56027 through 56037), these estimates
are based on the most recent available data. These estimates are also
based on our estimate of LTCH PPS rate year payments to LTCHs using
CMS' Office of the Actuary's (OACT) most recent estimate of the RPL
market basket of 3.1 percent for the 2009 LTCH PPS rate year, 2.8
percent for the 2010 LTCH PPS rate year, 3.0 percent for the 2011 LTCH
PPS and 2012 rate years, and 3.1 percent for the 2013 LTCH PPS rate
year. (We note that OACT develops its spending projections based on
existing policy. Therefore, changes that have not yet been implemented,
including those proposed in this proposed rule, and changes as a result
of the recent Medicare, Medicaid, and SCHIP Extension Act of 2007, are
not reflected in the spending projections shown in this section.) We
also considered OACT's most recent projections of changes in Medicare
beneficiary enrollment that estimate increases in Medicare fee-for-
service beneficiary enrollment of 0.6 percent in the 2009 LTCH PPS rate
year, 0.7 percent in the 2010 LTCH PPS rate year, 1.2 percent in the
2011 LTCH PPS rate year, 2.0 percent in the 2012 LTCH PPS rate year,
and 2.5 percent in the 2013 LTCH PPS rate year. It is important to note
that, while we provide these estimates of future payments under the
LTCH PPS in order to provide a projected estimate of payments to LTCHs,
these estimates will be neither the basis for determining whether the
one-time budget neutrality adjustment available under Sec.
412.523(d)(3) should be proposed, nor are these estimates the basis for
any of the proposed policy changes presented in this proposed rule. It
is important to note that any proposal regarding the one-time budget
neutrality adjustment would be based solely on the data related to FY
2003 that would be available at the time of the proposal, rather than
on projections of payments under LTCH PPS for future years.
In the August 30, 2002 LTCH PPS final rule implementing the LTCH
PPS (67 FR 55954), we set forth the implementing regulations, based
upon

[[Page 5354]]

the broad authority granted to the Secretary, under section 123 of the
BBRA (as amended by section 307(b) of the BIPA). Section 123(a)(1) of
the BBRA required that the system ``maintain budget neutrality.'' The
statute requires the LTCH PPS to be budget neutral in FY 2003, so that
estimated aggregate payments under the LTCH PPS for FY 2003 should be
equal to the estimated aggregate payments that would be made if the
LTCH PPS were not implemented for FY 2003. The methodology for
determining the LTCH PPS standard Federal rate for FY 2003 that would
``maintain budget neutrality'' is described in considerable detail in
the August 30, 2002 final rule (67 FR 56027 through 56037). As we
discussed previously in this section, our methodology for estimating
payments for the purposes of budget neutrality calculations used the
best available data, and necessarily reflected assumptions in
estimating aggregate payments that would be made if the LTCH PPS was
not implemented. In the August 30, 2002 final rule, we also stated our
intentions to monitor LTCH PPS payment data to evaluate whether later
data varied significantly from the data available at the time of the
original budget neutrality calculations (for example, data related to
inflation factors, intensity of services provided, or behavioral
response to the implementation of the LTCH PPS). To the extent the
later data significantly differ from the data employed in the original
calculations, the aggregate amount of payments during FY 2003 based on
later data may be higher or lower than the estimates upon which the
budget neutrality calculations were based. In that same final rule, the
Secretary exercised his broad authority in establishing the LTCH PPS
and provided for the possibility of a one-time prospective adjustment
to the LTCH PPS rates by October 1, 2006, in Sec. 412.523(d)(3). This
deadline was revised to July 1, 2008, in the RY 2007 LTCH PPS final
rule. As we discussed in the RY 2007 LTCH PPS final rule (71 FR 27842
through 27844), because the LTCH PPS was only recently implemented,
sufficient new data had not yet been generated that would enable us to
conduct a comprehensive reevaluation of our budget neutrality
calculations. Therefore, in that same final rule, we did not implement
the one-time adjustment provided 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 would not be
perpetuated in the PPS rates for future years. However, we stated that
we would continue to collect and interpret new data as it became
available in order to determine whether we should propose such an
adjustment in the future. Therefore, we revised Sec. 412.523(d)(3) by
changing the original October 1, 2006 deadline (established in the
August 30, 2002 final rule that implemented the LTCH PPS) to July 1,
2008, to postpone the possible one-time adjustment due to the time lag
in the availability of Medicare data upon which a proposed adjustment
would be based. We noted that there is a lag time between the
submission of claims data and cost report data, and the availability of
that data in the MedPAR files and HCRIS, respectively. As also
explained in that same final rule, we believed that postponing the
deadline of the possible one-time prospective adjustment to the LTCH
PPS rates provided for in Sec. 412.523(d)(3) to July 1, 2008, would
allow our decisions regarding a possible adjustment to be based on more
complete and up-to-date data. It should be noted that, in the years
following the initial implementation of the LTCH PPS, we have already
adopted some revised policies and adjustments to LTCH PPS payment
levels. However, none of these revised policies and payment adjustments
have addressed the intended purpose of the adjustment allowed under
Sec. 412.523(d)(3) of the regulations, to ensure that any significant
difference between the original estimates and calculations based on
more recent data are not perpetuated in the LTCH PPS rates for future
years. For example, the adjustments that we have made to account for
coding changes in excess of real severity increases in RY 2007 and RY
2008 were made to account for changes in coding behavior in the years
following the implementation of the LTCH PPS, and not to address any
issue regarding the budget neutrality calculations that were used to
establish the base rate for the LTCH PPS.
Section 114(c)(4) of MMSEA provides that the ``Secretary shall not,
for the 3-year period beginning on the date of the enactment of this
Act, make the one-time prospective adjustment to long-term care
hospital prospective payment rates provided for in section
412.523(d)(3) of title 42, Code of Federal Regulations, or any similar
provision.'' That provision delays the effective date of any one-time
budget neutrality adjustment until no earlier than December 29, 2010.
Therefore, we are proposing to revise Sec. 412.523(d)(3) of the
regulations to conform with this requirement.
Prior to the enactment of the Medicare, Medicaid, and SCHIP
Extension Act of 2007, we had developed a methodology for evaluating
whether to propose a one-time budget neutrality adjustment under Sec.
412.523(d)(3) of the regulations. In order to inform the public of our
thinking, and to stimulate comments for our consideration during the 3-
year delay in implementing any one-time budget neutrality adjustment
under the law referenced above, we have decided to discuss our analysis
and its results in this proposed rule. Evaluating the appropriateness
of the possible one-time prospective adjustment under Sec.
412.523(d)(3) requires a thorough review of the relevant LTCH data (as
described below). When we established the FY 2003 standard Federal rate
in a budget neutral manner, we used the most recent LTCH cost data
available at that time (that is, FY 1999 data), and trended that data
forward to estimate what Medicare would have paid to LTCHs in FY 2003
under the TEFRA payment system if the PPS were not implemented for FY
2003 (67 FR 56033). We have conducted a thorough review of the relevant
data. We now have cost data from FY 2002, representing the final year
LTCHs were paid under the TEFRA payment system. The cost report data
for FY 2002 is comprised of a high proportion of settled and audited
cost reports submitted by LTCHs. We also have payment data on the first
year of the LTCH PPS (that is, FY 2003). On the basis of our review of
these data sources, we developed a potential methodology for
determining whether the one-time adjustment available under Sec.
412.523(d)(3) of the regulations should be proposed. On the basis of
this methodology, we have also determined a potential method for
computing an adjustment, if appropriate. Employing that methodology,
our analysis has indicated that a permanent adjustment factor of 0.9625
to the LTCH PPS standard Federal rate could be warranted. Consistent
with the requirements of section 114(c)(4) of the recently enacted
Medicare, Medicaid, and SCHIP Extension Act of 2007, we are not
proposing any adjustment for the upcoming rate year. However, we
welcome public comment on our analysis, which we are presenting in this
proposed rule. We will consider these comments if and when we decide to
propose an actual adjustment. We note that in the final rule, we will
respond to any comments on our proposed changes to Sec. 412.523(d)(3)
of the regulations that would--(1) specify

[[Page 5355]]

the methodology for the one-time budget neutrality adjustment; and (2)
implement the requirements of section 114(c)(4) of Public Law 110-173,
in the final rule.
In order to determine whether a one-time budget neutrality
adjustment could be warranted, it is necessary to estimate both
aggregate payments under the LTCH PPS for FY 2003 and the estimated
aggregate payments that would have been made under the TEFRA system in
FY 2003 if the LTCH PPS were not implemented. While we know actual
TEFRA payments to LTCHs for FY 2002, the last year of payment under
that methodology, it is necessary to estimate what TEFRA payments would
have been in FY 2003 if the new LTCH PPS had not been implemented. In
developing our methodology for evaluating a one-time adjustment, we
considered whether we should employ actual FY 2003 costs to calculate
estimated TEFRA payments for FY 2003 or employ costs for FY 2002
trended forward to FY 2003 as the basis for the calculation. Basing the
estimate on actual FY 2003 costs would avoid the need to employ any
factor to update costs from FY 2002 to FY 2003. However, since FY 2003
was the first year of payment under the LTCH PPS, the cost experience
of LTCHs in that year would reflect their response to the incentives
provided by the new payment system, instead of reflecting behavior
under the reasonable cost payment system. Indeed, implementation of an
LTCH PPS should directly affect the behavior of LTCHs, and therefore,
the level of costs in LTCHs. One of the incentives of a PPS is to
improve efficiency in the delivery of care, which generally results in
decreased cost per discharge. For this reason, employing FY 2003 costs
directly could be a poor basis for estimating payments that ``would
have been made if the LTCH PPS were not implemented.'' On balance, we
believe that trending forward for 1 year the costs incurred under the
last year of the TEFRA payment system poses a smaller prospect for
distortion than using costs incurred during the subsequent year, when
the incentives faced by LTCHs to reduce costs could have had a
significant effect. Therefore, we could base our calculation of the
estimated aggregate payments that would have been made if the LTCH PPS
were not implemented (that is, estimated FY 2003 TEFRA payments) on FY
2002 costs, trended forward to FY 2003 using the excluded hospital
market basket. It may be worth noting in this context that some
representatives of LTCHs have expressed concern that employing FY 2003
costs directly would provide a poor basis upon which to estimate
payments that ``would have been made if the LTCH PPS were not
implemented'' for precisely the reasons we have just discussed. We
believe that basing the estimate of FY 2003 TEFRA payments on FY 2002
costs trended forward should satisfy these concerns.
In determining whether a one-time budget neutrality adjustment
could be warranted, the estimate of the payments that would have been
made in FY 2003 under the TEFRA methodology should be compared to
estimated payments under the new LTCH PPS in FY 2003. The most direct
way to determine payments under the new LTCH PPS, of course, is simply
to aggregate the actual payments calculated under the LTCH PPS
methodology for the discharges that occurred during the first year of
the LTCH PPS (FY 2003). However, that approach raises an issue of
consistency in the use of data. The discharges for which we paid under
the LTCH PPS during FY 2003 are obviously not the same as the
discharges for which costs were incurred during the last year of
payment under the TEFRA methodology, FY 2002. For the reasons we have
just discussed, we believe that the best way to estimate the TEFRA
payments that would have been made to LTCHs during FY 2003 is to use
inflated FY 2002 costs as a proxy for FY 2003 costs. Comparing actual
FY 2003 LTCH PPS payments to FY 2003 TEFRA payments estimated on the
basis of FY 2002 discharges would amount to a comparison between
payments related to two different sets of discharges, potentially
skewing the results. Therefore consistency suggests that, rather than
comparing TEFRA payments based on FY 2002 costs updated to FY 2003, to
aggregate LTCH PPS payments for discharges that actually occurred in FY
2003, it would be preferable to compare estimated TEFRA payments based
on updated FY 2002 costs to the estimated payments that would have been
made under LTCH PPS methodology in FY 2003 for those same FY 2002
discharges. In other words, we believe that the best approach would be
to compare--
Estimated aggregate FY 2003 TEFRA payments calculated on
the basis of FY 2002 costs updated to FY 2003; to
Estimated aggregate payments that would have been made in
FY 2003 under the LTCH PPS methodology, by applying the FY 2003 LTCH
payment rules to the discharges that occurred in FY 2002.
In this way, we would ensure that we are comparing the estimated FY
2003 TEFRA payments, which are based on updated costs incurred for FY
2002 discharges to the estimated PPS payments that would have been made
for those same FY 2002 discharges under the new LTCH PPS payment
methodology.
Therefore, in the absence of the Medicare, Medicaid, and SCHIP
Extension Act of 2007, we would have proposed to employ the general
methodology we have just described to determine: (1) Whether the one-
time adjustment available under Sec. 412.523(d)(3) of the regulations
should be proposed for RY 2009, and (2) if such adjustment should be
proposed, the actual proposed adjustment factor. In this proposed rule,
we would revise the current language of Sec. 412.523(d)(3) of the
regulations to conform more specifically with this preferred
methodology. At the time of the final LTCH PPS rule in 2002, we
described the nature of the one-time adjustment in very general terms.
Specifically, that section currently provides the following:

The Secretary reviews payments under this prospective payment
system and may make a one-time prospective adjustment to the long-
term care hospital prospective payment system rates on or before
July 1, 2008 so that the effect of any significant difference
between actual payments and estimated payments for the first year of
the long term care hospital prospective payment system is not
perpetuated in the prospective payment rates for future years.

Our policy objective in providing for this one-time budget neutrality
adjustment has always been to ensure that computations based on the
earlier, necessarily limited (but at that time best available) data
available at the inception of the LTCH PPS would not be built
permanently into the rates if data available at a later date could
provide more accurate results. Prior to the thorough analysis we
conducted in preparation for this rate year, we had believed that the
only appropriate method for meeting this policy objective involved
employing actual payment data from the first year of payment under the
LTCH. As we have just discussed, we believe after a thorough evaluation
of the currently available data in the light of this policy objective,
that the most appropriate methodology for evaluating an adjustment to
the original budget neutrality adjustment does not involve comparing
the payments estimated in the original calculations against the
``actual payments * * * for the first year,'' strictly speaking.
Rather, as just

[[Page 5356]]

discussed, considerations of consistency and other factors suggest that
the most appropriate comparison would employ an estimate of FY 2003
LTCH PPS payments based on the same set of discharges (from FY 2002)
which are the basis for the best estimate of what would have been paid
in FY 2003 under the TEFRA system. As a result of this methodological
determination, under the broad authority of section 123 of the BBRA, as
amended by section 307(b) of BIPA, to make appropriate adjustments to
the LTCH PPS, we are proposing to revise Sec. 412.523(d)(3) to reflect
the preferred methodology more clearly. As we have discussed
previously, we are also proposing to revise that section of the
regulations to correspond with the requirements of section 114(c)(4) of
the Medicare, Medicaid, and SCHIP Extension Act of 2007. Specifically,
we are now proposing to revise Sec. 412.523(d)(3) of the regulations
to read as follows:

The Secretary reviews payments under this prospective payment
system and may make a one-time prospective adjustment to the long-
term care hospital prospective payment system rates no earlier than
December 29, 2010, so that the effect of any significant difference
between the data used in the original computations and more recent
data to determine budget neutrality is not perpetuated in the
prospective payment rates for future years.

Our proposed revision to Sec. 412.523(d)(3) of the regulations would
continue to provide that the Secretary may make a one-time adjustment
to the LTCH PPS rates in order to ensure that any ``significant''
difference is not perpetuated in the LTCH PPS rates for future years.
The regulation does not specifically define what constitutes a
significant difference for this purpose. In the absence of section
114(c)(4) of the Medicare, Medicaid, and SCHIP Extension Act of 2007,
we would have proposed to consider as ``significant'' any difference
greater than or equal to a 0.25 percentage point difference between the
original budget neutrality calculations and budget neutrality
calculations based on the more recent data now available. This
threshold avoids making an adjustment to account for very minor
deviations between earlier and later estimates of budget neutrality. It
is also consistent with thresholds that we have employed for similar
purposes in prospective payment systems. For example, under the capital
IPPS, we make a forecast error correction in the framework used to
update the capital Federal rate if a previous forecast of input prices
varies by at least a 0.25 percentage point from actual input price
changes (72 FR 47425). We do not believe that we should treat
differences greater than or equal to 0.25 percent as not
``significant,'' since the effect of any difference will be magnified
as the rates are updated each year.
As discussed previously, absent the requirement of section
114(c)(4) of the Medicare, Medicaid and SCHIP Extension Act of 2007, we
would have proposed to use FY 2002 LTCH costs as a basis for estimating
FY 2003 LTCH TEFRA payments in evaluating whether to propose a one-time
prospective adjustment under Sec. 412.523(d)(3). We also would have
proposed to update the FY 2002 costs for inflation to FY 2003 by our
Office of the Actuary's current estimate of the actual increase in the
excluded hospital market basket from FY 2002 to FY 2003 of 4.2 percent.
This updated amount would serve as the proxy for actual FY 2003 TEFRA
costs in the proposed budget neutrality computation for purposes of
Sec. 412.523(d)(3). We estimated FY 2003 LTCH TEFRA payments using a
methodology that is similar in concept to the methodology we used to
estimate FY 2003 LTCH total payments under the TEFRA system when we
determined the initial standard Federal rate in the August 30, 2002
final rule (67 FR 56030 through 56033). We also made modifications to
the methodology we initially used to estimate FY 2003 LTCH TEFRA
payments because we are using data from a later period, as discussed in
greater detail below. In general, we estimated total payments under the
TEFRA payment system using the following steps:
Estimate each LTCH's payment per discharge for inpatient
operating costs under the TEFRA system for FY 2003;
Estimate each LTCH's payment per discharge for capital-
related costs for FY 2003; and
Sum each LTCH's estimated operating and capital payment
per case to determine its estimated total FY 2003 TEFRA payment system
payment per discharge.

We discuss each of these steps in greater detail below.
The first step in the process of estimating total FY 2003 payments
under the TEFRA payment system is to estimate each LTCH's payment per
discharge for inpatient operating costs under the TEFRA. Until FY 1998,
the payment methodology for inpatient operating costs under the TEFRA
payment system was a relatively straightforward process. First, we
calculated a target amount by dividing the Medicare total inpatient
operating costs in a base year by the number of Medicare discharges.
The provider's TEFRA target amount was then updated by a rate-of-
increase percentage (Sec. 413.40(c)(3) of the regulations, as
established by the Congress, to determine the TEFRA target amount for
the subsequent cost reporting period (Sec. 413.40(c)(4)(i), (ii)). For
any particular cost reporting period, the Medicare payment for
inpatient operating costs would be the lesser of the hospital's
reasonable costs, or the updated target amount multiplied by the number
of Medicare discharges during the cost reporting period, that is, the
TEFRA ceiling (Sec. 413.40(a)(3)).
The methodology described above, broadly speaking, is the general
approach that we would use to arrive at an estimate of what Medicare
payments for hospital inpatient operating costs would have been in FY
2003 under the TEFRA payment system: each LTCH's FY 2003 target amount
would be calculated by updating its estimated FY 2002 target amount per
discharge by the full market basket percentage increase. The sum of all
LTCH payments for operating costs (TEFRA target amount multiplied by
Medicare discharges), bonus or relief payments, continuous improvement
bonus payments, and payments for capital-related costs yields, in
general, the estimate of what total Medicare payments to LTCHs would be
in FY 2003 under the TEFRA payment system if the LTCH PPS had not been
implemented.
However, because sections 4413 through 4419 of the BBA of 1997,
section 122 of the BBRA of 1999, and section 307(a)(1) of the BIPA made
numerous changes to the TEFRA payment system, we had to make variations
in the method described above to arrive at the estimate of FY 2003
payments for the inpatient operating costs of each LTCH under the TEFRA
system, depending on the participation date of the hospital.
Specifically, we must make the requisite computations differently for
two classes of hospitals, ``existing'' hospitals and ``new'' hospitals.
(A detailed explanation of the provisions affecting LTCHs, established
by each of the amendments, is found in the August 30, 2002 final rule
that implemented the LTCH PPS (67 FR 55959).) We discuss below these
specific BBA, BBRA, and BIPA changes, and their impact on the
calculations of estimated FY 2003 TEFRA payments for ``existing'' and
``new'' hospitals. As discussed in greater detail below, we would
employ two approaches to estimate Medicare payments under the TEFRA
system to LTCHs in FY 2003, depending on how these changes in
calculating TEFRA

[[Page 5357]]

payments, as established by the amendments, applied to each LTCH.
The first set of changes that we had to take into account were
included in the BBA. The BBA made significant changes to the TEFRA
payment methodology starting with cost reporting periods beginning on
or after October 1, 1997. While the changes were applicable to three
types of PPS-excluded providers (rehabilitation hospitals and units,
psychiatric hospitals and units, and LTCHs), the following discussion
will address the provisions of the amendments as they relate to LTCHs.
The first change to consider under BBA is section 4414 that
established caps on the TEFRA target amounts for cost reporting periods
beginning on or after October 1, 1997, for LTCHs that were paid as IPPS
excluded providers prior to that date. The cap was determined by taking
the 75th percentile of target amounts for cost reporting periods ending
in FY 1996 for each class of provider (rehabilitation hospitals and
units, psychiatric hospitals and units, and LTCHs), updating that
amount by the market basket percentage increases to FY 1998, and
applying it to the cost reporting period beginning on or after October
1, 1997 (62 FR 46018). The cap calculated for FY 1998 was updated by
the applicable market basket percentages to determine the cap amounts
for cost reporting periods beginning during FY 1999 through 2002.
Providers subject to the 75th percentile cap were paid the lesser of
their inpatient operating costs or the TEFRA target amount, which was
limited by the 75th percentile cap amount (67 FR 55959). In addition,
section 4411 of the BBA established a formula for calculating the
update factor for FY 1999 through FY 2002 that was dependent on the
relationship of a provider's inpatient operating costs to its ceiling
amount based on data from the most recently available cost report.
Section 121 of the BBRA provided that the 75th percentile cap amount
should be wage adjusted starting with cost reporting periods beginning
on or after October 1, 1999 and before October 1, 2002.
The second change that we had to take into account was section 4415
of the BBA. This provision revised the percentage factors used to
determine the amount of bonus and relief payments for LTCHs meeting
specific criteria. If a provider's net inpatient operating costs did
not exceed the hospital's ceiling, a bonus payment was made to the LTCH
(Sec. 413.40(d)(2) of the regulations). The bonus payment was the
lower of 15 percent of the difference between the hospital's inpatient
operating costs and the ceiling, or 2 percent of the ceiling. In
addition, relief payments were made to providers whose net inpatient
operating costs were greater than 110 percent of the ceiling (or the
adjusted ceiling, if applicable). These relief payments were the lower
of 50 percent of the costs in excess of 110 percent of the ceiling or
(or the adjusted ceiling, if applicable) or 10 percent of the ceiling
(or adjusted ceiling, if applicable) (Sec. 413.40(d)(3)(ii) of the
regulations).
The third change was an additional incentive established by section
4415 of the BBA, the continuous improvement bonus payment (CIB) for
providers meeting certain conditions and that kept their costs below
the target amount. Eligibility for the CIB required that a provider had
three full cost reporting periods as an IPPS-excluded provider prior to
the applicable fiscal year (62 FR 46019). To qualify for a CIB, a
provider's operating costs per discharge in the current cost reporting
period had to be lower than the least any of the following: its target
amount; its expected costs, that is, the lower of its target amount or
inpatient operating costs per discharge from the previous cost
reporting period, updated; or, its trended costs, that is, the
inpatient operating costs per discharge from its third full cost
reporting period, updated by the market basket percentage increase to
the applicable fiscal year (62 FR 46019, Sec. 413.40(d)(5)(ii)(B) of
the regulations). For providers with their third or subsequent full
cost reporting period ending in FY 1996, trended costs are the lower of
their inpatient operating costs per discharge or target amount updated
forward to the current year (Sec. 413.40(d)(5)(ii)(A) of the
regulations). The CIB payment equals the lesser of 50 percent of the
amount by which the operating costs were less than expected costs, or,
1 percent of the ceiling (Sec. 413.40(d)(4) of the regulations).
Section 122 of the BBRA increased this percentage for LTCH's for FY
2001 to 1.5 percent of the ceiling, and beginning in FY 2002, to 2
percent of the ceiling (Sec. 413.40(d)(4)(ii) and (iii) of the
regulations). The increase in the CIB percentage is not to be accounted
for in the development and implementation of the LTCH PPS in accordance
with section 307(a)(2) of BIPA.
The fourth change that we had to take into account was section 4416
of the BBA which significantly revised the payment methodology for
``new'' IPPS-excluded providers. This provision applies to three
classes of providers--psychiatric hospitals and units, rehabilitation
hospitals and units, and LTCHs--that were not paid as excluded
hospitals prior to October 1, 1997. The payment amount for a new
provider for the first 12-month cost reporting period is the lower of
its Medicare inpatient operating cost per discharge or a limit based on
110 percent of the national median of target amounts for the same class
of hospital for cost reporting periods ending in FY 1996, updated by
the market basket percentage increases to the applicable period, and
wage-adjusted. The payment limit in the second 12-month cost reporting
period is the same 110 percent limit as for the first year (Sec.
413.40(f)(2)(ii) of the regulations). A new provider's target amount
would be established in its third cost reporting period by updating the
amount paid in its second cost reporting period by the market basket
percentage increase for hospitals and hospital units excluded from the
IPPS, applicable to the specific year, as published annually in the
Federal Register, which then becomes the target amount for its third
cost reporting period. The target amount for the fourth and subsequent
cost reporting periods is determined by updating the target amount from
the previous cost reporting period by the applicable market basket
percentage increase.
Finally, two provisions under BIPA were directed specifically at
LTCHs. Section 307(a)(1) of BIPA provided a 2 percent increase to the
wage-adjusted 75th percentile cap for existing LTCHs for cost reporting
periods beginning in FY 2001, and a 25 percent increase to the target
amount for LTCHs, subject to the increased 75th percentile cap.
However, it is important to note that in accordance with section
307(a)(2) of BIPA, the 2 percent increase to the 75th percentile cap
and the 25 percent increase to the target amount were not to be taken
into account in the development and implementation of the LTCH PPS.
In order to determine what a LTCH's estimated payments would be
under TEFRA in FY 2003, we utilized cost report data for LTCHs from the
Hospital Cost Reporting Information System (HCRIS) for FYs 1999 through
2002. In addition, to determine whether a LTCH is ``new,'' the
certification date for each LTCH was obtained from the On-line Survey &
Certification Automated Reporting (OSCAR) file. Based on the
certification date, a LTCH would either be a ``new'' LTCH, meaning a
LTCH that was not paid as an excluded hospital prior to October 1,
1997, or, an ``existing'' LTCH, meaning a LTCH that was paid as an
excluded hospital prior to October 1, 1997. This could include a LTCH
that was certified as an LTCH on or after October 1, 1997, but was

[[Page 5358]]

previously paid as another type of IPPS-excluded provider prior to
October 1, 1997. Our approach to estimating Medicare payments in FY
2003 under the TEFRA payment system varied somewhat, depending on
whether an LTCH was ``existing'' or ``new'' (as discussed in greater
detail below).
Based on all these statutory changes mentioned above, the first
step would be to estimate FY 2003 inpatient operating payments under
the TEFRA system for ``existing'' LTCHs. ``Existing'' LTCHs are those
receiving payment as IPPS-excluded providers in cost reporting periods
prior to FY 1998. These LTCHs were subject to the 75th percentile cap
on their target amounts. While section 307(a)(1) of BIPA provided for a
2 percent increase to the 75th percentile cap amount for LTCH's for
cost reporting periods beginning in FY 2001 and a 25 percent increase
to the target amount for cost reporting periods beginning in FY 2001
(subject to the limiting or cap amount determined under section
1886(b)(3)(H) of the Act), section 307(a)(2) of BIPA precluded
accounting for these increases in developing the LTCH PPS. In addition,
section 122 of the BBRA increased the CIB payment percentage to 1.5
percent for FY 2001 and 2.0 percent for FY 2002 (Sec. 413.40(d)(4)(ii)
and (iii) of the regulations). But these increases, also, are not to be
accounted for in the development and implementation of the LTCH PPS in
accordance with section 307(a)(2) of BIPA. Therefore, to ensure that
these increases would be excluded from the computations, as required by
the statute, we estimated an existing LTCH's FY 2003 target amount by
starting with the hospital's target amount from the FY 2000 cost
report, the year prior to when these increases were effective. Target
amounts and payments for FY 2003 were simulated using the FY 2000
target amount in the hospital's cost report and updating the target
amount for each subsequent cost reporting period by the applicable
rate-of-increase percentage as described in Sec. 413.40(c)(3)(vii)
through FY 2002. The target amount from FY 2002 is updated by the
forecasted market basket percentage increase of 3.5 percent to arrive
at the FY 2003 target amount (Sec. 413.40(c)(3)(viii)). (Note, the
forecasted increase in the excluded hospital market basket for FY 2003
of 3.5 percent was the applicable rate-of-increase percentage used to
update TEFRA target amounts in accordance with Sec. 413.40(c)(3)(viii)
in the FY 2003 IPPS final rule (August 1, 2002, 67 FR 50289)). Based on
more recent data, our Office of the Actuary currently estimates an
increase of 4.2 percent in the excluded hospital market basket for FY
2003, which we used to update LTCHs' FY 2002 costs to FY 2003, as
described below.) In a small number of cases where FY 2002 operating
cost data were not available, we used operating cost data from the most
recent year available and trended it forward to FY 2003. In addition,
we estimated FY 2003 bonus or relief payments without the inclusion of
the 2 percent and 25 percent increases to the cap amount and target
amount, respectively, and without the 1.5 percent and 2.0 percent
increases to the CIB payments, consistent with section 307(a)(2) of
BIPA as discussed above.
In addition, since comparisons are made between the target amount
and Medicare inpatient operating costs to determine bonus or relief
payments, we estimated FY 2003 operating costs for each LTCH by
updating its FY 2002 operating costs by the actual percentage increase
in operating costs for PPS-excluded hospitals from FY 2002 to FY 2003
(4.2 percent, as determined by OACT). The 3.5 percent market basket
increase used to update the TEFRA target amounts from FY 2002 to FY
2003 was the forecast increase used at that time based on the most
recent information from OACT, at that time. However, because we now
have more recent data available for estimating the market basket
increase for IPPS-excluded hospitals from FY 2002 to FY 2003, we are
using that more recent data which OACT currently estimates that the
IPPS-excluded hospital market basket increase from FY 2002 to FY 2003
is 4.2 percent. As discussed earlier, we estimated the FY 2003
operating costs using FY 2002 costs rather than use the costs reported
on the FY 2003 cost report.
The 75th percentile cap for LTCHs for FY 2002, without the 2
percent and 25 percent increases to the cap and target amount,
respectively, was $30,783 for the wage-index adjusted labor-related
share, and $12,238 for the nonlabor-related share. If a LTCH's costs
and hospital-specific target amount were above the 75th percentile cap,
Medicare's payment under the TEFRA system would be the wage-index
adjusted cap amount. If under our payment model a LTCH's estimated FY
2002 TEFRA payment would have been limited by the wage-adjusted 75th
percentile cap in FY 2002, that amount would be updated by the
forecasted market basket percentage increase (of 3.5 percent) to FY
2003 to determine the LTCH's FY 2003 target amount that was used to
estimate its TEFRA payment amount for FY 2003.
The second approach that we used to estimate FY 2003 hospital
operating payments under the TEFRA system applied to ``new'' LTCHs. A
``new'' LTCH is one that was first paid as an IPPS excluded hospital on
or after October 1, 1997. For a ``new'' LTCH, payment in the hospital's
first 12-month cost reporting period is the lower of its Medicare net
inpatient operating costs per discharge or the wage-adjusted 110
percent median amount determined for that particular year (Sec.
413.40(f)(2)(ii) of the regulations). For the hospital's second 12-
month cost reporting period, payment is the lower of their costs, or
the same 110 percent median amount that was used in the first cost
reporting period, that is, it is not updated. The hospital's ``target
amount'' is established in the third cost reporting period by updating
the per discharge amount that was paid in the prior cost reporting
period by the estimated market basket percentage increase for hospitals
and hospital units excluded from the IPPS, applicable to the specific
year, as published annually in the Federal Register. Therefore, if the
LTCH was paid its costs in the previous cost reporting period because
costs were lower than the 110 percent median amount, the hospital's
cost per discharge for the second cost reporting period is updated and
becomes the target amount for the hospital's third cost reporting
period. Target amounts for subsequent cost reporting periods are
determined by updating the previous year's target amount by the
applicable market basket percentage increase.
New LTCHs with their first 12-month cost reporting period beginning
in FY 1998, would have had a target amount calculated under section
1886(b)(7)(A)(ii) of the Act, in FY 2000. Therefore, as with the
``existing'' LTCH's, in estimating the FY 2003 target amount, we used
the target amount from the FY 2000 cost report for those LTCHs and
update that target amount by the applicable estimated market basket
percentage increases as published annually in the Federal Register for
the IPPS final rule, without the 25 percent increase, to FY 2003. For
LTCH's with their first 12-month cost reporting period beginning in FY
1999, we used the lower of their costs or target amount from their FY
2000 cost report, and updated that amount by the applicable estimated
market basket percentage increase to establish the target amount in FY
2001, without the 25 percent increase. From this point, we would
continue to update that target amount by the estimated market basket

[[Page 5359]]

percentage increases to FY 2003. It is necessary to compute an
estimated target amount for LTCHs that are ``new'' in FY 1999 in order
to eliminate the potential inclusion of the increase to the target
amounts provided for by section 307(a)(1) of BIPA (consistent with the
statute).
The 25 percent increase (under section 307(a) of the BIPA) to the
target amount was not an issue for LTCH's with their first 12-month
cost reporting period beginning in FYs 2000, 2001, and 2002 because
they would not have a ``target amount'' based on sections
1886(b)(7)(A)(ii) of the Act, in FY 2001. Rather, for these LTCHs, we
would have proposed to determine the estimated payment amount for their
first 12-month cost reporting period by looking at their certification
date from the OSCAR file, the applicable 110 percent median amount
(adjusted by their wage-index) and their costs from the applicable cost
report, and then proceed in accordance with the policy in Sec.
413.40(f)(2)(ii) of the regulations, to arrive at estimated FY 2003
TEFRA payments.
In addition to the TEFRA payments for operating costs, and any
bonus or relief payments made, we also added $10 million as an estimate
of the CIB payments that would have been made in FY 2003 under the
TEFRA payment system. We estimated this payment by using actual CIB
payments from the cost reports for FYs 1999 and 2000 as they would not
include the statutory increases to the target amount as discussed
above, and recalculated CIB payments for FYs 2001 and 2002 based on
cost report data. Based on these historical CIB payments, we estimated
that CIB payments in FY 2003 would have been approximately $10 million.
Just as the TEFRA payments and bonus and relief payments had to be
recalculated in particular years to eliminate percentage increases that
were not to be included in our budget neutrality calculations, it was
necessary to recalculate the CIB payments in FYs 2001 and 2002 to
eliminate the percentage increases to these payments as provided for
under section 122 of BBRA, but not to be accounted for in the
development of the LTCH in accordance with section 307(a)(2) of BIPA.
As we discussed above, the second step in estimating total payments
under the TEFRA payment system is to estimate each LTCH's payment per
discharge for capital-related costs. Under the TEFRA system, in
accordance with section 1886(g) of the Act, Medicare allowable capital
costs are paid on a reasonable cost basis. Therefore, we took each
LTCH's payment for capital-related costs directly from the FY 2002 cost
report and updated it for inflation using the FY 2003 capital excluded
hospital market basket estimate of 0.7 percent, consistent with the
methodology used in the August 30, 2002 final rule (67 FR 56032) in
which we established the initial standard Federal rate. Thus, we
determined capital-related costs per case using capital cost data from
Worksheets D, Parts I and II, and total Medicare discharges for the
cost reporting period from worksheet S-3. (We note that since payments
for capital-related costs are on a reasonable-cost basis, capital
payments were the same for ``existing'' and ``new'' LTCHs.)
Once we have estimated total TEFRA payments as the sum of each
LTCH's estimated operating and capital payment per case, it is
necessary to estimate FY 2003 payments under the LTCH PPS. As we
discussed above, in evaluating the one-time prospective adjustment at
Sec. 412.523(d)(3), we believe that the best approach is to use FY
2002 LTCH claims data as a proxy for estimating FY 2003 LTCH PPS
payments. We note (as explained below) that we used the same FY 2002
LTCH MedPAR data that was used to develop the FY 2004 LTC-DRG relative
weights in the FY 2004 IPPS final rule (68 FR 45376). As we discussed
in that final rule, there is a data problem with the FY 2002 claims
data for LTCHs where multiple bills for the stay were submitted.
Specifically, given the long stays at LTCHs, some providers had
submitted multiple bills for payment under the reasonable cost-based
reimbursement system for the same stay. In certain LTCHs, hospital
personnel apparently reported a different principal diagnosis on each
bill since, under the reasonable cost-based (TEFRA) reimbursement
system, payment was not dependent upon principal diagnosis, as it is
under a DRG-based PPS system. As a result of this billing practice, we
discovered that only data from the final bills were being extracted for
the MedPAR file. Therefore, it was possible that the original MedPAR
file was not receiving the correct principal diagnosis. In that same
IPPS final rule, we discussed how we addressed this problem in the LTCH
FY 2002 MedPAR data when we used that data to determine the FY 2004
LTC-DRG relative weights. As stated above, for the evaluation of the
one-time budget neutrality adjustment at Sec. 412.523(d)(3) in this
proposed rule, we used the same ``corrected'' FY 2002 LTCH MedPAR data
that was used to develop the FY 2004 LTC-DRG relative weights. For the
reader's benefit, we are providing a summary of how we addressed the
multiple bill problem in the FY 2002 LTCH MedPAR data below. As we
explained in the FY 2004 IPPS final rule (68 FR 45376), we addressed
this problem by identifying all LTCH cases in the FY 2002 MedPAR file
for which multiple bills were submitted. For each of these cases,
beginning with the first bill and moving forward consecutively through
subsequent bills for that stay, we recorded the first unique diagnosis
codes up to 10 and the first unique procedure codes up to 10. We then
used these codes to appropriately group each LTCH case to a LTC-DRG for
FY 2004.
We estimated FY 2003 LTCH PPS payments using the same general
methodology that we used to estimate FY 2003 payments under the LTCH
PPS (without a budget neutrality adjustment) when we determined the
initial standard Federal rate in the August 30, 2002 final rule (67 FR
56032). Specifically, we estimated FY 2003 LTCH PPS payments for each
LTCH by simulating payments on a case-by-case basis by applying the
final FY 2003 payment policies established in the August 30, 2002 final
rule that implemented the LTCH PPS (67 FR 55954) based on the LTCH
case-specific discharge information from the FY 2002 MedPAR files (as
explained above), and we also used LTCH provider-specific data from the
FY 2003 provider specific file (PSF), as these were the data used by
FIs to make LTCH payments during the first year of the LTCH PPS (FY
2003). We used the FY 2003 LTC-DRG Grouper (Version 22.0) software
program, relative weights, and average length of stay (see 67 FR 55979
through 55995); we made adjustments for differences in area wage levels
established for FY 2003 as set forth at Sec. 412.525(c) using the
appropriate phase-in wage index values and cost-of-living for Alaska
and Hawaii as set forth at Sec. 412.525(b) established for FY 2003
(see 67 FR 56015 through 56020 and 56022, respectively); we made
adjustments for short-stay outlier cases based on the method for
determining payment applicable for discharges occurring during FY 2003
in accordance with Sec. 412.529(c)(1) (see 67 FR 55975 and 55995-
56002); and we included additional payments for high cost outlier cases
as initially implemented in accordance with former Sec. 412.525(a) for
determining payments for discharges occurring in FY 2003 and the FY
2003 fixed-loss amount of $24,450 (see 67 FR 56023). (We note that
correctly billed interrupted stay cases under Sec. 412.531 are single
LTCH cases in the MedPAR files, and therefore, we estimated a

[[Page 5360]]

single LTCH PPS payment for those cases.) For purposes of this
calculation, we simulated case-by-case payments for each LTCH as if it
were paid based on 100 percent of the standard Federal rate in FY 2003
rather than the transition blend methodology set forth at Sec.
412.533. To determine total estimated PPS payments for all LTCHs, we
summed the individual estimated LTCH PPS payments for each LTCH.
The next step we did to evaluate a potential one-time adjustment
under Sec. 412.523(d)(3) was to determine a case-weighted average
estimated TEFRA payment, consistent with the methodology used when we
determined the initial standard Federal rate in the August 30, 2002
final rule (68 FR 56032). This step is necessary in order to determine
if there is any difference between estimated total TEFRA payments and
estimated LTCH PPS payments in FY 2003. Each LTCH's estimated total FY
2003 TEFRA payment per discharge was determined by summing its
estimated FY 2003 operating and capital payments under the TEFRA
payment system based on FY 2002 cost report data (as described above),
and dividing that amount by the number of discharges from the FY 2002
cost report data. Next, we determined each LTCH's average estimated
TEFRA payment weighted for its number of discharges in the FY 2002
MedPAR file (for the purpose of estimating FY 2003 LTCH PPS payments,
as discussed above) by multiplying its average estimated total TEFRA
payment per discharge by its number of discharges in the FY 2002 MedPAR
file. We then estimated total case-weighted TEFRA payments by summing
each LTCH's (MedPAR) case-weighted estimated FY 2003 TEFRA payments.
This estimated FY 2003 total TEFRA payment is compared to the estimated
FY 2003 total LTCH PPS payment in order to determine whether a one-time
budget neutrality adjustment would be appropriate. (As discussed in
greater detail above, we are determining both estimated total FY 2003
TEFRA payments and estimated total FY 2003 LTCH PPS payments based on
FY 2002 cost report and claims data, respectively.) Adjusting our
estimate of FY 2003 TEFRA payments for the number of discharges that we
are using to estimate FY 2003 LTCH PPS payments ensures that the
comparison of estimated aggregate FY 2003 TEFRA payments to estimated
aggregate FY 2003 LTCH PPS payments is based on the same number of LTCH
discharges.
Using the methodology and data described above, we have calculated
that estimated FY 2003 LTCH PPS payments are approximately 2.5 percent
higher than estimated payments to the same LTCHs in FY 2003 if the LTCH
PPS had not been implemented (that is, estimated total FY 2003 TEFRA
payments). This analysis was based on approximately 91,300 LTCH cases
for 250 LTCHs. As discussed above, we would have proposed that any
difference greater than or equal to 0.25 percentage points
``significant'' for purposes of determining whether the one-time budget
neutrality adjustment provided under Sec. 412.523(d)(3) may be
warranted. Although we project that estimated FY 2003 LTCH PPS payments
are approximately 2.5 percent higher than estimated FY 2003 TEFRA
payments, reducing the standard Federal rate by 2.5 percent would not
``maintain budget neutrality'' for FY 2003 (that is, estimated FY 2003
LTCH PPS payments would not be equal to estimated FY 2003 TEFRA
payments) because a considerable number of LTCH discharges are
projected to have received a LTCH PPS payment in FY 2003 based on the
estimated cost of the case (rather than a payment based on the standard
Federal rate) under the payment adjustment for short-stay outlier (SSO)
cases at Sec. 412.529. Specifically, our payment data indicate that
nearly 20 percent of estimated FY 2003 LTCH PPS payments are SSO
payments that were paid based on estimated cost and not based on the
LTCH PPS standard Federal rate. These SSO cases that receive a payment
based on the estimated cost of the case are generally unaffected by any
changes to the Federal rate because the estimated cost of the case is
determined by multiplying the Medicare allowable charges by the LTCH's
cost-to-charge ratio (see Sec. 412.529(d)(2)). In other words, if we
were to reduce the Federal rate by 2.5 percent, estimated total FY 2003
LTCH PPS payments would still be greater than estimated total FY 2003
TEFRA payments, and therefore would not be budget neutral. This is
because the estimated LTCH PPS payments for those SSO cases that in FY
2003 were estimated to have been paid 120 percent of the estimated cost
of the case generally are not affected (that is, in this case, not
lowered) by any budget neutrality factor that would be applied to the
standard Federal rate since those payments are not derived from the
Federal rate (as explained above). Therefore, it would be necessary to
propose to offset the standard Federal rate by a factor that is larger
than 2.5 percent in order to ensure that estimated total FY 2003 LTCH
PPS payments would be equal to estimated total FY 2003 TEFRA payments
in order to ``maintain budget neutrality.'' To determine the necessary
adjustment factor that would need to be applied to the standard Federal
rate in order to ``maintain budget neutrality,'' we simulated FY 2003
LTCH PPS payments using the same payment simulation model discussed
above (that we used to estimate FY 2003 LTCH PPS payments without a
budget neutrality factor). Using iterative payment simulations using
the data from the 250 LTCHs in our database, we determined that a
factor of 0.9625 (that is, approximately 3.75 percent (rather than 2.5
percent)) would need to be applied to the standard Federal rate in
order to make estimated total FY 2003 LTCH PPS payments equal to
estimated total FY 2003 TEFRA payments.
In the absence of section 114(c)(4)of the Medicare, Medicaid, and
SCHIP Extension Act of 2007, we would have proposed to employ this
methodology in determining whether it would have been appropriate to
propose a one-time budget neutrality adjustment. As the discussion
above indicates, that analysis suggests that an adjustment of 3.75
percent to the standard Federal rate would have been warranted. We
expect to address the issue again when it is closer to the time section
114(c)(4) of the MMSEA permits us to implement a one-time adjustment
under Sec. 412.523(d)(3). In the meantime, we welcome comments on the
methodology that we have described. We would take these comments into
account in proposing to implement a one-time budget neutrality
adjustment on or after December 29, 2010. As noted above, we will
respond to any comments on our proposed changes to the methodology for
the one-time budget neutrality adjustment and proposed change to
implement the requirements of section 114(c)(4) of Public Law 110-173.

E. Proposed Standard Federal Rate for the 2008 LTCH PPS Rate Year

1. Background
At Sec. 412.523(c)(3)(ii), for LTCH PPS rate years beginning RY
2004 through RY 2006, we updated the standard Federal rate by a rate
increase factor to adjust for the most recent estimate of the increases
in prices of an appropriate market basket of goods and services for
LTCHs. We established the policy of annually updating the standard
Federal rate because at that time we believed that was the most
appropriate method for updating the LTCH PPS standard Federal rate
annually for years after FY 2003. When we moved the date of the annual
update of the LTCH PPS from

[[Page 5361]]

October 1 to July 1 in the RY 2004 LTCH PPS final rule (68 FR 34138),
we revised Sec. 412.523(c)(3)accordingly. At that time, we believed
that was the most appropriate method for updating the LTCH PPS standard
Federal rate annually for years after RY 2004.
In the RY 2007 LTCH PPS final rule (71 FR 27818), we explained that
rather than solely using the most recent estimate of the LTCH PPS
market basket as the basis of the update factor for the Federal rate
for RY 2007, we believed it was appropriate to adjust the Federal rate
to account for the changes in coding practices (rather than patient
severity) as indicated by our ongoing monitoring activities. We
established at Sec. 412.523(c)(3)(iii) that the update to the standard
Federal rate for the 2007 LTCH PPS rate year was zero percent, based on
the most recent estimate of the LTCH PPS market basket at the time
which was offset by an adjustment to account for changes in case-mix in
prior periods due to changes in coding practices rather than increased
patient severity in FY 2004. Therefore, effective from July 1, 2006
through June 30, 2007, the standard rate was $38,086.04 (71 FR 27818).
For the following year, we also considered changes in coding practices
(rather than patient severity) in establishing the update to the
Federal rate for the 2008 LTCH PPS rate year. In the RY 2008 final rule
(72 FR 26887 through 27890), we adjusted the Federal rate based on the
most recent estimate of market basket (3.2 percent) and an adjustment
to account for changes in coding practices (2.49 percent) in FY 2005.
Accordingly, we established at Sec. 412.523(c)(3)(iv) that the update
to the standard Federal rate for RY 2008 was 0.71 percent.
Consequently, in the RY 2008 final rule, we established the LTCH PPS
standard Federal rate, effective from July 1, 2007 through June 30,
2008, of $38,356.45 (see 72 FR 26890).
As stated in section I.A. of this preamble, section 114(e)(1) of
the Medicare, Medicaid, and SCHIP Extension Act of 2007, enacted on
December 29, 2007 revises the base rate for RY 2008. Specifically,
section 114(e)(1) of Public Law 110-173 adds a new subsection to the
Act at 1886(m)(2), which provides that the base rate for RY 2008
``shall be the same as the base rate for discharges for the hospital
occurring during the rate year ending in 2007.'' In addition, section
114(e)(2) of Public Law 110-173 indicates that section 1886(m)(2) of
the Act ``shall not apply to discharges occurring on or after July 1,
2007, and before April 1, 2008'' (that is, the first 9 months of RY
2008). We note that the statute uses the term ``base rate,'' which is
an undefined term in Sec. 1886(m) of the ACT and in 42 CFR Part 412,
subpart O. We are interpreting that term to mean the standard Federal
rate because we believe the Congress meant to eliminate the 0.71
percent update from the RY 2008 standard Federal rate.
If the term ``base rate'' used in the statute refers to the
standard Federal rate, then the standard Federal rate for RY 2008 would
be the same as the standard Federal rate for RY 2007 and the 0.71
percent update finalized in the RY 2008 final rule would be reversed.
We do not believe that the term ``base rate'' could refer to the
``unadjusted rate'' (that is, to determine the standard Federal rate
for any given rate year, the previous year's standard Federal rate,
referred herein as the ``unadjusted rate'', is updated by the current
year's update factor.) If the interpretation of ``base rate'' is the
``unadjusted rate,'' it would render meaningless the provision at the
section 114(e)(1) of the MMSEA and Congress does not legislate a
nullity. The provision would be meaningless under such an
interpretation because even though the unadjusted rate for RY 2008
would be the same as the unadjusted rate for RY 2007, this unadjusted
rate must still be updated by 0.71 percent, and doing so would result
in the same standard Federal rate for RY 2008 as was adopted in the RY
2008 final rule. (The unadjusted rate must be updated by 0.71 percent
in order to determine the standard Federal rate because it is the
standard Federal rate that is the basis for Federal prospective LTCH
PPS payments.) Consequently, LTCH PPS payments would be unaffected by
section 114(e)(1) of the Medicare, Medicaid, and SCHIP Extension Act of
2007. We explain below why RY 2008 LTCH PPS payments would be
unaffected by section 114(e)(1) of Public Law 110-173 if ``base rate''
means ``unadjusted rate.'' Specifically, if ``base rate'' means the
``unadjusted rate,'' the RY 2007 ``base rate'' (that is, $38,086.04)
would be the same as the standard Federal rate for RY 2007 (also
$38,086.04) since we established a zero percent update for RY 2007.
Consequently, if ``base rate'' is interpreted to mean ``unadjusted
rate,'' the ``unadjusted rate'' for RY 2008 ($38,086.04) would be the
same as the RY 2007 ``unadjusted rate'' ($38,086.04). The RY 2008
``unadjusted rate'' of $38,086.04 would subsequently be updated by the
0.71 percent update factor finalized in the RY 2008 final rule,
resulting in a standard Federal rate for RY 2008 of $38,356.45, which
is the same standard Federal rate that was actually finalized in the RY
2008 final rule and which would continue to be the standard Federal
rate for RY 2008 even if section 114(e)(1) of MMSEA had not been
enacted. Since as we noted above, Congress does not legislate a
nullity, we therefore believe that the term ``base rate'' used in
section 114(e)(1) of MMSEA refers to the standard Federal rate and not
the ``unadjusted rate.'' In subsequent sections of this preamble, we
shall be using the term standard Federal rate instead of ``base rate''
when referencing the provision in section 114(e)(1) of MMSEA in order
to avoid further confusion. As noted above, the standard Federal rate
for RY 2007 was $38,086.04 (71 FR 27818).
2. Proposed Standard Federal Rate for the 2009 LTCH PPS Rate Year
In the RY 2008 LTCH PPS final rule (72 FR 26890), we established a
standard Federal rate of $38,356.45 for the 2008 LTCH PPS rate year
that was based on the best available data and policies established in
that final rule. As discussed above, the Medicare, Medicaid, and SCHIP
Extension Act of 2007, enacted on December 29, 2007, revises the
standard Federal rate for RY 2008 while specifying that this rate
``shall not apply to discharges occurring on or after July 1, 2007, and
before April 1, 2008'' (that is, the first 9 months of RY 2008).
Specifically, section 114(e)(1) of MMSEA provides that under the new
1886(m)(2) to the Act the standard Federal rate for RY 2008 shall be
the same as the standard Federal rate for RY 2007 (which shall not
apply to discharges occurring before April 1, 2008). Thus, the standard
Federal rate for RY 2008 will be $38,086.04 (the same as standard
Federal rate for 2007). In this proposed rule, consistent with our
historical practice, we are proposing to update the standard Federal
rate from the previous year ($38,086.04) to determine the proposed
standard Federal rate for RY 2009. Under the broad authority conferred
upon the Secretary by section 123 of the BBRA as amended by section
307(b) of the BIPA, we are proposing an annual update to the standard
Federal rate for the proposed 15-month 2009 rate year based on the most
recent LTCH PPS market basket estimate of 3.5 percent, as discussed
above in section IV.C. of the preamble of this proposed rule, and an
adjustment of 0.9 percent to account for the increase in case-mix in a
prior period (FY 2006) that resulted from changes in coding practices
rather than an increase in patient severity.
As we discussed in greater detail in the RY 2007 and RY 2008 LTCH
PPS

[[Page 5362]]

final rules (71 FR 27819 through 27827 and 72 FR 26887 through 26890,
respectively), while we continue to believe that an update to the LTCH
PPS Federal rate year should be based on the most recent estimate of
the LTCH PPS market basket, we believe it is appropriate that the rate
be offset by an adjustment to account for any changes in coding
practices that do not reflect increased patient severity. Such an
adjustment protects the integrity of the Medicare Trust Funds by
ensuring that the LTCH PPS payment rates better reflect the true costs
of treating LTCH patients (71 FR 27819 through 27827).
We continue to believe that a proposed update to the LTCH PPS
Federal rate year should be based on the most recent estimate of the
LTCH PPS market basket, offset if appropriate by an adjustment to
account for changes in coding practices that do not reflect increased
patient severity. Furthermore, in the FY 2008 IPPS final rule, we did
not finalize the proposed case-mix budget neutrality factor for the
adoption of the severity adjusted MS-LTC-DRG patient classification
system to the FY 2008 MS-LTC-DRG relative weights. We stated in that
rule that since we have an established mechanism to adjust
prospectively LTCH payments to account for the effect of changes in
coding from a previous year and documentation which is based on actual
LTCH data, and because at the time of the final rule we were unable to
determine an appropriate adjustment factor applicable to LTCHs, we
believed it was appropriate to continue using the established process
rather than making a prospective adjustment based on an estimate of
projected LTCH specific case-mix change due to improved coding and
documentation. We also stated that consistent with past LTCH payment
policy, we could propose to make future adjustments to account for
improvements in coding and documentation that do not reflect real
changes in case mix during these years that we are implementing MS-LTC-
DRGs. We also stated in that final rule that we continue to believe
more accurate and complete documentation and coding will occur, and
that we will continue to monitor LTCHs' response to the MS-LTC-DRG
transition and would propose an adjustment factor to LTCHs to account
prospectively for coding and documentation changes if CMS is able to
estimate an appropriate adjustment factor applicable to LTCHs. In
determining the proposed update to the standard Federal rate for the
2009 LTCH PPS rate year, we performed a CMI analysis using the most
recent available LTCH claims data (FY 2006 MedPAR files) and estimated
the observed CMI change for FY 2006 to be 1.9 percent (based on the
most recent available LTCH case-mix data from FY 2005 compared to FY
2006). We continue to believe, as discussed and for the same reasons
stated in the RY 2008 final rule (72 FR 26888 through 26890), that it
is appropriate to utilize the estimate of real CMI increase of 1.0
percent, based on the well-established RAND study referred to in the RY
2008 final rule, as the proxy for the portion of the observed 1.9
percent CMI increase from FY 2005 to FY 2006 that represents real CMI
changes for use in determining the proposed RY 2009 Federal rate
update. (A more detailed discussion on the use of the RAND study
estimate for real CMI change can be found in the RY 2008 final rule
appearing in the Federal Register on May 11, 2007. (72 FR 26887 through
26890)). Accordingly, we believe that 0.9 percent (1.9 - 1.0 = 0.9) of
the observed 1.9 percent CMI increase from FY 2005 to FY 2006 reflects
CMS increase that is due to changes in coding practices (rather than
patient severity).
At this time, the most recent estimate of the LTCH PPS market
basket is 3.5 percent as discussed above in section IV.C.2. of this
proposed rule. We are proposing to update the standard Federal Rate for
RY 2009 based on the full LTCH PPS market basket estimate of 3.5
percent and a proposed adjustment to account for the increase in case-
mix in the prior period (FY 2006) that resulted from changes in coding
practices of 0.9 percent. Therefore, the proposed update factor to the
standard Federal rate for RY 2009 is 2.6 percent (3.5 - 0.9 = 2.6).
That is, under the broad authority conferred upon the Secretary under
the BBRA and the BIPA, we are proposing to specify under Sec.
412.523(c)(3)(v), that, for discharges occurring on or after July 1,
2008 and on or before September 30, 2009, the standard Federal rate
from the previous year would be updated by 2.6 percent. In determining
the proposed standard Federal rate for RY 2009, we are applying the
proposed 2.6 percent update to the RY 2008 Federal rate of $38,086.04),
which is the same standard Federal rate for discharges occurring during
the rate year ending in 2007, consistent with section 114(e)(1) of the
Medicare, Medicaid, and SCHIP Extension Act of 2007. Consequently, the
proposed standard Federal rate for RY 2009 would be $39,076.28.
We also propose that if more recent data becomes available (such as
a more recent estimate of the LTCH PPS market basket), we would use
that data, if appropriate, to determine the update to the standard
Federal rate for the RY 2009 final rule, and thus, the Federal rate
update noted in the proposed regulation text at Sec. 412.523(c)(3)(v)
could change.

F. Calculation of Proposed LTCH Prospective Payments for the 2009 LTCH
PPS Rate Year

1. Proposed Adjustment for Area Wage Levels
a. Background
Under the authority of section 123 of the BBRA as amended by
section 307(b) of the BIPA, we established an adjustment to the LTCH
PPS Federal rate to account for differences in LTCH area wage levels at
Sec. 412.525(c). The labor-related share of the LTCH PPS Federal rate,
currently estimated by the FY 2002-based RPL market basket (as
discussed in greater detail in section IV.C.1. of this preamble), is
adjusted to account for geographic differences in area wage levels by
applying the applicable LTCH PPS wage index. The applicable LTCH PPS
wage index is computed using wage data from inpatient acute care
hospitals without regard to reclassification under sections 1886(d)(8)
or 1886(d)(10) of the Act.
As we discussed in the August 30, 2002 LTCH PPS final rule (67 FR
56015), when the LTCH PPS was implemented, we established a 5-year
transition to the full wage adjustment. The wage index adjustment was
completely phased-in beginning with cost reporting periods beginning in
FY 2007. Therefore, for cost reporting periods beginning on or after
October 1, 2006, the applicable LTCH wage index values are the full
(five-fifths) LTCH PPS wage index values calculated based on acute-care
hospital inpatient wage index data without taking into account
geographic reclassification under sections 1886(d)(8) and (d)(10) of
the Act. For additional information on the phase-in of the wage index
adjustment under the LTCH PPS, refer to the August 30, 2002 LTCH PPS
final rule (67 FR 56017 through 56019) and the RY 2008 LTCH PPS final
rule (72 FR 26891).
b. Proposed Updates to the Geographic Classifications/Labor Market Area
Definitions
(1) Background
As discussed in the August 30, 2002 LTCH PPS final rule, which
implemented the LTCH PPS (67 FR 56015 through 56019), in establishing
an adjustment for area wage levels under Sec. 412.525(c), the labor-
related portion of a LTCH's Federal prospective payment is adjusted by
using an appropriate wage index based on the

[[Page 5363]]

labor market area in which the LTCH is located. In the RY 2006 LTCH PPS
final rule (70 FR 24184 through 24185), in regulations at Sec.
412.525(c), we revised the labor market area definitions used under the
LTCH PPS effective for discharges occurring on or after July 1, 2005
based on the Office of Management and Budget's (OMB's) Core Based
Statistical Area (CBSA) designations based on 2000 Census data. We made
this revision because we believe that those new CBSA-based labor market
area definitions will ensure that the LTCH PPS wage index adjustment
most appropriately accounts for and reflects the relative hospital wage
levels in the geographic area of the hospital as compared to the
national average hospital wage level. As set forth in existing Sec.
412.525(c)(2), a LTCH's wage index is determined based on the location
of the LTCH in an urban or rural area as defined in Sec.
412.64(b)(1)(ii)(A) through (C). An urban area under the LTCH PPS is
currently defined at Sec. 412.64(b)(1)(ii)(A) and (B). Under Sec.
412.64(b)(1)(ii)(C), a rural area is defined as any area outside of an
urban area.
We note that these are the same CBSA-based designations implemented
for acute care hospitals under the IPPS at Sec. 412.64(b) effective
October 1, 2004 (69 FR 49026 through 49034). For further discussion of
the labor market area (geographic classification) definitions currently
used under the LTCH PPS, see the RY 2006 LTCH PPS final rule (70 FR
24182 through 24191).
(2) Proposed Update to the CBSA-based Labor Market Area Definitions
On December 18, 2006, OMB announced the inclusion of two new CBSAs
and the revision of designations for six areas (OMB Bulletin No. 07-
01). This OMB bulletin is available on the OMB Web site at http://www.whitehouse.gov/omb/bulletins/fy2007/b07-01.pdf.
The two new CBSAs

outlined in this bulletin are as follows:
Lake Havasu-Kingman, Arizona (CBSA code 29420). This CBSA
comes from Mohave County, Arizona.
Palm Coast, Florida (CBSA code 37380). This CBSA comes
from Flager County, Florida.
The six revised CBSA designations outlined in this bulletin are as
follows:
Mauldin, South Carolina and Easley, South Carolina qualify
as new principal cities of the Greenville-Mauldin-Easley, South
Carolina CBSA (CBSA code 24860).
Conway, Arkansas qualifies as a new principal city of the
Little Rock-North Little Rock-Conway, Arkansas CBSA (CBSA code 30780).
Goleta, California qualifies as a new principal city of
the Santa Barbara-Santa Maria-Goleta, California CBSA (CBSA code
42060).
Franklin, Tennessee qualifies as a new principal city of
the Nashville-Davidson-Murfreesboro-Franklin, Tennessee CBSA (CBSA code
34980).
Fort Pierce, Florida no longer qualifies as a principal
city of the Port St. Lucie-Fort Pierce, Florida CBSA; the new
designation is Port St. Lucie, Florida CBSA (CBSA code 38940).
Essex County, Massachusetts Metropolitan Division was
renamed as the Peabody, Massachusetts Metropolitan Division, which
changed the CBSA code from 21604 to 37764.
We note that these six revised CBSA designations made in OMB
Bulletin No. 07-01 do not change the composition (constituent counties)
of the affected CBSAs; they only revise the CBSA titles (and the CBSA
code for the CBSA that consists of Essex County, MA).
In this proposed rule, under the broad authority conferred upon the
Secretary by section 123 of the BBRA, as amended by section 307(b) of
BIPA to determine appropriate adjustments under the LTCH PPS, we are
proposing to apply these changes to the current CBSA-based labor market
area definitions and geographic classifications used under the LTCH PPS
effective for discharges occurring on or after July 1, 2008. We believe
these revisions to the LTCH PPS CBSA-based labor market area
definitions, which are based on the most recent available data, would
ensure that the LTCH PPS wage index adjustment most appropriately
accounts for and reflects the relative hospital wage levels in the
geographic area of the hospital as compared to the national average
hospital wage level. (We note that we are currently not aware of any
LTCHs located in the two new proposed CBSAs (that is, proposed CBSA
29420 and proposed CBSA 37380), and as discussed above, the six
proposed revisions to the CBSA designations would only revise the CBSA
titles (and the CBSA code for the CBSA that consists of Essex County,
MA).) Accordingly, the proposed RY 2009 LTCH PPS wage index values
presented in Tables 1 and 2 in the Addendum of this proposed rule were
calculated based on the proposed revisions to the CBSA-based labor
market area definitions described above. We also note that these
revisions to the CBSA-based designations were adopted under the IPPS
effective beginning October 1, 2007 (72 FR 47308 through 47309).
(3) Clarification of New England Deemed Counties
We are also taking this opportunity to address the change in the
treatment of ``New England deemed counties'' (that is, those counties
in New England listed in Sec. 412.64(b)(1)(ii)(B) that were deemed to
be parts of urban areas under section 601(g) of the Social Security
Amendments of 1983) that was made in the FY 2008 IPPS final rule with
comment period. These counties include the following: Litchfield
County, Connecticut; York County, Maine; Sagadahoc County, Maine;
Merrimack County, New Hampshire; and Newport County, Rhode Island. Of
these five ``New England deemed counties,'' three (York County,
Sagadahoc County, and Newport County) are also included in metropolitan
statistical areas defined by OMB and are considered urban under both
the current IPPS and LTCH PPS labor market area definitions in Sec.
412.64(b)(1)(ii)(A) (they would also be urban under the proposed
conforming changes to Sec. 412.503). The remaining two, Litchfield
County and Merrimack County, are geographically located in areas that
are considered rural under the current IPPS (and LTCH PPS) labor market
area definitions (however, they have been previously deemed urban under
the IPPS in certain circumstances as discussed below).
In the FY 2008 IPPS final rule with comment period (72 FR 47337
through 47338), Sec. 412.64(b)(1)(ii)(B) was revised such that the two
``New England deemed counties'' that are still considered rural by OMB
(Litchfield county, CT and Merrimack county, NH) are no longer
considered urban effective for discharges occurring on or after October
1, 2007, and therefore, are considered rural in accordance with Sec.
412.64(b)(1)(ii)(C). However, for purposes of payment under the IPPS,
acute-care hospitals located within those areas are treated as being
reclassified to their deemed urban area effective for discharges
occurring on or after October 1, 2007 (see 72 FR 47337 through 47338).
(We note that the LTCH PPS does not provide for such geographic
reclassification (67 FR 56019 through 56020)). Also in the FY 2008 IPPS
final rule with comment period (72 FR 47338), we explained that we have
limited this policy change for the ``New England deemed counties'' only
to IPPS hospitals, and any change to non-IPPS provider wage indices
would be addressed in the respective payment system rules. Accordingly,
as stated above, we are taking this opportunity to clarify the
treatment of ``New England

[[Page 5364]]

deemed counties'' under the LTCH PPS in this proposed rule.
As discussed above, under existing Sec. 412.525(c)(2), a LTCH's
wage index is determined based on the location of the LTCH in an urban
or rural area as defined in Sec. 412.64(b)(1)(ii)(A) through (C).
Under existing Sec. 412.525(c)(2), an urban area under the LTCH PPS is
currently defined at Sec. 412.64(b)(1)(ii)(A) and (B), and a rural
area is defined as any area outside of an urban area in Sec.
412.64(b)(1)(ii)(C).
Historical changes to the labor market area/geographic
classifications and annual updates to the wage index values under the
LTCH PPS have been made effective July 1 each year. When we established
the most recent LTCH PPS payment rate update, effective for LTCH
discharges occurring on or after July 1, 2007 through June 30, 2008, we
considered the ``New England deemed counties'' (including Litchfield
county, CT and Merrimack county, NH) as urban for RY 2008 (in
accordance with the definitions of urban and rural stated in the RY
2008 LTCH PPS final rule (72 FR 26891) and as evidenced by the
inclusion of Litchfield county as one of the constituent counties of
urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT), and the
inclusion of Merrimack county as one of the constituent counties of
urban CBSA 31700 (Manchester-Nashua, NH)). (See 72 FR 27004 and 27008,
respectively).
As noted above, existing Sec. 412.525(c)(2) indicates that the
terms ``rural'' and ``urban'' as areas are defined according to the
definitions of those terms in Sec. 412.64(b)(1)(ii)(A) through (C). As
Litchfield county, CT and Merrimack county, NH would be considered
rural areas in accordance with our regulations at (Sec. 412.525(c)(2),
these two counties will be ``rural'' under the LTCH PPS effective with
the next update of the LTCH PPS payment rates, which will be July 1,
2008 (under the LTCH PPS effective for discharges on or after July 1,
2008, Litchfield County, CT and Merrimack County, NH are not urban
under Sec. 412.64(b)(1)(ii)(A-B) and therefore are rural under Sec.
412.64(b)(1)(ii)(c)). (We note that Litchfield and Merrimack counties
will also be rural under our proposed Sec. 412.503, discussed in
greater detail below, that would incorporate the existing definitions
of ``urban'' and ``rural'' areas.) Therefore, Litchfield county, CT and
Merrimack county, NH will be considered ``rural'' effective for LTCH
PPS discharges occurring on or after July 1, 2008, and will no longer
be considered as being part of urban CBSA 25540 (Hartford-West
Hartford-East Hartford, CT) and urban CBSA 31700 (Manchester-Nashua,
NH), respectively. We note that currently we are not aware of any LTCHs
located in either Litchfield county, CT or Merrimack county, NH. We
also note that this policy is consistent with our policy of not taking
into account IPPS geographic reclassifications in determining payments
under the LTCH PPS. In addition, as discussed above, in this section,
effective for discharges on or after July 1, 2008, Sec.
412.64(b)(1)(ii)(B) is no longer applicable under the LTCH PPS.
(4) Proposed Codification of the Definitions of Urban and Rural Under
42 CFR Part 412 Subpart O
Under the current regulations at Sec. 412.525(c), the labor-
related portion of the LTCH PPS Federal rate is adjusted to account for
geographical differences in the area wage levels using an appropriate
wage index to reflect the relative level of hospital wages and wage-
related costs in the geographic area (that is, urban or rural area) of
the hospital compared to the national average level of hospital wages
and wage-related costs annually. Currently, the application of the wage
index under existing Sec. 412.525(c)(2) is made on the basis of the
location of the facility in an urban or rural area as defined in Sec.
412.64(b)(1)(ii)(A) through (C) (in 42 CFR Part 412 subpart D).
In light of regulatory construct discussed above where Sec.
412.525(c) indicated that the terms ``rural area'' and ``urban area''
as defined according to the definitions of those terms'' under the IPPS
in 42 CFR Part 412 subpart D, we believe it may be administratively
simpler to have the LTCH PPS urban and rural labor market area
definitions self-contained in (Sec. 412.503) 42 CFR Part 412 subpart O
rather than cross-referring to the definitions of urban and rural in
the IPPS regulations in 42 CFR Part 412, Subpart D. This approach is
similar to the change we made in Sec. 412.525(a) for high cost
outliers and Sec. 412.529 for short-stay outliers in the FY 2007 IPPS
final rule when we embedded within Subpart O the regulatory provisions
concerning the determination of cost-to-charge ratios (CCRs) and the
reconciliation of outlier payments (71 FR 48115 through 48122). Under
the broad authority of Sec. 123 of the BBRA as amended by Sec. 307(b)
of BIPA we are proposing to codify in Sec. 412.503 the definitions for
``urban area'' and ``rural area.'' The proposed definitions for ``urban
area'' and ``rural area'' in Sec. 412.503 would incorporate the
provisions of Sec. 412.62(f)(1)(ii) and (f)(1)(iii) as well as Sec.
412.64(b)(1)(ii)(A) through (C). Furthermore, since, as explained above
in section IV.F.1.b.3., the definition of ``urban area'' at Sec.
412.64(b)(1)(ii)(B) is no longer applicable under the LTCH PPS
effective for discharges occurring on or after July 1, 2008, and
therefore, the only remaining definition of ``urban area'' will be that
of a Metropolitan Statistical Area (MSA) as defined by the Executive
Office of Management and Budget. (See 72 FR 47337 through 47338). Thus,
we omit the language of Sec. 412.64(b)(1)(ii)(B) from the proposed
definition of ``urban area'' that would be applicable to discharges
occurring on or after July 1, 2008 in proposed 412.503. We, however,
included the language from Sec. 412.64(b)(1)(ii)(A) in the proposed
definition of ``urban area'' that would be applicable to discharges
occurring on or after July 1, 2008 in proposed 412.503. For the reason
just described, we note that the proposed definitions of ``urban'' and
``rural'' that would be effective for discharges occurring on or after
July 1, 2008 (in subparagraph (3) in the both the proposed definition
of ``rural area'' and the proposed definition of ``urban area'') vary
slightly from the wording in the current regulations at Sec.
412.64(b)(1)(ii)(A) through (C); however, substantively the definitions
are the same. We believe that the slight difference in the wording of
412.503 more precisely conveys the treatment of New England deemed
counties under the LTCH PPS, as discussed above. As a conforming
change, we are also proposing to replace the cross-references to Sec.
412.62(f)(1)(iii) and Sec. 412.64(b)(1)(ii)(A) through (C) in Sec.
412.525(c) with references to the proposed definitions of ``urban
area'' and ``rural area'' at Sec. 412.503. Accordingly, we are
proposing to revise Sec. 412.525(c) to specify that the application of
the LTCH PPS wage index would be made on the basis of the location of
the LTCH in an urban or rural area as defined in proposed Sec.
412.503. As discussed in section VI.G.3. of this proposed rule, we are
also proposing to make conforming changes to the regulations governing
short-stay outlier payments (at Sec. 412.529) and the special payment
provisions for co-located LTCHs (at Sec. 412.534) and free-standing
LTCHs (at Sec. 412.536), which refer to the definition of urban and
rural under the LTCH PPS.
c. Proposed Labor-Related Share
In the August 30, 2002 LTCH PPS 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 costs
(wages and salaries, employee benefits,

[[Page 5365]]

professional fees, postal services, and all other labor-intensive
services) and capital costs of the excluded hospital with capital
market basket based on FY 1992 data. We did not revise the labor-
related share in RYs 2004 through 2006 while we conducted further
analysis to determine the most appropriate methodology and data for
determining the labor-related share under the LTCH PPS (70 FR 24182).
After our research into the labor-related share methodology was
complete, we revised the labor-related share under the LTCH PPS in the
RY 2007 final rule (71 FR 27829). Specifically, beginning in RY 2007,
we established a labor-related share 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 RPL market basket
based on FY 2002 data, as it is the best available data that reflect
the cost structure of LTCHs.
Consistent with our historical practice, the labor-related share
currently used under the LTCH PPS is determined by identifying the
national average proportion of operating costs and capital costs that
are related to, influenced by, or vary with the local labor market.
Accordingly, in the RY 2008 LTCH PPS final rule (72 FR 26892), we
updated the LTCH PPS labor-related share to 75.788 percent based on the
relative importance of the labor-related share of operating costs
(wages and salaries, employee benefits, professional fees, and all
other labor-intensive services) and capital costs of the RPL market
basket based on FY 2002 data from the first quarter of 2007.
As discussed in section IV.C.2. of this preamble, we now have data
from the 4th quarter of 2007 (with history through the 3rd quarter of
2007) available for determining the labor-related share of the FY 2002-
based RPL market basket. Based on this more recent data, in this
proposed rule, under the broad authority conferred upon the Secretary
by section 123 of the BBRA as amended by section 307(b) of the BIPA,
consistent with our historical practice of determining the labor-
related share by identifying the national average proportion of
operating costs and capital costs that are related to, influenced by,
or varies with the local labor market, we are proposing to revise the
LTCH PPS labor-related share from 75.788 percent to 75.920 percent
based on the relative importance of the labor-related share of
operating costs (wages and salaries, employee benefits, professional
fees, and all other labor-intensive services) and capital costs of the
FY 2002-based RPL market basket from the fourth quarter of 2007, as
shown in Table 1. The proposed labor-related share is the sum of the
relative importance of wages and salaries, fringe benefits,
professional fees, labor-intensive services, and a portion of the
capital share from an appropriate market basket.
In this proposed rule, for RY 2009, we are proposing to use the FY
2002-based RPL market basket costs based on data from the fourth
quarter of 2007 to determine the labor-related share for the LTCH PPS
effective for discharges occurring on or after July 1, 2008 and before
September 30, 2009, as this is the most recent available data. The
proposed labor-related share for RY 2009 LTCH PPS would continue to be
the sum of the relative importance of each labor-related cost category,
and would reflect the different rates of price change for these cost
categories between the base year (FY 2002) and the (15-month) 2009 LTCH
PPS rate year. (As discussed in greater detail above in section IV.B.
of this proposed rule, we are proposing to move the LTCH PPS annual
payment rate year beginning July 1st to a rate year beginning October
1st and have a 15-month rate year for 2009 (that is, July 1, 2008
through September 30, 2009). Accordingly, we are proposing to use the
15-month RY 2009 RPL market basket, discussed above, to determine the
proposed labor-related share for RY 2009 in this proposed rule.
Consistent with our historical practice of using the best data
available, if more recent data are available to determine the labor-
related share of the RPL market basket (used under the LTCH PPS), we
propose to use it for determining the labor-related share for the 2009
LTCH PPS rate year in the final rule.
Based on the most recent available data, we are proposing that the
sum of the relative importance for the 2009 LTCH PPS rate year for
operating costs (wages and salaries, employee benefits, professional
fees, and labor-intensive services) would be 71.965, as shown in Table
1. The portion of capital that is influenced by the local labor market
is still estimated to be 46 percent, which is the same percentage used
when we established the current labor-related share in the RY 2008 LTCH
PPS final rule. Since, based on the most recent available data, the
relative importance for capital would be 8.597 percent of the FY 2002-
based RPL market basket for the 2009 LTCH PPS rate year, we are
proposing to multiply the estimated portion of capital influenced by
the local labor market (46 percent) by the relative importance for
capital (8.597 percent) to determine the proposed labor-related share
of capital for the 2009 LTCH PPS rate year. The result would be 3.955
percent (0.46 x 8.597 percent), which we would add to the proposed
71.965 percent for the operating cost amount to determine the proposed
total labor-related share for the 2009 LTCH PPS rate year. Thus, based
on the latest available data, we are proposing to use a labor-related
share of 75.920 percent (71.965 percent + 3.955 percent) under the LTCH
PPS for the 2009 LTCH PPS rate year. As noted above in this section,
this proposed labor-related share is determined using the same
methodology as employed in calculating the current LTCH labor-related
share (72 FR 26892) and the labor-related shares used under the IRF PPS
and IPF PPS, which also use the RPL market basket.
Table 1 shows the 2008 LTCH PPS rate year relative importance
labor-related share of the FY 2002-based RPL market basket (established
in the RY 2008 LTCH PPS final rule) and the proposed 2009 LTCH PPS rate
year relative importance labor-related share of the FY 2002-based RPL
market basket.

Table 1.--RY 2008 Labor-Related Share Relative Importance and Proposed
RY 2009 Labor-Related Share Relative Importance of the FY 2002-Based RPL
Market Basket
------------------------------------------------------------------------
RY 2008 Proposed RY
Cost category relative 2009 relative
importance* importance
------------------------------------------------------------------------
Wages and Salaries...................... 52.588 52.830
Employee Benefits....................... 14.127 14.079
Professional fees....................... 2.907 2.907
All other labor intensive services...... 2.145 2.149
-------------------------------

[[Page 5366]]

Subtotal............................ 71.767 71.965

Labor share of capital costs............ 4.021 3.955
===============================
Total Labor-related share........... 75.788 75.920
------------------------------------------------------------------------
* As established in the RY 2008 LTCH PPS final rule (72 FR 26892).
** Other labor intensive services includes landscaping services,
services to buildings, detective and protective services, repair
services, laundry services, advertising, auto parking and repairs,
physical fitness facilities, and other government enterprises.

d. Proposed Wage Index Data
Historically, under the LTCH PPS, we have established LTCH PPS wage
index values calculated from acute care IPPS hospital wage data without
taking into account geographic reclassification under sections
1886(d)(8) and (d)(10) of the Act. As we discussed in the August 30,
2002 LTCH PPS 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. Therefore, we would need to
establish instructions for the collection of this LTCH data as well as
develop some type of application and determination process before a
geographic reclassification adjustment under the LTCH PPS could be
implemented. Thus, 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. Acute care
hospital inpatient wage index data are also used to establish the wage
index adjustment used in other Medicare PPSs, such as the IRF PPS, IPF
PPS, HHA PPS, and SNF PPS.
In the RY 2008 LTCH PPS final rule (72 FR 26893), we established
LTCH PPS wage index values for the RY 2008 calculated from the same
data (collected from cost reports submitted by hospitals for cost
reporting periods beginning during FY 2003) used to compute the FY 2007
acute care hospital inpatient wage index data without taking into
account geographic reclassification under sections 1886(d)(8) and
(d)(10) of the Act because that was the best available data at that
time. The LTCH PPS wage index values applicable for discharges
occurring on or after July 1, 2007 through June 30, 2008 are shown in
Table 1 (for urban areas) and Table 2 (for rural areas) in the Addendum
to the RY 2008 LTCH PPS final rule (72 FR 26996 through 27019).
In this proposed rule, under the broad authority conferred upon the
Secretary by section 123 of the BBRA as amended by section 307(b) of
BIPA to determine appropriate adjustments under the LTCH PPS, we are
proposing that, for the RY 2009, the same data (collected from cost
reports submitted by hospitals for cost reporting periods beginning
during FY 2004) used to compute the FY 2008 acute care hospital
inpatient wage index data without taking into account geographic
reclassification under sections 1886(d)(8) and (d)(10) of the Act would
be used to determine the applicable wage index values under the LTCH
PPS because these data (FY 2004) are the most recent complete data.
(For information on the data used to compute the FY 2008 IPPS wage
index refer to the FY 2008 IPPS final rule with comment period (72 FR
47308 through 47309, 47315)). We are proposing to continue to use IPPS
wage data as a proxy to determine the proposed LTCH wage index values
for RY 2009 because both LTCHs and acute-care hospitals are required to
meet the same certification criteria set forth in section 1861(e) of
the Act to participate as a hospital in the Medicare program and they
both compete in the same labor markets, and therefore, experience
similar wage-related costs. We note that the IPPS wage data used to
determine the proposed RY 2009 LTCH wage index values reflects our
policy that was adopted under the IPPS beginning in FY 2008 that
apportions the wage data for multicampus hospitals' located in
different labor market areas (CBSAs) to each CBSA where the campuses
are located (see the FY 2008 IPPS final rule with comment period (72 FR
47317 through 47320)). For the proposed RY 2009 LTCH PPS wage index,
which is computed from IPPS wage data submitted by hospitals for cost
reporting periods beginning in FY 2004 (just like the FY 2008 IPPS wage
index), we allocated salaries and hours to the campuses of two
multicampus hospitals with campuses that are located in different labor
areas, one in Massachusetts and another in Illinois. Thus, the proposed
RY 2009 LTCH PPS wage index values for the following CBSAs are affected
by this policy: Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-
Falls River, RI-MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA
16974) and Lake County-Kenosha County, IL-WI (CBSA 29404) (refer to
Table 1 in the Addendum of this proposed rule). Furthermore, the
proposed RY 2009 LTCH PPS wage index values presented in this proposed
rule were computed consistent with the urban and rural geographic
classifications (labor market areas) discussed above in section
IV.F.1.b. of this proposed rule and consistent with pre-reclassified
IPPS wage index policy (that is, our historical policy of not taking
into account IPPS geographic reclassifications in determining payments
under the LTCH PPS). Specifically, we note that the wage data of the
IPPS hospitals located in Litchfield county, CT, and Merrimack county,
NH, were included in the calculation of the proposed RY 2009 LTCH PPS
statewide rural wage index values for Connecticut and New Hampshire,
respectively (rather than urban CBSA 25540 (Hartford-West Hartford-East
Hartford, CT) and urban CBSA 31700 (Manchester-Nashua, NH),
respectively). In addition, the proposed RY 2009 wage index reflects
our proposals (discussed in greater detail below) to establish wage
index values in urban and rural areas in which there are no IPPS wage
data from which to compute a wage index value under our methodology
described above. As noted above, the IPPS wage data we are proposing to
use are the same FY 2004 acute care hospital inpatient wage data that
were used to compute the FY 2008 wage index currently used under the
IPPS.
In this proposed rule, under the broad authority conferred upon the
Secretary by section 123 of the BBRA as amended by section 307(b) of
BIPA to determine appropriate adjustments under the LTCH PPS, we are
also proposing to establish a policy for determining LTCH

[[Page 5367]]

PPS wage index values for labor market areas in which there is no IPPS
hospital wage data from which to compute a wage index value under our
methodology described above. Currently, there are no LTCHs located in
labor areas where there is no IPPS hospital wage data (or IPPS
hospitals). However, we believe it is appropriate to establish a
methodology for determining LTCH PPS wage index values for these areas
in the event that in the future a LTCH should open in one of those
areas. Thus, any LTCH that would open in area in which there is no IPPS
wage data for which to compute a wage index based on our established
methodology would have a wage index value assigned to them for
determining their LTCH PPS payments. Under this proposal, each year we
would determine a wage index value for any area in which there is no
IPPS wage data based on the proposed methodologies described below. As
IPPS hospitals may open or close at any time, the number of areas
without any IPPS wage data may change from year to year, and even when
an IPPS hospital does open in area where there are currently no IPPS
hospitals, because there is a lag-time between the time a hospital
opens or becomes an IPPS provider and when the hospital's cost report
wage data are available to include in calculating the area wage index
(see 72 FR 47323), we believe it is appropriate to establish a
methodology for determining LTCH PPS wage index values for these areas,
if necessary. Our proposed policies for determining LTCH PPS wage index
values for areas with no IPPS hospital wage data are consistent with
the policies that have been established under other Medicare post-acute
care PPSs, such as SNF and HHA, as well as the IPPS.
The first situation for which we are proposing to establish a
policy for determining a LTCH PPS wage index value is for urban CBSAs
with no IPPS wage data. As discussed above, as IPPS wage data is
dynamic, it is possible that urban areas without IPPS wage data will
vary in the future. Consistent with the policy established under other
PPSs, such as the HHA (70 FR 40795 and 71 FR 65892 through 65893), we
are proposing to use an average of all of the urban areas within the
State to serve as a reasonable proxy for determining the LTCH PPS wage
index for an urban area without specific IPPS hospital wage index data.
We believe that an average of all of the urban areas within the State
would be a reasonable proxy for determining the LTCH PPS wage index for
an urban area in the State with no wage data because it is based on
pre-reclassified IPPS wage data, it is easy to evaluate, and it uses
the most geographically similar relative wage-related costs data
available. (Our rationale for using pre-reclassified IPPS wage data is
discussed above in the beginning of this section.) Based on the FY 2004
IPPS wage data that we are proposing to use to determine the proposed
RY 2009 LTCH PPS wage index (discussed above), there is no IPPS wage
data for the urban area of Hinesville-Fort Stewart, GA (CBSA 25980).
Consistent with our proposal for determining a LTCH PPS wage index
value for urban areas with no IPPS wage data, in this proposed rule, we
calculated the proposed wage index value for RY 2009 for CBSA 25980 as
the average of the wage index values for all of the other urban areas
within the State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260,
15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and
47580) (refer to Table 1 of the Addendum of this proposed rule). (As
noted above, there are currently no LTCHs located in CBSA 25980). We
believe that this policy could be readily applied to other urban CBSAs
(besides CBSA 25980) that lack IPPS wage data (possibly due to acute-
care hospitals converting to a different provider type that does not
submit the appropriate wage data). However, if the proposed policy is
adopted, we may re-examine the application of this proposed policy
should a similar situation arise in the future.
The other situation for which we are proposing to establish a
policy for determining a LTCH PPS wage index value is for rural areas
with no IPPS wage data. As discussed above, as IPPS wage data is
dynamic, it is possible that rural areas without IPPS wage data will
vary in the future. Consistent with the policy established under other
PPSs, such as the HHA (71 FR 65905 through 65906) and the IPPS (72 FR
47323 through 47324), we are proposing to use the unweighted average of
the wage indices from all of the CBSAs that are contiguous to the rural
counties of the State to serve as a reasonable proxy in determining the
LTCH PPS wage index for a rural area without specific IPPS hospital
wage index data. For this purpose, we would define ``contiguous'' as
sharing a border. We are not able to apply a similar averaging in rural
areas with no wage data as we proposed above for urban areas with no
wage data because there is no rural hospital data available for
averaging on a state-wide basis. We believe that using an unweighted
average of the wage indices from all of the CBSAs that are contiguous
to the rural counties of the State would be a reasonable proxy for
determining the wage index for rural areas in a State with no wage data
because it is based on pre-reclassified IPPS wage data, it is easy to
evaluate, and it uses the most geographically similar relative wage-
related costs data available. (Our rationale for using pre-reclassified
IPPS wage data is discussed above in the beginning of this section.)
Based on the FY 2004 IPPS data that we are proposing to use to
determine the proposed RY 2009 LTCH PPS wage index (discussed above),
rural Massachusetts (CBSA code 11) does not have any IPPS wage data.
Consistent with our proposal for determining a LTCH PPS wage index
value for rural areas with no IPPS hospital wage data, in this proposed
rule, we determined the proposed wage index value for RY 2009 rural
Massachusetts by computing the unweighted average of the wage indices
from all of the CBSAs that are contiguous to the rural counties in that
State. Specifically, in the case of Massachusetts, the entire rural
area consists of Dukes and Nantucket counties. We determined that the
borders of Dukes and Nantucket counties are ``contiguous'' with
Barnstable County, MA, and Bristol County, MA. Therefore, the proposed
RY 2009 LTCH PPS wage index value for rural Massachusetts would be
computed as the unweighted average of the proposed RY 2009 wage indexes
for Barnstable county and Bristol county (refer to Tables 1 and 2 of
the Addendum of this proposed rule). (As noted above, there are
currently no LTCHs located in rural Massachusetts.) We believe that
this proposed policy could be readily applied to other rural areas
(besides Massachusetts) that lack IPPS wage data (possibly due to
acute-care hospitals converting to a different provider type that does
not submit the appropriate wage data). However, if the proposed policy
is adopted, we may re-examine the application of this proposed policy
should a similar situation arise in the future.
The proposed RY 2009 LTCH wage index values that would be
applicable for LTCH discharges occurring on or after July 1, 2008
through September 30, 2009, are presented in Table 1 (for urban areas)
and Table 2 (for rural areas) in the Addendum of this proposed rule. As
discussed in greater detail above in section IV.B. of this preamble, we
are proposing to move the LTCH PPS annual payment rate update cycle
from July 1 to October 1 and to have a 15-month rate year for 2009
(that is, July 1, 2008 through September 30, 2009). Therefore, we note
that if our proposal

[[Page 5368]]

to move the LTCH PPS annual payment rate update cycle is finalized, the
next proposed update to the LTCH wage index values would be effective
for discharges occurring on or after October 1, 2009 (FY 2010). In
addition, as noted above, the wage index adjustment under the LTCH PPS
was completely phased in beginning with cost reporting periods
beginning in FY 2007 (that is, for cost reporting periods beginning on
or after October 1, 2006). Therefore, for LTCH PPS discharges occurring
during RY 2009, the labor related portion of the standard Federal rate
will be adjusted by the applicable full (five fifths) proposed RY 2009
LTCH PPS wage index value. (As noted above, the proposed RY 2009 LTCH
PPS wage index values are shown in Tables 1 and 2 of the Addendum to
this proposed rule).
2. Proposed 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 COLA for LTCHs located in Alaska and Hawaii
to account for the higher costs incurred in those States. In the RY
2008 LTCH PPS final rule (72 FR 26894), for RY 2008, we established 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 3 of that same final rule.
Similarly, in this proposed rule, under the broad authority
conferred upon the Secretary by section 123 of the BBRA as amended by
section 307(b) of BIPA to determine appropriate adjustments under the
LTCH PPS, for RY 2009 we are proposing a COLA to payments to LTCHs
located in Alaska and Hawaii by multiplying the proposed standard
Federal payment rate by the proposed factors listed below in Table 2
because these are currently the most recent available data. These
proposed factors are obtained from the U.S. Office of Personnel
Management (OPM) and are currently also used under the IPPS (72 FR
47422). In addition, we propose that if OPM releases revised COLA
factors before March 1, 2008, we would use them for the development of
LTCH PPS payments for RY 2009 and publish those revised COLA factors in
the final rule.

Table 2.--Proposed Cost-of-Living Adjustment Factors for Alaska and
Hawaii Hospitals for the 2009 LTCH PPS Rate Year
------------------------------------------------------------------------

------------------------------------------------------------------------
Alaska:
City of Anchorage and 80-kilometer (50-mile) radius by road.. 1.24
City of Fairbanks and 80-kilometer (50-mile) radius by road.. 1.24
City of Juneau and 80-kilometer (50-mile) radius by road..... 1.24
All other areas of Alaska.................................... 1.25
Hawaii:
City and County of Honolulu.................................. 1.25
County of Hawaii............................................. 1.17
County of Kauai.............................................. 1.25
County of Maui and County of Kalawao......................... 1.25
------------------------------------------------------------------------

3. Proposed Adjustment for High-Cost Outliers (HCOs)
a. Background
Under the broad authority conferred upon the Secretary by section
123 of the BBRA as amended by section 307(b) of BIPA, in the
regulations at Sec. 412.525(a), we established 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
incurred when 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 estimated outlier payments are projected to equal 8
percent of total estimated payments under the LTCH PPS. Outlier
payments under the LTCH PPS are determined consistent with the
instructions issued for the IPPS outlier policy.
Under Sec. 412.525(a) (in conjunction with the revised definition
of ``LTC-DRG'' at Sec. 412.503), we make outlier payments for any
discharges if the estimated cost of a case exceeds the adjusted LTCH
PPS payment for the MS-LTC-DRG plus a fixed-loss amount. Specifically,
in accordance with Sec. 412.525(a)(3) (in conjunction with the revised
definition of ``LTC-DRG'' at Sec. 412.503), 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 MS-LTC-DRG and the fixed-loss amount). The
fixed-loss amount is the amount used to limit the loss that a hospital
will incur under the outlier policy for a case with unusually high
costs. This results in Medicare and the LTCH sharing financial risk in
the treatment of extraordinarily costly cases. Under the LTCH PPS HCO
policy, the LTCH's loss is limited to the fixed-loss amount and a fixed
percentage (currently 80 percent) of costs above the outlier threshold
(LTCH DRG payment plus the fixed loss amount). The fixed percentage of
costs is called the marginal cost factor. We calculate the estimated
cost of a case by multiplying the Medicare allowable covered charge by
the overall hospital cost-to-charge ratio (CCR).
Under the LTCH PPS, 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 estimating aggregate
payments with and without an outlier policy. The fixed-loss amount will
result in estimated total outlier payments being projected to be equal
to 8 percent of projected total LTCH PPS payments. Currently, MedPAR
claims data and CCRs based on data from the most recent provider
specific file (PSF) (or to the applicable Statewide average CCR if a
LTCH's CCR data are faulty or unavailable) are used to establish a
fixed-loss threshold amount under the LTCH PPS.
b. Cost-to-Charge Ratios (CCRs)
The following is a discussion of cost-to-charge ratios (CCRs) used
in determining payments for high cost and short-stay outlier cases
under the LTCH PPS, at Sec. 412.525(a) and Sec. 412.529,
respectively. Although this section is specific to high cost outlier
cases, because CCRs and the policies and methodologies pertaining to
them are used in determining payments for both high cost and short-stay
outlier cases, (as explained below), we are discussing the
determination of CCRs under the LTCH PPS for both of these type of
cases simultaneously. In section IV.G. of this proposed rule, which
discusses short-stay outlier (SSO) cases, we refer the reader to this
section of the preamble for a complete discussion on the determination
of CCRs.
In determining both high-cost outlier payments (at Sec.
412.525(a)) and short-stay outlier payments (at Sec. 412.529), we
calculate the estimated cost of the case by multiplying the LTCH's
overall CCR by the Medicare allowable charges for the case. In general,
we use the LTCH's overall CCR, which is computed based on either the
most recently settled cost report or the most recent tentatively
settled cost report, whichever is from

[[Page 5369]]

the latest cost reporting period, in accordance with Sec.
412.525(a)(4)(iv)(B) and Sec. 412.529(c)(4)(iv)(B) for high cost
outliers and SSOs, respectively. (We note that in some instances we use
an alternative CCR, such as the statewide average CCR in accordance
with the regulations at Sec. 412.525(a)(4)(iv)(C) and Sec.
412.529(c)(4)(iv)(C), or a CCR that is specified by CMS or that is
requested by the hospital under the provisions of the regulations at
Sec. 412.525(a)(4)(iv)(A) and Sec. 412.529(c)(4)(iv)(A).) Under the
LTCH PPS, a single prospective payment per discharge is made for both
inpatient operating and capital-related costs. Therefore, we compute a
single ``overall'' or ``total'' LTCH-specific CCR based on the sum of
LTCH operating and capital costs (as described in Chapter 3, section
150.24, of the Medicare Claims Processing Manual (CMS Pub. 100-4)) as
compared to total charges. Specifically, a LTCH's CCR is calculated by
dividing a LTCH's total Medicare costs (that is, the sum of its
operating and capital inpatient routine and ancillary costs) by its
total Medicare charges (that is, the sum of its operating and capital
inpatient routine and ancillary charges).
Generally, a LTCH is assigned the applicable statewide average CCR
if, among other things, a LTCH's CCR is found to be in excess of the
applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This
is because CCRs above this threshold are most likely due to faulty data
reporting or entry, and, therefore, these CCRs should not be used to
identify and make payments for outlier cases. Such data are clearly
errors and should not be relied upon. Thus, under our established
policy, generally, if a LTCH's calculated CCR is above the applicable
ceiling, the applicable LTCH PPS statewide average CCR is assigned to
the LTCH instead of the CCR computed from its most recent (settled or
tentatively settled) cost report data.
In the FY 2008 IPPS final rule with comment period, in accordance
with Sec. 412.525(a)(4)(iv)(C)(2) for high-cost outliers and Sec.
412.529(c)(4)(iv)(C)(2) for short-stay outliers, using our established
methodology for determining the LTCH total CCR ceiling, based on IPPS
total CCR data from the March 2007 update to the Provider-Specific File
(PSF), we established a total CCR ceiling of 1.284 under the LTCH PPS
effective October 1, 2007 through September 30, 2008. (For further
detail on our methodology for annually determining the LTCH total CCR
ceiling, we refer readers to the FY 2007 IPPS final rule (71 FR 48119
through 48121) and the FY 2008 IPPS final rule with comment period (72
FR 47403 through 47404).)
Our general methodology established for determining the statewide
average CCRs used under the LTCH PPS is similar to our established
methodology for determining the LTCH total CCR ceiling (described
above) since it is based on ``total'' IPPS CCR data. Under the LTCH PPS
HCO policy at Sec. 412.525(a)(4)(iv)(C) and the short-stay outlier
policy at Sec. 412.529(c)(4)(iv)(C), the FI may use a statewide
average CCR, which is established annually by CMS, if it is unable to
determine an accurate CCR for a LTCH in one of the following
circumstances: (1) New LTCHs that have not yet submitted their first
Medicare cost report (for this purpose, consistent with current policy,
a new LTCH would be defined as an entity that has not accepted
assignment of an existing hospital's provider agreement in accordance
with Sec. 489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR
ceiling (as discussed above); and (3) other LTCHs for whom data with
which to calculate a CCR are not available (for example, missing or
faulty data). (Other sources of data that the FI may consider in
determining a LTCH's CCR include data from a different cost reporting
period for the LTCH, data from the cost reporting period preceding the
period in which the hospital began to be paid as a LTCH (that is, the
period of at least 6 months that it was paid as a short-term acute care
hospital), or data from other comparable LTCHs, such as LTCHs in the
same chain or in the same region.)
In the FY 2008 IPPS final rule with comment period, in accordance
with Sec. 412.525(a)(4)(iv)(C) for high-cost outliers and Sec.
412.529(c)(4)(iv)(C) for short-stay outliers, using our established
methodology for determining the LTCH statewide average CCRs, based on
the most recent complete IPPS total CCR data from the March 2007 update
of the PSF, the LTCH PPS statewide average total CCRs for urban and
rural hospitals effective for discharges occurring on or after October
1, 2007, and before October 1, 2008, are presented in Table 8C of the
Addendum to that final rule with comment period (72 FR 48127). (For
further detail on our methodology for annually determining the LTCH
urban and rural statewide average CCRs, we refer readers to the FY 2007
IPPS final rule (71 FR 48119 through 48121) and FY 2008 IPPS final rule
with comment period (72 FR 47403 through 47404).)
We note, under the LTCH PPS high cost outlier policy at Sec.
412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at Sec.
412.529(c)(4)(iv)(D), the payments for high cost outlier and SSO cases,
respectively, are subject to reconciliation. Specifically, any
reconciliation of outlier payments is based on the CCR calculated based
on a ratio of costs to charges computed from the relevant cost report
and charge data determined at the time the cost report coinciding with
the discharge is settled. For additional information, refer to the RY
2008 LTCH PPS final rule (72 FR 26899 through 26900).
c. Establishment of the Proposed Fixed-Loss Amount
When we implemented the LTCH PPS, as discussed in the August 30,
2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad
authority of section 123 of the BBRA as amended by section 307(b) of
BIPA, we established a fixed-loss amount so that total estimated
outlier payments are projected to equal 8 percent of total estimated
payments under the LTCH PPS. To determine the fixed-loss amount, we
estimate outlier payments and total LTCH PPS payments for each case
using claims data from the MedPAR files. Specifically, to determine the
outlier payment for each case, we estimate the cost of the case by
multiplying the Medicare covered charges from the claim by the LTCH's
hospital specific CCR. Under Sec. 412.525(a)(3) (in conjunction with
the revised definition of ``LTC-DRG'' at Sec. 412.503), if the
estimated cost of the case exceeds the outlier threshold (the sum of
the adjusted Federal prospective payment for the MS-LTC-DRG and the
fixed-loss amount), we pay an outlier payment equal to 80 percent of
the difference between the estimated cost of the case and the outlier
threshold (the sum of the adjusted Federal prospective payment for the
MS-LTC-DRG and the fixed-loss amount).
In the RY 2008 LTCH PPS final rule (72 FR 26898), in calculating
the fixed-loss amount that would result in estimated outlier payments
projected to be equal to 8 percent of total estimated payments for the
2008 LTCH PPS rate year, we used claims data from the December 2006
update of the FY 2006 MedPAR files and CCRs from the December 2006
update of the PSF, as that was the best available data at that time. We
believe that CCRs from the PSF are the best available CCR data for
determining estimated LTCH PPS payments for a given LTCH PPS rate year
because they are the most recently available CCRs actually used to make
LTCH PPS payments.
As we also discussed in the RY 2008 LTCH PPS rate year final rule
(72 FR 26898), we calculated a single fixed-loss

[[Page 5370]]

amount for the 2008 LTCH PPS rate year based on the version 24.0 of the
GROUPER, which was the version in effect as of the beginning of the
LTCH PPS rate year (that is, July 1, 2007 for the 2008 LTCH PPS rate
year). In addition, we applied the outlier policy under Sec.
412.525(a) in determining the fixed-loss amount for the 2008 LTCH PPS
rate year; that is, we assigned the applicable Statewide average CCR
only to LTCHs whose CCRs exceeded the ceiling (and not when they fell
below the floor). Accordingly, we used the FY 2007 LTCH PPS total CCR
ceiling of 1.321 (72 FR 26898). As noted in that same final rule, in
determining the fixed-loss amount for the 2008 LTCH PPS rate year using
the CCRs from the PSF, there were no LTCHs with missing CCRs or with
CCRs in excess of the current ceiling and, therefore, there was no need
for us to independently assign the applicable Statewide average CCR to
any LTCHs in determining the fixed-loss amount for the 2008 LTCH PPS
rate year (as this may have already been done by the FI in the PSF in
accordance with the established policy).
Accordingly, in 2008 LTCH PPS rate year final rule (72 FR 26898),
as amended by the RY 2008 correction notice (72 FR 36613), we
established a fixed-loss amount of $20,738 for the 2008 LTCH PPS rate
year. Thus, 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 PPS payment for the MS-LTC-DRG and the fixed-
loss amount of $20,738).
In this proposed rule, for the 2009 LTCH PPS rate year, we used the
March 2006 update of the FY 2006 MedPAR claims data to determine a
proposed fixed-loss amount that would result in estimated outlier
payments projected to be equal to 8 percent of total estimated
payments, based on the policies described in this proposed rule,
because these data are the most recent complete LTCH data available.
Consistent with our historical practice of using the best data
available, if more recent LTCH claims data become available, we propose
to use it for determining the fixed-loss amount for the 2009 LTCH PPS
rate year in the final rule. Furthermore, as noted previously, we
determined the proposed fixed-loss amount based on the version of the
GROUPER that would be in effect as of the beginning of the 2009 LTCH
PPS rate year (July 1, 2008), that is, Version 25.0 of the GROUPER (as
established in the FY 2008 IPPS final rule (72 FR 47278)).
We also used CCRs from the July 2007 update of the PSF for
determining the proposed fixed-loss amount for the 2009 LTCH PPS rate
year as they are currently the most recent complete available data.
Consistent with our historical practice of using the best data
available, if more recent CCR data are available, we propose to use it
for determining the fixed-loss amount for the 2009 LTCH PPS rate year
in the final rule. Furthermore, in determining the proposed fixed-loss
amount for the 2009 LTCH PPS rate year, we used the current FY 2008
applicable LTCH ``total'' CCR ceiling of 1.284 and LTCH Statewide
average ``total'' CCRs established in the FY 2008 IPPS final rule (72
FR 47404 and 48126 through 48127) such that the current applicable
Statewide average CCR would be assigned if, among other things, a
LTCH's CCR exceeded the current ceiling (1.284). We note that in
determining the proposed fixed-loss amount for the 2009 LTCH PPS rate
year using the CCRs from the PSF, there was no need for us to
independently assign the applicable Statewide average CCR to any LTCHs
(as this may have already been done by the FI in the PSF in accordance
with our established policy). (Currently, the applicable FY 2008 LTCH
Statewide average CCRs can be found in Table 8C of the FY 2008 IPPS
final rule (72 FR 48126 through 48127).)
Accordingly, based on the data and policies described in this
proposed rule, we are proposing a fixed-loss amount of $21,199 for the
2009 LTCH PPS rate year. Thus, we would 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 adjusted proposed Federal
LTCH payment for the MS-LTC-DRG and the proposed fixed-loss amount of
$21,199). We note that the proposed fixed-loss amount for the 2009 LTCH
PPS rate year is somewhat higher than the current fixed-loss amount of
$20,738. In addition to being based on the most recent available LTCH
data to estimate the cost of each LTCH case, this proposed change in
the fixed-loss amount is primarily due to the projected increase in
estimated aggregate LTCH PPS payments that is expected to result from
the proposed 2.6 percent update to the Federal rate (discussed in
greater detail in section IV.E. of this preamble), in conjunction with
the proposed changes to the area wage adjustment (discussed in greater
detail in section IV.F.1. of this preamble) and the changes to the MS-
LTC-DRG relative weights for FY 2008 (as discussed in the FY 2008 IPPS
final rule (72 FR 47277 through 47299)). As discussed in greater detail
in the impact analysis presented in section XII. of this proposed rule,
we are projecting that the proposed changes would result in a 1.7
percent increase in estimated payments per discharge in RY 2009 as
compared to RY 2008, on average, for all LTCHs. Because of the
estimated increase in aggregate LTCH PPS payments proposed for the 2009
LTCH PPS rate year (as discussed above in this section), we believe
that an increase in the proposed fixed-loss amount is appropriate and
necessary to maintain the requirement that estimated outlier payments
would be projected to be equal to 8 percent of estimated total LTCH PPS
payments, as required under Sec. 412.525(a). As we discussed in the RY
2008 final rule (72 FR 26897), maintaining the fixed-loss amount at the
current level would result in HCO payments above the current regulatory
requirement that estimated outlier payments would be projected to equal
8 percent of estimated total LTCH PPS payments. Based on the regression
analysis that was performed when we implemented the LTCH PPS (August
30, 2002 final rule (67 FR 56022 through 56027)), we established the
outlier target at 8 percent of estimated total LTCH PPS payments to
allow us to achieve a balance between the ``conflicting considerations
of the need to protect hospitals with costly cases, while maintaining
incentives to improve overall efficiency'' (67 FR 56024). That
regression analysis also showed that additional increments of outlier
payments over 8 percent (that is, raising the outlier target to a
larger percentage than 8 percent) would reduce financial risk, but by
successively smaller amounts. Outlier payments are budget neutral, and
therefore, outlier payments are funded by prospectively reducing the
non-outlier PPS payment rates by projected total outlier payments. The
higher the outlier target, the greater the (prospective) reduction to
the base payment would need to be applied to the Federal rate to
maintain BN.
As we discussed in the RY 2008 LTCH PPS final rule (72 FR 26898
through 26899), as an alternative to proposing to lower the fixed-loss
amount for RY 2009, we examined adjusting the marginal cost factor
(that is, the percentage that Medicare will pay of the estimated cost
of a case that exceeds the sum of the adjusted Federal prospective
payment for the MS-LTC-DRG and the fixed-loss amount for LTCH PPS
outlier cases as specified in Sec. 412.525(a)(3) in conjunction with
the revised definition of ``LTC-DRG'' at Sec. 412.503), which is
currently equal to 80 percent, as a means of ensuring that estimated
outlier payments would be

[[Page 5371]]

projected to equal 8 percent of estimated total LTCH PPS payments. When
we initially established the 80 percent marginal cost factor in the
August 30, 2002 final rule (67 FR 56022 through 56027), we explained
that our analysis of payment-to-cost ratios for HCO cases showed that a
marginal cost factor of 80 percent appropriately addresses outlier
cases that are significantly more expensive than nonoutlier cases,
while simultaneously maintaining the integrity of the LTCH PPS.
In proposing increases to the fixed-loss amount for RY 2007 and RY
2008 (71 FR 27834 and 72 FR 4799 through 4800 respectively), we also
solicited comments on whether we should revisit the regression analysis
discussed above in this section that was used to establish the existing
8 percent outlier target and 80 percent marginal cost factor, using the
most recent available data to evaluate whether the current outlier
target of 8 percent or the 80 percent marginal cost factor should be
adjusted, and therefore, could have resulted in less of an increase in
the fixed-loss amount for RY 2007 and RY 2008, respectively. In
response to this solicitation in the RY 2007 proposed rule (as
summarized in the RY 2007 LTCH PPS final rule (71 FR 27834 through
27835)), several commenters opposed any option that would allow us to
revisit the regression analysis that was used to establish the existing
80 percent marginal cost factor and existing outlier target of 8
percent. The commenters stated their belief that the LTCH PPS is still
in its early stages and further changes to the 80 percent marginal cost
factor or 8 percent outlier target would result in instability to the
system. The commenters cautioned against making any premature changes
to the factors affecting HCO payments to LTCHs, particularly the
marginal cost factor and outlier target established by regulation when
the LTCH PPS was implemented. Also, the commenters agreed that keeping
the marginal cost factor at 80 percent and the outlier pool at 8
percent better identifies LTCH patients that are truly unusually costly
cases, and that this policy appropriately addresses outlier cases that
are significantly more expensive than non-outlier cases. Similarly, as
summarized in the RY 2008 final rule (72 FR 26897), we received no
comments in support of revisiting the regression analysis discussed
above that was used to establish the existing 8 percent outlier target
and 80 percent marginal cost factor, using the most recent available
data to evaluate whether the current outlier target of 8 percent or the
80 percent marginal cost factor should be adjusted in response to our
solicitation on this issue.
In response to these comments, we agreed with the commenters that,
based on the regression analysis done for the implementation of the
LTCH PPS (August 30, 2002; 68 FR 56022 through 56026), a marginal cost
factor of 80 percent and a outlier target of 8 percent best identifies
LTCH patients that are truly unusually costly cases, and that such a
policy appropriately addresses LTCH HCO cases that are significantly
more expensive than non-outlier cases, which is consistent with our
intent of the LTCH HCO policy as stated when we implemented the LTCH
PPS in the August 30, 2002 final rule (67 FR 56025). Therefore, as
supported by many commenters, in both the RY 2007 final rule (71 FR
27835) and the RY 2008 final rule (72 FR 26898), we did not revisit the
regression analysis that was used to establish the existing 80 percent
marginal cost factor and existing outlier target of 8 percent, and
therefore, did not make any changes to the marginal cost factor or
outlier target in either of those final rules.
Although proposing to increase the fixed-loss amount from $20,738
to $21,199 (based on the policies presented in this proposed rule)
would increase the amount of the ``loss'' that a LTCH must incur under
the LTCH PPS for a case with unusually high costs before the LTCH would
receive any additional Medicare payments, as we discussed above and as
we explained in greater detail in the RY 2006 LTCH PPS final rule (70
FR 24195 through 24196), we continue to believe that the existing 8
percent outlier target and 80 percent marginal cost factor continue to
adequately maintain the LTCHs' share of the financial risk in treating
the most costly patients and ensure the efficient delivery of services.
Accordingly, we are not proposing to adjust the existing 8 percent
outlier target or 80 percent marginal cost factor under the LTCH PPS
HCO policy at this time. However, we continue to be interested in any
comments that would support revisiting the analysis that was used to
establish the existing 8 percent outlier target and the existing 80
percent marginal cost factor, using the most recent available data to
evaluate whether any changes to the current HCO policy should be made,
and therefore, may result in a smaller increase (or even a decrease) in
the fixed-loss amount for RY 2009.
For the reasons described above, we believe the proposed fixed-loss
amount of $21,199 would appropriately identify unusually costly LTCH
cases while maintaining the integrity of the LTCH PPS. Thus, under the
broad authority of section 123(a)(1) of the BBRA and section 307(b)(1)
of BIPA, we are proposing a fixed-loss amount of $21,199 based on the
best available LTCH data and the policies presented in this proposed
rule because we believe a proposed increase in the fixed-loss amount is
appropriate and necessary to maintain estimated outlier payments are
projected to be equal to 8 percent of estimated total LTCH PPS
payments, as required under Sec. 412.525(a).
d. Application of Outlier Policy to Short-Stay Outlier (SSO) 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 SSO
case (as defined under Sec. 412.529 and discussed in section IV.G. of
this preamble) and also as a HCO case. In this scenario, a patient
could be hospitalized for less than five-sixths of the geometric ALOS
for the specific MS-LTC-DRG, and yet incur extraordinarily high
treatment costs. If the costs exceeded the high cost outlier threshold
(that is, the SSO payment plus the fixed-loss amount), the discharge is
eligible for payment as a HCO. Thus, for a SSO case in the 2009 LTCH
PPS rate year, the HCO payment would be 80 percent of the difference
between the estimated cost of the case and the proposed outlier
threshold (the sum of the proposed fixed-loss amount of $21,199 and the
amount paid under the SSO policy as specified in Sec. 412.529).
4. Other Payment Adjustments
Section 123(a)(1) of the BBRA, as amended by section 307(b) of
BIPA, granted the Secretary broad authority to determine appropriate
adjustments under the LTCH PPS, including whether (and how) to provide
for adjustments to reflect variations in the necessary costs of
treatment among LTCHs. In developing the LTCH PPS payment methodology,
we conducted extensive regression analyses of the relationship between
LTCH costs (including both operating and capital-related costs per
case) and several factors that may affect costs such as the percent of
Medicaid patients treated, the percent of Supplemental Security Income
(SSI) patients treated, the hospital's geographic location, and
training residents in approved medical education programs (67 FR
56014). The appropriateness of potential payment adjustments were
evaluated based upon whether including each adjustment increased the
accuracy of payments to LTCHs.

[[Page 5372]]

In the August 30, 2002 LTCH PPS final rule, we detailed the
extensive data analysis performed by our contractor, 3M Health
Information Systems (3M) and our resulting decisions to implement a
COLA for LTCHs in Alaska and Hawaii (Sec. 412.525(b)) and an
adjustment to account for geographical differences in area wage levels
(Sec. 412.525(c)). In addition, we discussed the extensive data
analyses that led to the decision not to implement adjustments for
geographic reclassification, rural location, the treatment of a
disproportionate share of low-income patients (DSH), or indirect
medical education (IME) costs. We also noted that we would continue to
collect data and revisit these determinations as additional data became
available. (For more detailed information, see 67 FR 56014 through
56027.)
When we implemented the LTCH PPS for FY 2003, we provided for a 5-
year transition period (Sec. 412.533), to allow LTCHs time to adjust
to the new payment system (67 FR 56038). For cost reporting periods
beginning on or after October 1, 2006, the final year of the 5-year
transition, LTCHs are paid based on 100 percent of the Federal rate.
We continued to collect and interpret new data as they became
available to determine if these data support proposing any additional
payment adjustments. In both the RY 2007 and the RY 2008 LTCH PPS final
rules, we stated that we believed that it was appropriate to wait for
the conclusion of the 5-year transition to 100 percent of the Federal
rate under the LTCH PPS to maximize the availability of data that
reflected LTCH behavior in response to the implementation of the LTCH
PPS. The availability of this data would allow us to conduct a
comprehensive reevaluation of payment adjustments under the LTCH PPS.
(See the RY 2007 and RY 2008 LTCH PPS final rules (71 FR 27839) and (72
FR 26900), respectively.)
Therefore, similar to the data analyses conducted at the inception
of the LTCH PPS for FY 2003, 3M evaluated LTCH data from the most
recent cost report files in our HCRIS database (updated through June
30, 2007) for providers' cost reports beginning during fiscal years
2004 through 2006. We believe that in the 5 years since the start of
the LTCH PPS, there has been sufficient new data generated to allow for
a comprehensive reevaluation of the appropriateness of payment
adjustments such as geographic reclassification, rural location, DSH,
and IME under the LTCH PPS at this time.
Our most recent data analysis which is based on the comprehensive
data analysis by 3M (referenced above), indicates that proposing
payment adjustments for geographic reclassification, rural location,
DSH, or indirect medical education (IME) costs would not improve the
accuracy of payments to LTCHs. (3M's ``Report on LTCH Payment
Methodology Review and Results'' is posted on our Web site at: http://www.cms.hhs.gov/LongTermCareHospitalPPS/08_download.asp#TopOfPage
.

We believe that these analyses confirm our initial determinations
as we developed the LTCH PPS regarding the applicability of PPS payment
adjustments. Therefore, we are not proposing to adopt any additional
payment adjustments such as geographic reclassification, rural
location, DSH, or IME, as features of the LTCH PPS. Proposed policies
for the RY 2009 wage index adjustment and the COLA are discussed in
sections IV.D.1 and 2. of this proposed rule, respectively.
Furthermore, now that the 5-year transition to the LTCH PPS is
completed, we have collected data that reflects LTCH behavior in
response to the implementation of the LTCH PPS. We believe that our
above described analyses of LTCH PPS data do not support the adoption
of any additional payment adjustments. We further believe that since
3M's recent analyses confirm policy determinations that have been in
place since the implementation of the LTCH PPS for FY 2003, that annual
data analyses related to potential payment adjustments for geographic
reclassification, rural location, DSH or IME will not be necessary
barring significant transformations in the nature of the LTCH universe
or substantial changes in Medicare payment outcomes that warrant
additional evaluation.
5. Technical Correction to the Budget Neutrality Requirement at Sec.
412.523(d)(2)
Section 123(a)(1) of the Public Law 106-113 requires that the PPS
developed for LTCHs be budget neutral for the initial year of
implementation. Furthermore, under section 307(a)(2) of the Public Law
106-554, the increases to the target amounts and the cap on the target
amounts for LTCHs provided for by section 307(a)(1) of Public Law 106-
554 (as set forth in section 1886(b)(3)(J) of the Act), and the
enhanced bonus payments for LTCHs provided for by section 122 of Public
Law 106-113 (as set forth in section 1886(b)(2)(E) of the Act) were not
to be taken into account in the development and implementation of the
LTCH PPS. Therefore, when we implemented the LTCH PPS, in the August
30, 2002 final rule (67 FR 56052), we established a budget neutrality
requirement at Sec. 412.523(d)(2) for calculating the standard Federal
rate for FY 2003 such that estimated aggregate LTCH PPS payments were
estimated to be equal to estimated payments that would have been made
to LTCHs under the reasonable cost-based payment methodology had the
PPS for LTCHs not been implemented, and, to implement section 307(a)(2)
of the Public Law 106-554, we excluded the effects of sections
1886(b)(2) and (b)(3) of the Act.
We are proposing a technical correction to existing Sec.
412.523(d)(2) that would more precisely describe the provisions of
sections 1886(b)(2) and (b)(3) of the Act that were not taken into
account when determining the standard Federal rate under Sec.
412.523(d). The current regulatory language at Sec. 412.523(d)(2)
cites the general sections of the Act which contain the specific
provisions set forth in Sec. 307(a)(2) of Public Law 106-554 that the
Secretary is required to not take into account in developing the PPS.
We believe that it is clearer and more precise to cite the specific
subparagraphs the Secretary did not take into account rather than to
cite the general sections of the Act of which such subparagraphs are a
part. In order to mitigate any confusion that may be caused by existing
regulations, we are proposing to make a technical correction at Sec.
412.523(d)(2). Specifically, we are proposing to revise Sec.
412.523(d)(2) to state that the effects of section 1886(b)(2)(E) of the
Act (enhanced bonus payments for LTCHs, as described above) and section
1886(b)(3)(J) of the Act (increases to the hospital-specific target
amounts and the cap on the target amounts for LTCHs, as described
above) were excluded in the development of the FY 2003 LTCH PPS
standard Federal rate. This technical correction would make the
regulatory language consistent with section 307(a)(2) of Public Law
106-113 and consistent with the methodology we used to determine the
LTCH PPS standard Federal rate under Sec. 412.523, and it is not a
change in policy. (Accordingly, no adjustments to the LTCH PPS standard
Federal rate computed under Sec. 412.523(d) have been proposed in
conjunction with this proposed technical correction to Sec.
412.523(d)(2).)

G. Proposed Conforming Changes

Various regulations throughout 42 CFR Part 412 Subpart O indicate
that the terms ``urban area'' and ``rural area'' are defined according
to the definitions of ``urban area'' and ``rural area'' found in 42 CFR
Part 412 Subpart D (the IPPS

[[Page 5373]]

regulations). Specifically, Sec. Sec. 412.525(c), 412.529(d)(4)(ii)(B)
and (d)(4)(iii)(B), 412.534(d)(1), (f)(2)(ii), and (f)(3)(ii), and
412.536(c)(1), (e)(2)(ii), and (e)(3)(ii) of Subpart O refer to the
definitions of ``urban area'' and ``rural area'' in either Sec.
412.62(f)(1)(ii) and (f)(1)(iii) or Sec. 412.64(b)(1)(ii)(A)-(C) in 42
CFR Part 412 Subpart D. As stated elsewhere in the preamble, we believe
that it is administratively simpler to define the terms ``urban area''
and ``rural area'' in Sec. 412.503 rather than cross-referencing the
definitions of ``urban area'' and ``rural area'' in Sec.
412.62(f)(1)(ii) and Sec. 412.62(f)(1)(iii) and Sec.
412.64(b)(1)(ii)(A)-(C). Consequently, in section IV.F.1.b(4). of this
regulation, we propose to add definitions for ``urban area'' and
``rural area'' in Sec. 412.503 which would incorporate the provisions
of Sec. 412.62(f)(1)(ii) and (f)(1)(iii) as well as Sec.
412.64(b)(1)(ii)(A) through (C). Because we are proposing to define
``urban area'' and ``rural area'' in Sec. 412.503, the citations to
the definitions of ``urban area'' and ``rural area'' in Sec.
412.62(f)(1)(ii) and Sec. 412.62 (f)(1)(iii) and Sec.
412.64(b)(1)(ii)(A)-(C) which are found in Sec. Sec. 412.525(c),
412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 412.534(d)(1), (f)(2)(ii), and
(f)(3)(ii), and 412.536(c)(1), (e)(2)(ii), and (e)(3)(ii) would need to
be replaced with references to Sec. 412.503. We are proposing to
replace the above-described references with Sec. 412.503.

(We note that provisions of the Medicare, Medicaid, and SCHIP Extension
Act of 2007, enacted on December 29, 2007 require a 3-year suspension
of the payment adjustments at Sec. 412.534 to ``grandfathered LTCHs''
and application of Sec. 412.536 to ``freestanding'' LTCHs for cost
reporting periods beginning on or after the date of enactment of the
legislation. In addition, revisions to the short stay outlier policy,
as well as other changes to the regulations necessitated by MMSEA will
be addressed in a future notice.)

VI. Computing the Proposed Adjusted Federal Prospective Payments for
the 2008 LTCH PPS Rate Year

In accordance with Sec. 412.525 and as discussed in section IV.C.
of this proposed 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 Addendum A to this proposed 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 3 in section IV.D.2 of this preamble). In the RY
2008 LTCH PPS final rule (72 FR 4776), we established a standard
Federal rate of $38,356.45 for the 2008 LTCH PPS rate year. In this
proposed rule, based on the best available data and the proposed
policies described in this proposed rule, we are proposing that the
standard Federal rate for the 2009 LTCH PPS rate year would be
$39,076.28 as discussed in section IV.C.3. of this preamble. We
illustrate the methodology that would be used to adjust the proposed
Federal prospective payments for the 2009 LTCH PPS rate year in the
following examples:

Example: During the 2009 LTCH PPS rate year, a Medicare patient
is in a LTCH located in Chicago, Illinois (CBSA 16974). The proposed
full LTCH PPS wage index value for CBSA 16974 is 1.0715 (see Table 1
in Addendum A to this proposed rule). The Medicare patient is
classified into MS-LTC-DRG 28 (Spinal Procedures with MCC), which
has a current relative weight of 1.1417 (see Table 3 of Addendum A
to this proposed rule).
To calculate the LTCH's proposed total adjusted Federal
prospective payment for this Medicare patient, we compute the
proposed wage-adjusted Federal prospective payment amount by
multiplying the proposed unadjusted standard Federal rate
($39,076.28) by the proposed labor-related share (75.920 percent)
and the proposed wage index value (1.0715). This proposed wage-
adjusted amount is then added to the nonlabor-related portion of the
proposed unadjusted standard Federal rate (24.080 percent; adjusted
for cost of living, if applicable) to determine the proposed
adjusted Federal rate, which is then multiplied by the MS-LTC-DRG
relative weight (1.1417) to calculate the proposed total adjusted
Federal prospective payment for the 2009 LTCH PPS rate year
($47,035.13). Table 6 illustrates the components of the calculations
in this example.

Table 6
------------------------------------------------------------------------

------------------------------------------------------------------------
Unadjusted Proposed Standard Federal $39,076.28
Prospective Payment Rate.
Proposed Labor-Related Share.............. x 0.75920
Proposed Labor-Related Portion of the = $29,666.71
Federal Rate.
Proposed Wage Index (CBSA 16974).......... x 1.0715
Proposed Wage-Adjusted Labor Share of = $31,787.88
Federal Rate.
Proposed Nonlabor-Related Portion of the + $ 9,409.57
Federal Rate ($39,076.28 x 0.24080).
Proposed Adjusted Federal Rate Amount..... = $41,197.45
MS-LTC-DRG 9 Relative Weight.............. x 1.1417
Proposed Total Adjusted Federal = $47,035.13
Prospective Payment.
------------------------------------------------------------------------

VII. Monitoring

In the August 30, 2002 final rule (67 FR 56014), we described an
on-going monitoring component to the new LTCH PPS. Specifically, we
discussed on-going analysis 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 PPS. As a result of our data analysis, we
have revisited a number of our original policies and have identified
behaviors by certain LTCHs that lead to inappropriate Medicare
payments.
In the RY 2005 LTCH PPS final rule (69 FR 25692) we revised the
interruption of stay policy. We also established a payment adjustment
for LTCH HwHs and satellites in the FY 2005 IPPS final rule (69 FR
49191 through 49214). In the RY 2008 final rule, at Sec. 412.536,
based on additional data monitoring and analysis, we expanded this
payment adjustment to apply to LTCHs and LTCH satellites that were not
co-located with their referring hospitals.
In the RY 2007 and 2008 final rules (71 FR 27798 and 72 FR 28670),
we revised the SSO payment adjustment formula as a consequence of data
analyses which indicated that Medicare was overpaying for certain SSO
cases.
Although at this time, we are not proposing any new payment
adjustments that have resulted from our monitoring activity, we
continue to pursue our on-going monitoring program that involves the
CMS Office of Research and Development (ORDI), existing QIO monitoring,
and studies described in the RY 2006 LTCH PPS final rule (70 FR 24211).

[[Page 5374]]

As we discussed in the RY 2004 LTCH PPS final rule (68 FR 34157),
the Medicare Payment Advisory Commission (MedPAC) endorsed our
monitoring activity. Furthermore, the Commission pursued an independent
research initiative that led to a section in MedPAC's June 2004 Report
to Congress entitled ``Defining long-term care hospitals''. This study
included recommendations that we develop facility and patient criteria
for LTCH admission and treatment and that we require a review by QIOs
to evaluate whether LTCH admissions meet criteria for medical necessity
once the recommended facility and patient criteria are established (70
FR 24210). In response to the recommendation in MedPAC's June 2004
Report, we awarded a contract to Research Triangle Institute,
International (RTI), on September 27, 2004, to conduct a thorough
examination of the feasibility of implementing MedPAC's
recommendations.
Both Part 1 and Part 2 of the RTI Report are available on our Web
site at http://www.cms.hhs.gov/LongTermCareHospitalPPS/02a_RTIReports.asp#TopOfPage.
We also included the Executive Summary of

RTI's final report in Addendum B of the RY 2008 proposed rule (72 FR
4884 through 4886). (A comprehensive discussion of RTI's continuing
work is included at section XI of this proposed rule.)

VIII. Method of Payment

Under Sec. 412.513, a Medicare LTCH patient is classified into a
MS-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 MS-
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 discharge bill. The
discharge bill also provides data to allow for reclassifying the stay
from payment at the full MS-LTC-DRG rate to payment for a case as a SSO
(under Sec. 412.529) or as an interrupted stay (under Sec. 412.531),
or to determine if the case will qualify for a HCO payment (under Sec.
412.525(a)).
Accordingly, the ICD-9-CM codes and other information used to
determine if an adjustment to the full MS-LTC-DRG payment is necessary
(for example, LOS or interrupted stay status) are recorded by the LTCH
on the Medicare patient's discharge bill and submitted to the Medicare
FI 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 the costs of photocopying and mailing
medical records requested by a Quality Improvement Organization (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), based on the
estimated prospective payment for the year, and may be eligible to
receive accelerated payments as described in Sec. 413.64(g). We
exclude HCO 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 and the costs
of photocopying and mailing medical records requested by a QIO, are
subject to the interim payment provisions as specified in 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) and this should
include any HCO payment determined as of the last day for which the
services have been billed.

IX. RTI's Research

With the recommendations of MedPAC's June 2004 Report to Congress
as a point of departure, we awarded a contract to Research Triangle
Institute, International (RTI) at the start of FY 2005 for a
comprehensive evaluation of the feasibility of developing patient and
facility level characteristics for LTCHs that could distinguish LTCH
patients from those treated in other hospitals.
RTI completed this project in two phases. In Phase I, RTI prepared
a background report summarizing existing information regarding LTCHs'
current role in the Medicare system: their history as Medicare
participating providers; the types of patients they treat; the criteria
QIOs currently use to review appropriateness of care in these settings;
and the types of regulations they face as Medicare participating
providers. This work reviewed prior analyses of these issues and
included discussions with MedPAC, other researchers, CMS, the QIOs, and
the hospital associations.
In Phase II, RTI collected additional information on tools
currently used by the QIOs and the industry to assess patient
appropriateness for admission; analyzed claims to understand
differences between short term acute care hospital patients with
outlier stays who were subsequently treated in LTCHs compared to those
who were not and differences between patients who continued treatment
as outliers in acute care hospitals with patients who had been admitted
to LTCH with the same DRGs; and visited different types of hospitals to
observe first-hand how LTCH patients differ from those in other
settings and how this pattern varies in different parts of the country.
RTI worked with different associations, including the National
Association of Long Term Hospitals (NALTH), the Acute Long Term
Hospital Association (ALTHA), the American Hospital Association (AHA),
and the American Medical Rehabilitation Providers Association (AMRPA),
as well as several of the larger LTCH chains. The final report for
those phases submitted by RTI summarizes these efforts and makes
recommendations to CMS regarding LTCHs.
(We have posted the reports on both Phase I and Phase II of RTI's
research on our Web site at http://www.cms.hhs.gov/LongTermCareHospitalPPS/02a_RTIReports.asp#TopOfPage.
)

In summary, RTI's research has resulted in an extensive and careful
analysis of the Medicare populations served by LTCHs, a comparison of
these populations with those treated in other acute settings, including
IPPS, IRFs, and Inpatient Psychiatric populations, as well as those
treated in less intensive settings such as SNFs. This work included
analysis of Medicare data to compare patient characteristics and
provider costs for certain types of patients; regulatory requirements
governing program conditions of participation for these different types
of facilities; interviews with private sector developers of level of
care determinations; and site visits and interviews with physicians
treating these typical and frequently overlapping populations.
The results suggested that while there are some patients who
require very long term acute care hospitalization there are also many
patients whose LOS at the LTCH may trigger a short stay outlier
payment, suggesting that not all LTCH admissions had a LOS consistent
with

[[Page 5375]]

the need for prolonged acute care hospitalization in an LTCH. While
existing patient criteria such as Interqual are useful for
distinguishing between the need for hospital-level treatment and a less
intensive level, such as SNF care, RTI's analysis has determined that,
in fact, the private sector criteria failed to distinguish between
patients at LTCHs and patients at acute care hospitals. The criteria
proposed by the National Association for Long Term Hospitals (NALTH)
also had this shortcoming. While they identified the acute care
patient, they failed to identify differences between LTCH admissions'
clinical characteristics and those treated in a general acute care
hospital, in either a step down unit, or in some cases, a general
medical/surgery unit.
On January 30, 2007, RTI convened a Technical Expert Panel (TEP)
comprised of physicians, nurses, and hospital administrators
representing, LTCHs, acute care hospitals, IRFs, and SNFs, all of which
represent the range of inpatient settings for treating medically
complex patients. The goal of this meeting was to identify a set of
clinical indicators that distinguish between the medically complex
populations at LTCHs and acute care hospitals , including ICU, step-
down, and general acute care. The panelists examined severity measures
and treatment needs for medically complex patients to define the point
at which ICU or acute care patients become appropriate for care at
LTCHs. They focused on patient criteria currently used by some
providers and QIOs. Presentations described existing systems for
identifying medical complexity and severity of illness for a particular
patient. In exchanges between the presenters and panel members ,
however, acute care hospital physicians stated that acute care
hospitals treated severely ill patients with medically complex
conditions for their entire episode of care and that these measures
were not useful for determining whether the patient should be treated
in an acute care hospital or a LTCH. After discussion, the TEP
participants reached a consensus that LTCHs provide a service that is
comparable to general acute step-down units and is not unique to LTCHs.
Discussions with LTCH physicians and acute care hospital physicians
practicing in areas that lack LTCHs confirmed the results of RTI's data
analyses in demonstrating the widespread overlap in the patient
populations treated in LTCHs and those treated in acute care hospitals.
Though representatives from the LTCHs clearly described the medical
complexity and severity of illness of their patient populations, much
of the difference between the LTCH and acute hospital patient
populations was driven by geography and access to LTCH facilities. In
the many areas of the country without access to LTCH services, acute
hospitals treat the medically complex patients and receive an acute
hospital IPPS payment, or outlier payment in cases where the costs of
care are very high, rather than the much higher LTCH payment. As a
result of the discussion, claims by the LTCH industry that medically
complex patients treated in LTCHs were significantly different from
medically complex patients treated in acute settings were not
confirmed, though panel members did agree that more work may need to be
done to measure outcomes for medically complex patients treated in each
of these settings. There was also consensus among the panelists that
quality of care was related to treating a sufficient volume of these
difficult cases, regardless of provider setting.
On November 6, 2007, RTI convened a second TEP based upon the
earlier meeting and participant responses. As with the first TEP, panel
members included LTCH physicians and administrators, acute care
physicians in areas without LTCHs (for example, New York and northern
New England), physicians from SNFs in areas without LTCHs, and several
IRF physicians.
There was an intentional focus at the second TEP on Medicare
patients with respiratory conditions requiring mechanical ventilation
(vent patients). RTI presented data showing the mechanical ventilator
patients were relatively homogenous in their likelihood of using LTCHs
whereas the medically complex (respiratory) patients were much more
diverse in their distributions making it more difficult to develop
measurable medical parameters and widely accepted treatment protocols
for this group. However, it was acknowledged that ventilator patients
(referred to as ``vent patients'' in the following discussion) comprise
less than 15 percent of all LTCH patients. RTI believed that the
category of ``medically complex'' cases was too amorphous and the focus
on vent patients would allow for more meaningful comparisons between
the provider types. Nationwide, vent patients are treated in acute care
hospitals and in LTCHs while some IRFs and SNFs accept and treat this
group of patients. (We would also note that, as MedPAC found in its
June, 2004 Report to Congress, the highest predictor of LTCH use is
whether a patient has had a tracheotomy which is common in long-term
ventilator-dependent patients. (p. 125))
RTI presented two analyses of Medicare claims data based on
episodes of care constructed for beneficiaries with vent-related DRGs
during their initial (acute) admission. The first analysis compared
outcomes for patients living in areas with LTCHs, to outcomes for
clinically similar patients living in geographically comparable areas
that had no LTCHs. The second examined episodes of care only for
beneficiaries in specific states with several LTCHs, and compared
outcomes for clinically similar cases that remained in the acute care
setting with those that were referred to an LTCH. Both analyses used a
``propensity score approach'' which groups patients according to the
clinical and demographic characteristics that predict LTCH referral.
The first analysis found that there was very little difference in
average episode length, Medicare cost, mortality or length of time
before being discharged home, between areas that have LTCHs and those
that do not. The second analysis found that results differed between
cases with the highest probability of using LTCHs (those medically
complex vent cases with tracheotomies, longer prior ICU stays), and
ventilator cases with lower probability of using LTCHs. In the small
group with a high likelihood, mortality was lower and the 60-day
likelihood of being discharged home was higher for those referred to
LTCHs than for those staying in acute settings, while Medicare payments
were the same or less. Among the less complex cases, however, RTI found
that LTCH referral was associated with much higher costs and same or
worse performance in other outcome measures. These findings are very
similar to those noted by MedPAC in the Commission's June 2004 Report
to the Congress. (p. 126-127).
RTI also asked TEP members to evaluate 6 case vignettes and assess
which patients were appropriate for admission to their type of
facility. The case vignettes consisted of detailed medical histories of
two ventilator-dependent patients admitted for weaning, two wound care
patients, and two ``medically complex'' patients.
The TEP indicated that there were significant differences between
the level of patient morbidity that the acute care hospitals and LTCHs
would admit and treat as compared to the IRFs and also the SNFs, but
that LTCH patients and patients treated in IPPS acute care hospital
step-down units were virtually indistinguishable. In further discussion
of individual case vignettes, LTCH and

[[Page 5376]]

acute care hospital physicians were in accord regarding appropriate
therapeutic dispositions for the stabilized, post-ICU ``critical care''
patients and they agreed that such patients could be appropriately
treated in either acute care hospital step-down units or in LTCHs.
Therefore, although there was consensus regarding the medical profile
of such patients, it was also noted by one acute care physician that
this indicated that ``there is no such thing as an LTCH-only patient.''
On the other hand, acute care hospital physicians noted that typically,
in their facilities, their step-down units may take a slightly less
stable ``critical care'' patient than would be treated in a LTCH, that
is, patients that may have some unresolved medical issues still being
diagnosed especially if there was a need to free-up an ICU bed. This
was possible because such a patient would continue treatment by the
same physicians and have access to the full range of acute care
hospital services but also could return to the ICU without significant
difficulty, if necessary.
The panelists also discussed a realistic definition of patient
stability for ``critical care'' patients in different settings and
whether this was typically based upon ``vital signs,'' dependence on
``pressors,'' (intravenous drugs administered to raise blood pressure)
or whether patient stability was based on a physician's subjective
determination (for example, ``I know it when I see it''). There was
additional clinically-oriented discussion of measures of medical
stability. (It was also noted that while some of the ``medically
complex'' patients currently being treated in LTCHs would fall into the
``critical care'' category, this is not the case for all of their
patients.)
Panelists also addressed the intensity of nursing care required by
a ``critical care'' patient and the central role of the nurse to
patient ratio in identifying the level of care offered in a hospital.
Both LTCHs and IPPS step-down units typically have a RN to patient
ratio of 1-to-4 or 1-to-5. LTCH physicians emphasized the value of the
LTCH ``team approach'' to patient care to the agreement of the TEP's
acute care hospital physicians who noted that this approach is also the
model that is in place in their facilities. One physician noted that he
had little doubt that a ``critical care'' patient hospitalized at any
of the acute care hospitals or LTCHs represented at the TEP would
receive an equivalent and high level of treatment.
Members of the panel also indicated that discharges from acute care
hospitals to LTCHs (in areas where this is an option) often occur
because the LTCH is known to provide specialized treatment for
particular types of patients. It was also noted, however, that
commonly, hospital resources drive patient placement regarding the
treatment of very sick and expensive patients when there is an LTCH
placement option.
Following the above exchanges, it was widely acknowledged by
panelists that measures distinguishing appropriate LTCH patients from
patients being treated in step-down units of acute care hospitals were
not going to be developed by the TEP. There were serious questions
raised as to whether developing such a product was even feasible. The
group concurred on the recommendations, listed below, for a treatment
model for the type of ``critical care'' patients who had been the focus
of TEP:
CMS should pay similar rates for similar patients
regardless of setting if certain objective parameters associated with
patient care were present, among which were:
++ A critical mass of patients with the targeted conditions to
ensure sufficient experience in those areas for the health
professionals in that setting;
++ Patient-level criteria to identify appropriate cases for this
level of care, applicable regardless of setting;
++ Quality of care should be based on structure and process
standards;
++ Interdisciplinary teams with physician leads, appropriate nurse
staffing levels; and inclusion of treating therapists (for example,
physical, respiratory, occupational);
Both LTCHs and these IPPS step-down units meeting these
standards could be recognized as ``Centers of Excellence'' for patients
defined as critically ill.
TEP members decided not to include ``patient outcomes'' on the list
of recommendations because of concerns that a facility's recognition
and/or payment based on patient outcomes could lead to ``cherry-
picking'' of less sick patients which could lead to access problems for
otherwise appropriate patients.
In summary, there was a consensus at the end of RTI's second TEP
that LTCHs treat patients who are also treated by acute care hospitals.
The ``critical care'' post-ICU patient who LTCHs describe as their
targeted patient are treated throughout most of the country in acute
care hospital step-down units. The interdisciplinary team treatment
model is the standard both in many LTCHs and in many acute care
hospitals with step-down units. While by definition, the patients
appropriate for treatment in a LTCH require hospital-level care (as
opposed to SNF level), it is not clear that any criteria can be
developed which identifies patients who belong in a LTCH exclusively.
RTI will continue to work on these issues in preparing its final
report. The results thus far have shown empirically, that LTCHs treat
medically stable but critically ill patients that are clinically
indistinguishable from those treated in step-down units of acute care
hospitals. The work has also confirmed earlier research showing that
for cases other than the vent patients discussed above in this section,
that in the absence of compelling data on patient outcomes, that
treatment at an LTCH is less cost-effective for the same DRGs than is
treatment at acute care hospitals for the same DRGs.
These TEPs have been important for furthering the discussion
regarding the feasibility of developing unique criteria for LTCH
patients. Over the past few years, the clinicians have agreed that
LTCHs specialize in treating critically ill patients with multiple
comorbidities and other longer term, acute level needs. This consensus
contributes to identifying an appropriate LTCH patient by acuity of
illness as well as LOS. Over the next few months, RTI will continue
working with the clinical community to make recommendations regarding
payment and treatment of critically ill patients, particularly in
LTCHs. Further work will expand on the Centers of Excellence concept to
examine the structure and process needed for such a designation.
Additional analysis will examine the relative costs and payments for
these patients under different payment systems.

X. Collection of Information Requirements

This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

XI. Regulatory Impact Analysis

[If you choose to comment on issues in this section, please include the
caption ``IMPACT'' at the beginning of your comments.]

A. Introduction

We have examined the impacts of this proposed rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of
1995

[[Page 5377]]

(UMRA) (Pub. L. 104-4), and Executive Order 13132.
1. Executive Order 12866
Executive Order 12866 (as amended by Executive Order 13258) 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 the impact analysis, we are using the proposed
rates, factors and policies presented in this proposed rule, including
updated proposed wage index values, and the best available claims and
CCR data to estimate the change in proposed payments for the 2009 LTCH
PPS rate year. As stated in section I.A. of this preamble section
114(e)(1) of the MMSEA at the new section 1886(m)(2) to the Act revises
the standard Federal rate for RY 2008 by providing that the base rate
for RY 2008 shall be the same as the base rate for RY 2007 (in other
words, the standard Federal rate for RY 2008 is the same as the
standard Federal rate for 2007). Also, section 114(e)(2) of the MMSEA
provides that the revised rate does not apply to discharges occurring
on or after July 1, 2007, and before April 1, 2008. As noted in section
IV.E. of this preamble, the standard Federal rate for RY 2007 was
$38,086.04. Furthermore, we note that section 114(c)(3) of MMSEA
requires a 3-year suspension of our implementation of the revisions to
the SSO policy at Sec. 412.529(c)(3)(i) that was finalized in the RY
2008 final rule. Both of these revisions to RY 2008 LTCH PPS payments
(that is, sections 114(c)(3) and (e)(1) through (2) of MMSEA) affect
the modeling of payments in this impact analysis, which we will discuss
in greater detail in section XVI.B.3. of this proposed rule. Based on
the best available data for 394 LTCHs, we estimate that the proposed
update to the standard Federal rate for RY 2009 (discussed in section
IV.C. of the preamble of this proposed rule) and the proposed changes
to the area wage adjustment (discussed in section IV.F.1. of the
preamble of this proposed rule), for the 2009 LTCH PPS rate year, in
addition to an estimated increase in short-stay and high cost outlier
payments (as discussed in greater detail below) would result in an
increase in estimated payments from the 2008 LTCH PPS rate year of
approximately $124 million (or about 2.9 percent) for the 394 LTCHs in
our database. Based on the 394 LTCHs in our database, we estimate RY
2008 LTCH PPS payments to be approximately $4.32 billion and RY 2009
LTCH PPS payments to be approximately $4.44 billion. Because the
combined distributional effects and estimated changes to the Medicare
program payments would be greater than $100 million, this proposed rule
would be considered a major economic rule, as defined in this section.
We note the approximately $124 million for the projected increase in
estimated aggregate LTCH PPS payments resulting from the provisions
presented in this proposed rule does not reflect changes in LTCH
admissions or case-mix intensity in estimated LTCH PPS payments, which
would also affect overall payment changes. (We note that due to
rounding, the approximation of $124 million is closer to the projected
increase in estimated aggregate LTCH PPS payments than the difference
between the approximately $4.44 billion and approximately $4.32 billion
in estimated RY 2008 and RY 2009 LTCH PPS payments, respectively.)
We note that the average combined effect of the proposed standard
Federal rate and area wage adjustment changes on estimated aggregate
payments cannot be computed by simply adding up the estimated averages
in columns 6 and 7 of Table 9 because each of those two columns are
intended to show the isolated impact of the respective proposed change
(that is, the proposed change to the standard Federal rate or the
proposed change to the area wage adjustment) on estimated payments for
RY 2009 as compared to RY 2008, and the interactive effects resulting
from both the proposed change to the standard Federal rate and proposed
change to the area wage adjustment are not accounted for in the
modeling of estimated payments to produce the percent change in each of
these columns. However, the interactive effects of all proposed changes
are taken into account in the modeling of estimated payments for RY
2009 as compared to RY 2008 in Column 8 of Table 9. Notwithstanding
this limitation in comparing the various columns in Table 9, the
difference between the projected increase in payments per discharge
from RY 2008 to RY 2009 for all changes of 2.9 percent (column 8) and
the sum of the projected increase due to proposed change to the
standard Federal rate (2.2 percent in column 6) and the proposed change
due to the area wage adjustment (-0.1 percent in column 7) of 2.1
percent (that is, 2.2 percent + (-0.1 percent) = 2.1 percent) is mostly
attributable to the effect of the estimated increase in payments for
HCO and SSO cases in RY 2009 as compared to RY 2008. That is, in
calculating the estimated increase in payments from RY 2008 to RY 2009
for HCO and SSO cases, we increased estimated costs by the applicable
proposed market basket (approximately 3.5 percent). We note, SSO cases
comprise approximately 16 percent of estimated total LTCH PPS payments
and HCO cases comprise approximately 8 percent of estimated total LTCH
PPS payments. The vast majority of the payments for SSO cases (over 80
percent) are based on the estimated cost of the case.
While the effects of the estimated increase in SSO and HCO payments
and the proposed change to the standard Federal rate which are
projected to increase estimated payments per discharge from RY 2008 to
RY 2009, the proposed changes to the area wage adjustment from RY 2008
to RY 2009 are expected to result in a small decrease of 0.1 percent in
estimated aggregate LTCH PPS payments from the 2008 LTCH PPS rate year
to the 2009 LTCH PPS rate year (see column 7 of Table 9). As discussed
in section IV.F.1. of this proposed rule, we are proposing to update
the wage index values for RY 2009 based on the most recent available
data. In addition, we are proposing to increase the labor-related share
from 75.788 percent to 75.920 percent under the LTCH PPS for RY 2009
based on the most recent available data on the relative importance of
the labor-related share of operating and capital costs of the market
basket applicable to the LTCH PPS (also discussed in section IV.F.1. of
this proposed rule).
2. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
$6.5 million to $31.5 million in any 1 year. For further information,
see the Small Business Administration's regulation at 70 FR 72577,
December 6, 2005. Individuals and States are not included in the
definition of a small entity. 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 FIs are
not considered to be small entities. The

[[Page 5378]]

Secretary certifies that this proposed rule would not have a
significant economic impact on a substantial number of small entities.
Currently, our database of 394 LTCHs includes the data for 88 non-
profit (voluntary ownership control) LTCHs and 265 proprietary LTCHs.
Of the remaining 41 LTCHs, 25 LTCHs are Government-owned and operated
and the ownership type of the other 16 LTCHs is unknown (as shown in
Table 9). The impact of the proposed payment rate and policy changes
for the 2009 LTCH PPS rate year (including the proposed update to the
standard Federal rate and the proposed changes to the area wage
adjustment) is discussed in section XVI.B.4.c. of this proposed rule.
As we discuss in detail throughout the preamble of this proposed
rule, based on the most recent available LTCH data, we believe that the
provisions of this proposed rule would result in an increase in
estimated aggregate LTCH PPS payments and that the resulting LTCH PPS
payment amounts result in appropriate Medicare payments.
The impact analysis of the proposed payment rate and policy changes
in Table 9 shows that estimated payments per discharge are expected to
increase approximately 2.9 percent, on average, for all LTCHs from the
2008 LTCH PPS rate year as compared to the 2009 LTCH PPS rate year. We
are proposing a 2.6 percent increase to the standard Federal rate for
RY 2009 (as discussed in section IV.E. of this proposed rule). The
projected 2.9 percent increase in estimated payments per discharge from
the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year is
attributable to the proposed change to the rate, the area wage
adjustment (discussed in section IV.F.1. of this proposed rule) and
estimated increases in short-stay outlier (SSO) and high cost outlier
(HCO) payments (as discussed in greater detail below). That is, as
Table 9 shows, the proposed change to the standard Federal rate is
projected to result in an estimated average increase of 2.2 percent in
estimated payments per discharge from RY 2008 to RY 2009, on average,
for all LTCHs, while the proposed changes to the area wage adjustment
are projected to result in an estimated decrease of 0.1 percent, on
average, for all LTCHs (columns 6 and 7 of Table 9, respectively). A
thorough discussion of the regulatory impact analysis for the proposed
changes presented in this proposed rule can be found below in section
XVI.B.3. of this proposed rule.
3. Impact on Rural Hospitals
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 shown in Table 9, we
are projecting a 2.6 percent increase in estimated payments per
discharge from the 2008 LTCH PPS rate year as compared to the 2009 LTCH
PPS rate year for rural LTCHs as a result of the proposed changes
presented in this proposed rule (that is, the proposed update to the
standard Federal rate discussed in section IV.E. of the preamble of
this proposed rule and the proposed changes to the area wage adjustment
as discussed in section IV.F.1. of the preamble of this proposed rule)
based on the data of the 25 rural LTCHs in our database of 394 LTCHs
for which complete data were available.
As shown in Table 9, the estimated increase in estimated LTCH PPS
payments from the 2008 LTCH PPS rate year as compared to the 2009 LTCH
PPS rate year for rural LTCHs is primarily due to the proposed update
to the standard Federal rate (as discussed in greater detail in section
IV.E. of the preamble of this proposed rule) and the proposed change in
the area wage adjustment (as discussed in greater detail in section
V.F.1. of the preamble of this proposed rule) in conjunction with the
estimated increased payments for SSO and HCO cases (as discussed below
in section XVI.B.3. of this proposed rule). We believe that the changes
to the area wage adjustment presented in this proposed rule (that is,
the proposed use of updated wage data and the proposed change in the
labor-related share) would result in accurate and appropriate LTCH PPS
payments in RY 2009 since they are based on the most recent available
data. Such updated data appropriately reflect national differences in
area wage levels and identifies the portion of the proposed standard
Federal rate that should be adjusted to account for such differences in
area wages, thereby resulting in accurate and appropriate LTCH PPS
payments.
4. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any one year of
$100 million in 1995 dollars, updated annually for inflation. That
threshold level is currently approximately $120 million. This proposed
rule would not mandate any requirements for State, local, or tribal
governments, nor would it result in expenditures by the private sector
of $120 million or more in any 1 year.
5. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications.
We have examined this proposed rule under the criteria set forth in
Executive Order 13132 and have determined that this proposed rule would
not have any significant impact on the rights, roles, and
responsibilities of State, local, or tribal governments or preempt
State law, based on the 25 State and local LTCHs (that is, Government
ownership type) in our database of 394 LTCHs for which data were
available.
6. Alternatives Considered
In the preamble of this proposed rule, we are setting forth the
proposed annual update to the payment rates for the LTCH PPS for RY
2009. In this preamble, we specify the statutory authority for the
provisions that are presented, identify those proposed policies when
discretion has been exercised, and present rationale for our decisions
as well as alternatives that were considered, and solicit comments on
suggested alternatives from commenters (where relevant).

B. Anticipated Effects of Proposed Payment Rate Changes

We discuss the impact of the proposed changes to the payment rates,
factors, and other payment rate policies presented in the preamble of
this proposed rule in terms of their estimated fiscal impact on the
Medicare budget and on LTCHs.
1. Budgetary Impact
Section 123(a)(1) of the BBRA requires that the PPS developed for
LTCHs ``maintain budget neutrality.'' We believe that the statute's
mandate for budget neutrality (BN) applies only to the first year of
the implementation of the LTCH PPS (that is, FY 2003). Therefore, in
calculating the FY 2003 standard Federal rate under Sec.
412.523(d)(2), we set total estimated payments for FY 2003 under the
LTCH PPS so that estimated aggregate payments under the LTCH PPS are
estimated to equal the amount that would have been paid if the LTCH PPS
had not been implemented.

[[Page 5379]]

2. Impact on Providers
The basic methodology for determining a per discharge LTCH PPS
payment is set forth in Sec. 412.515 through Sec. 412.536. In
addition to the basic MS-LTC-DRG payment (standard Federal rate
multiplied by the MS-LTC-DRG relative weight), we make adjustments for
differences in area wage levels, COLA for Alaska and Hawaii, and SSOs.
Furthermore, LTCHs may also receive HCO payments for those cases that
qualify based on the threshold established each rate year.
To understand the impact of the proposed changes to the LTCH PPS
payments discussed in section IV. of this proposed rule on different
categories of LTCHs for the 2009 LTCH PPS rate year, it is necessary to
estimate payments per discharge for the 2008 LTCH PPS rate year using
the rates, factors and policies established in the RY 2008 LTCH PPS
final rule (72 FR 26870 through 27029), the RY 2008 LTCH PPS correction
notice (72 FR 36613 through 36616) and the applicable sections of MMSEA
(as described in greater detail below in section XVI.B.3. of this
proposed rule). It is also necessary to estimate the proposed payments
per discharge that would be made under the proposed LTCH PPS rates,
factors and policies for the 2009 LTCH PPS rate year (as discussed in
the preamble of this proposed rule). We also evaluated the change in
estimated 2008 LTCH PPS rate year payments to estimated proposed 2009
LTCH PPS rate year payments (on a per discharge basis) for each
category of LTCHs.
Hospital groups were based on characteristics provided in the OSCAR
data, FY 2003 through FY 2005 cost report data in HCRIS, and PSF data.
Hospitals with incomplete characteristics were grouped into the
``unknown'' category. Hospital groups include the following:
Location: Large Urban/Other Urban/Rural.
Participation date.
Ownership control.
Census region.
Bed size.
To estimate the impacts of the proposed payment rates and policy
changes among the various categories of existing providers, we used
LTCH cases from the FY 2006 MedPAR file to estimate payments for RY
2008 and to estimate proposed payments for RY 2009 for 394 LTCHs. While
currently there are just under 400 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 FY 2006 MedPAR data for the 394 LTCHs in our database, which
includes 265 proprietary LTCHs, provide sufficient representation in
the MS-LTC-DRGs containing discharges for patients who received LTCH
care for the most commonly treated LTCH patients' diagnoses.
3. Calculation of Prospective Payments
For purposes of this impact analysis, to estimate per discharge
payments under the LTCH PPS, we simulated payments on a case-by-case
basis using LTCH claims for the FY 2006 MedPAR files. In modeling
estimated LTCH PPS payments for both RY 2008 and RY 2009 in this impact
analysis, we applied the RY 2008 standard Federal rate (that is,
$38,086.04) provided for by sections 114(e)(1) and (2) of Public Law
110-173, and the SSO policy provided for by section 114(c)(3) of the
MMSEA7 (that is, excluding the revisions to the SSO policy at Sec.
412.529(c)(3)(i) of the regulations). Although we realize that the
effective date for the change in the SSO policy during RY 2008 in the
MMSEA is December 29, 2007, and the revised standard Federal rate for
RY 2008 is not applicable for discharges occurring on or after July 1,
2007 and before April 1, 2008, for purposes of this impact analysis, in
estimating RY 2008 LTCH PPS payments we applied both the revised SSO
policy and revised standard Federal rate for all of RY 2008. Similarly,
in modeling LTCH PPS payments to project the average change in
estimated payments per discharge from RY 2008 to RY 2009 due to the
proposed change in the standard Federal rate (column 6 of Table 9),
rather than using the RY 2008 standard Federal rate finalized in the RY
2008 final rule, we compared the RY 2008 ``base rate'' (which we
interpret to mean the standard Federal rate) mandated by section
114(e)(1) of the Medicare, Medicaid and SCHIP Extension Act of 2007
(that is, $38,086.04), to the proposed RY 2009 standard Federal rate of
$39,076.28 (that is, $38,086.04 updated by 2.6 percent, as discussed in
section IV.E. of this proposed rule) in order to appropriately estimate
the effect of updating the rate by 2.6 percent. We took this approach
for the impact analysis in this proposed rule since for the last 3
months of the 2008 LTCH PPS rate year (that is, April 2008 through June
2008), which is the 3-month period immediately preceding the start of
the 2009 LTCH PPS rate year, LTCHs will be paid in accordance with the
RY 2008 standard Federal rate and SSO policy established by section 114
of the Medicare, Medicaid, and SCHIP Extension Act of 2007. Therefore,
for purposes of the impact analysis in this proposed rule, we modeled
the projected changes in estimated payments from RY 2008 to RY 2009
based on computing estimated RY 2008 LTCH PPS payments using a standard
Federal rate of $38,086.04 and the corresponding change to the SSO
policy, which excludes the revisions to the SSO policy at Sec.
412.529(c)(3)(i), as if those policies were applicable to all
discharges occurring during RY 2008. (Additional information on section
114 of the Medicare, Medicaid and SCHIP Extension Act of 2007 can be
found at section I.A. of this proposed rule.)
Furthermore, in modeling estimated LTCH PPS payments for both RY
2008 and RY 2009 in this impact analysis, we applied the RY 2008 and
proposed RY 2009 adjustments for area wage differences (as described in
section IV.F.1. of the preamble of this proposed rule), and the COLA
for Alaska and Hawaii (as described in section IV.F.2. of the preamble
of this proposed rule). Specifically, we adjusted for area wage
differences for estimated 2008 LTCH PPS rate year payments using the
current LTCH PPS labor-related share of 75.788 percent (72 FR 26892),
the wage index values established in the Tables 1 and 2 of the Addendum
of the RY 2008 final rule (72 FR 26996 through 27019) and the COLA
factors established in Table 3 of the preamble of the RY 2008 final
rule (72 FR 26894). Similarly, we adjusted for area wage differences
for estimated 2009 LTCH PPS rate year payments using the proposed LTCH
PPS labor-related share of 75.920 percent (see section IV.D.1.c. of
this proposed rule), the proposed wage index values presented in the
Tables 1 and 2 of the Addendum of this proposed rule and the proposed
COLA factors established in Table 3 of the preamble of this proposed
rule.
As discussed above, we also accounted for the payment policy for
SSOs. We also estimated additional payments that would be made for HCOs
(as described in section IV.F.3. of this proposed rule). As noted in
section IV.F.4. of this proposed rule, we are not proposing to make
adjustments for rural location, geographic reclassification, indirect
medical education costs, or a DSH payment for the treatment of low-
income patients because our most recent data analysis that reflects
LTCH behavior subsequent to the implementation of the LTCH PPS
indicates that proposing payment adjustments for geographic
reclassification, rural location, DSH, or indirect medical education
costs would not improve the accuracy of payments

[[Page 5380]]

made under the LTCH PPS to LTCHs. (See Section IV.F.4 ).
These impacts reflect the estimated ``losses'' or ``gains'' among
the various classifications of LTCHs for the 2008 LTCH PPS rate year
compared to the 2009 LTCH PPS rate year based on the proposed payment
rates and policy changes presented in this proposed rule. Table 9
illustrates the estimated aggregate impact of the LTCH PPS 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 LTCH cases.
The fourth column shows the estimated payment per
discharge for the 2008 LTCH PPS rate year (as described above).
The fifth column shows the estimated proposed payment per
discharge for the 2009 LTCH PPS rate year (as described above).
The sixth column shows the percentage change in estimated
payments per discharge from the 2008 LTCH PPS rate year to the 2009
LTCH PPS rate year for proposed changes to the standard Federal rate
(as discussed in section IV.E. of the preamble of this proposed rule).
The seventh column shows the percentage change in
estimated payments per discharge from the 2008 LTCH PPS rate year to
the 2009 LTCH PPS rate year for proposed changes to the area wage
adjustment at Sec. 412.525(c) (as discussed in section IV.D.1. of the
preamble of this proposed rule).
The eighth column shows the percentage change in estimated
payments per discharge from the 2008 LTCH PPS rate year (column 4) to
the 2009 LTCH PPS rate year (column 5) for all proposed changes.

Table 9.--Projected Impact of Proposed Payment Rate and Payment Rate Policy Changes to LTCH PPS Payments for RY 2009
(Estimated 2008 LTCH PPS Rate Year Payments Compared to Estimated Proposed 2009 LTCH PPS Rate Year Payments *)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent
Percent change in
change in estimated Percent
estimated payments change in
Average payments per estimated
Average estimated per discharge payments
Number of estimated proposed RY discharge from RY per
LTCH Classification Number of LTCH PPS RY 2008 2009 LTCH from RY 2008 to RY discharge
LTCHs cases LTCH PPS PPS payment 2008 to RY 2009 for from RY
payment per per case 2009 for proposed 2008 to RY
case \1\ \2\ proposed changes to 2009 for
changes to the area all changes
the Federal wage \5\
rate \3\ adjustment
\4\
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS................................................ 394 134,160 $32,166 $33,092 2.2 -0.1 2.9
BY LOCATION:
RURAL.................................................... 25 6,076 26,951 27,643 2.4 -0.5 2.6
URBAN.................................................... 369 128,084 32,414 33,351 2.2 -0.1 2.9
LARGE................................................ 193 78,292 33,732 34,736 2.2 -0.1 3.0
OTHER................................................ 176 49,792 30,341 31,172 2.3 -0.3 2.7
BY PARTICIPATION DATE:
BEFORE OCT. 1983......................................... 28 9,779 27,864 28,849 2.2 0.4 3.5
OCT. 1983--SEPT. 1993.................................... 46 21,101 33,189 34,175 2.2 -0.1 3.0
OCT. 1993--SEPT. 2002.................................... 204 74,145 32,207 33,082 2.3 -0.3 2.7
AFTER OCTOBER 2002....................................... 112 28,598 32,793 33,783 2.3 0.0 3.0
UNKNOWN.................................................. 4 537 31,300 32,442 2.3 0.7 3.6
BY OWNERSHIP TYPE:
VOLUNTARY................................................ 88 27,948 31,061 32,017 2.2 0.0 3.1
PROPRIETARY.............................................. 265 100,047 32,415 33,314 2.2 -0.2 2.8
GOVERNMENT............................................... 25 3,692 33,984 35,155 2.1 0.1 3.4
UNKNOWN.................................................. 16 2,473 31,864 33,177 2.3 1.1 4.1
BY CENSUS REGION:
NEW ENGLAND.............................................. 20 9,776 27,177 28,213 2.2 0.7 3.8
MIDDLE ATLANTIC.......................................... 36 10,756 31,851 32,629 2.2 -0.6 2.4
SOUTH ATLANTIC........................................... 50 13,544 35,730 36,822 2.2 0.0 3.1
EAST NORTH CENTRAL....................................... 70 19,552 35,316 36,289 2.2 -0.2 2.8
EAST SOUTH CENTRAL....................................... 30 8,667 32,736 33,565 2.2 -0.5 2.5
WEST NORTH CENTRAL....................................... 18 5,350 34,325 35,378 2.2 0.0 3.1
WEST SOUTH CENTRAL....................................... 130 51,441 28,779 29,538 2.3 -0.3 2.6
MOUNTAIN................................................. 22 5,804 35,089 36,143 2.2 0.0 3.0
PACIFIC.................................................. 18 9,270 41,129 42,633 2.1 0.6 3.7
BY BED SIZE:
BEDS: 0-24............................................... 33 4,797 30,110 30,888 2.4 -0.5 2.6
BEDS: 25-49.............................................. 195 45,212 32,404 33,305 2.2 -0.2 2.8
BEDS: 50-74.............................................. 72 26,064 32,145 33,040 2.2 -0.2 2.8
BEDS: 75-124............................................. 52 23,503 33,212 34,246 2.2 0.1 3.1
BEDS: 125-199............................................ 21 17,567 32,088 33,013 2.2 -0.2 2.9
BEDS: 200 +.............................................. 21 17,017 30,781 31,717 2.2 0.0 3.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated 2009 LTCH PPS rate year payments based on the proposed payment rates and policy changes presented in the preamble of this proposed rule.

[[Page 5381]]

\2\ Estimated 2008 LTCH PPS rate year payments based on the rates, factors and policies established in the RY 2008 LTCH PPS final rule (72 FR 26870
through 27029), the RY 2008 LTCH PPS correction notice (72 FR 36613 through 36616) and the applicable sections of the Medicare, Medicaid, and SCHIP
Extension Act of 2007. As described in section XVI.B.3. of this proposed rule, although we are aware that there are different effective dates for the
various provisions of MMSEA that affect RY 2008 LTCH PPS payments, for the purpose of this impact analysis, we modeled estimated RY 2008 payments as
if those provisions were applicable to discharges for the entire 2008 LTCH PPS rate year. Specifically, in estimating RY 2008 LTCH PPS payments, we
applied the RY 2008 Federal rate provided for by sections 114(e)(1) of the MMSEA (that is, $38,086.04), and the SSO policy provided for by section
114(c)(3) of the MMSA (that is, excluding the revisions to the SSO policy at Sec. 412.529(c)(3)(i)).
\3\ Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year for the proposed changes to the
Federal rate, as discussed in section IV.E. of the preamble of this proposed rule. (Note, because about 34 percent of all LTCH cases are projected to
receive a payment adjustment under the SSO policy that is based either on the estimated cost of the case or the ``blend option'' (which is based in
part on the ``IPPS comparable amount'') rather than the proposed Federal rate in RY 2009, the percent change in estimated payments per discharge due
to the proposed changes to the Federal rate for most of the categories of LTCHs, 2.2 percent, is somewhat less than the proposed update to the Federal
rate of 2.6 percent.)
\4\ Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year for proposed changes to the area
wage adjustment at Sec. 412.525(c) (as discussed in section V.F.1. of the preamble of this proposed rule).
\5\ Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year (as described in section XVI.B.3. of this proposed rule) to the
2009 LTCH PPS rate year for all of the proposed changes presented in the preamble of this proposed rule. Note, this column, which shows the percent
change in estimated payments per discharge for all proposed changes, may not equal the sum of the percent changes in estimated payments per discharge
for proposed changes to the Federal rate (column 6) and the proposed changes to the area wage adjustment (column 7) due to the effect of estimated
changes in both payments to SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed this proposed rule), as well as
other interactive effects that cannot be isolated.

4. Results
Based on the most recent available data (as described previously
for 394 LTCHs), we have prepared the following summary of the impact
(as shown in Table 9) of the proposed LTCH PPS payment rate and policy
changes presented in this proposed rule. The impact analysis in Table 9
shows that estimated payments per discharge are expected to increase
approximately 2.9 percent, on average, for all LTCHs from the 2008 LTCH
PPS rate year as compared to the 2009 LTCH PPS rate year as a result of
the proposed payment rate and policy changes presented in this proposed
rule. We note that although we are proposing a 2.6 percent increase to
the standard Federal rate for RY 2009, based on the latest proposed
market basket estimate (3.5 percent) and offset by the proposed coding
and documentation adjustment (0.9 percent), for most categories of
LTCHs, the impact analysis shown in Table 9 (column 7) only shows a 2.2
percent increase in estimated payments per discharge from RY 2008 to RY
2009 as a result of the proposed change to the standard Federal rate.
The reason that this column shows an estimated 2.2 percent increase
rather than an estimated 2.6 percent increase (based on the proposed
2.6 percent update to the standard Federal rate) is because about 34
percent of all LTCH cases are projected to receive an SSO payment that
would be based either on the estimated cost of the case or the ``blend
option'' (which is based in part on the ``IPPS comparable amount'')
rather than a LTCH PPS payment based on the proposed standard Federal
rate. Therefore, because over 30 percent of all LTCH PPS cases would
receive a payment that is not based fully on the proposed standard
Federal rate, the percent change in estimated payments per discharge
due to the proposed changes to the standard Federal rate for most
categories of LTCHs shown in Table 9 is projected to be 2.2 percent,
which is somewhat less than the 2.6 percent proposed update to the
standard Federal rate. In addition to the proposed 2.6 percent increase
to the standard Federal rate for RY 2009, the projected percent
increase in estimated payments per discharge from the 2008 LTCH PPS
rate year to the 2009 LTCH PPS rate year of 2.9 percent shown in Table
9 (see column 8) reflects the effect of increased HCO and SSO payments
as we discussed previously. That is, in calculating the estimated
increase in payments for HCO and SSO from RY 2008 to RY 2009, we
increased costs by applying the proposed market basket (approximately
3.5 percent). As noted above, SSOs comprise approximately 16 percent of
total LTCH PPS payments and high cost outliers comprise approximately 8
percent of estimated total LTCH PPS payments. Furthermore, as discussed
previously in this regulatory impact analysis, the average increase in
estimated payments per discharge from the 2008 LTCH PPS rate year to
the 2009 LTCH PPS rate year, on average, for all LTCHs of approximately
2.9 (as shown in Table 9) was determined by comparing estimated RY 2009
LTCH PPS payments (using the proposed rates and policies discussed in
the preamble of this rule) to estimated RY 2008 LTCH PPS payments (as
described above in section XVI.B.3. of this regulatory impact
analysis).
a. Location
Based on the most recent available data, the majority of LTCHs are
in urban areas. Approximately 6 percent of the LTCHs are identified as
being located in a rural area, and approximately 5 percent of all LTCH
cases are treated in these rural hospitals. The impact analysis
presented in Table 9 shows that the average percent increase in
estimated payments per discharge for the 2008 LTCH PPS rate year
compared to the 2009 LTCH PPS rate year for all hospitals is 2.9
percent for all proposed changes. For rural LTCHs, the percent change
for all proposed changes is estimated to be 2.6 percent, while for
urban LTCHs, we estimate this increase to be 2.9 percent. Large urban
LTCHs are projected to experience a 3.0 percent increase in estimated
payments per discharge from the 2008 LTCH PPS rate year compared to the
2009 LTCH PPS rate year, while other urban LTCHs are projected to
experience a 2.7 percent increase in estimated payments per discharge
from the 2008 LTCH PPS rate year compared to the 2009 LTCH PPS rate
year, as shown in Table 9. Rural LTCHs are projected to experience a
somewhat lower than average increase in estimated payments per
discharge for all proposed changes primarily due to the proposed
changes to the area wage adjustment. That is, 68 percent of the LTCHs
in these areas are expected to experience a decrease in their wage
index value from RY 2008 to RY 2009. In addition, because all LTCHs in
rural areas have a wage index value that is less than 1.0, the proposed
increase to the labor-related share (from 75.788 percent to 75.920
percent) would also contribute to the estimated lower than average
increase in estimated payments from RY 2008 to RY 2009 shown in column
8 of Table 9.
b. Participation Date
LTCHs are grouped by participation date into four categories: (1)
Before October 1983; (2) between October 1983 and September 1993; (3)
between October 1993 and September 2002; and (4) after October 2002.
Based on the most recent available data, the majority (approximately 52
percent) of the LTCH cases are in hospitals that began

[[Page 5382]]

participating between October 1993 and September 2002, and are
projected to experience a slightly lower than average increase of 2.7
percent in estimated payments per discharge from the 2008 LTCH PPS rate
year compared to the 2009 LTCH PPS rate year, as shown in Table 9,
mostly because approximately 66 percent of hospitals in this category
are projected to experience a decrease in their wage index value from
RY 2008 to RY 2009. In addition, because the majority of hospitals (80
percent) in this category have a wage index of less than 1.0, the
proposed increase to the labor-related share (from 75.788 percent to
75.920 percent) would also contribute to the slightly lower than
average increase in payments from RY 2008 to RY 2009 shown in column 8
of Table 9.
LTCHs that began participating in Medicare between October 1983 and
September 1993, and those LTCHs that began participating in Medicare
after October 2002 are projected to experience close to the average
percent increase (3.0 percent) in estimated payments per discharge from
the 2008 LTCH PPS rate year compared to the 2009 LTCH PPS rate year, as
shown in Table 9. Approximately 12 percent of LTCHs began participating
in Medicare between October 1983 and September 1993 while approximately
28 percent of LTCHs began participating in Medicare after October 2002
(that is, the beginning of the LTCH PPS, which was implemented for cost
reporting periods beginning on or after October 1, 2002).
LTCHs that began participating before October 1983 are projected to
experience a 3.5 percent increase in estimated payments per discharge
from the 2008 LTCH PPS rate year compared to the 2009 LTCH PPS rate
year (see Table 9). We are projecting that LTCHs that began
participating in Medicare before October 1983 would experience a larger
than average increase in estimated payments for RY 2009 as compared to
RY 2008 primarily due to the proposed changes to the area wage
adjustment. This is because approximately 68 percent of the LTCHs that
began participating in Medicare before October 1983 are located in
areas where the proposed RY 2009 wage index value would be greater than
the RY 2008 wage index value. In addition, because a significant number
(75 percent) of hospitals in this category have a wage index of greater
than 1.0, the proposed increase to the labor-related share (from 75.788
percent to 75.920 percent) would also contribute to the larger than
average increase in estimated payments from RY 2008 to RY 2009.
c. Ownership Control
Other than LTCHs whose ownership control type is unknown, LTCHs are
grouped into three categories based on ownership control type:
Voluntary; proprietary; and government. Based on the most recent
available data, approximately 6 percent of LTCHs are identified as
government-owned and operated (see Table 9). We expect that for these
government-owned and operated LTCHs, estimated 2009 LTCH PPS rate year
payments per discharge would increase 3.4 percent in comparison to the
2008 LTCH PPS rate year, as shown in Table 9. We are projecting that
government-run LTCHs would experience a somewhat higher than average
increase in estimated payments in RY 2009 as compared to RY 2008
primarily due to the effect of the proposed changes to the area wage
adjustment. Specifically, LTCHs in this category are projected to
experience a higher than average increase in their estimated payments
from RY 2008 to RY 2009 due to the proposed changes to the area wage
adjustment primarily because the majority (60 percent) of hospitals in
this category would experience an increase in their wage index value
from RY 2008 to RY 2009.
We project that estimated 2009 LTCH PPS rate year payments per
discharge for voluntary LTCHs, which account for approximately 22
percent of LTCHs, would increase near the average (3.1 percent) in
comparison to estimated 2008 LTCH PPS rate year payments (see Table 9).
The majority (approximately 67 percent) of LTCHs are identified as
proprietary. We project that 2009 LTCH PPS rate year estimated payments
per discharge for these proprietary LTCHs would increase 2.8 percent
(nearly average) in comparison to the 2008 LTCH PPS rate year (see
Table 9).
d. Census Region
Estimated payments per discharge for the 2009 LTCH PPS rate year
are projected to increase for LTCHs located in all regions in
comparison to the 2008 LTCH PPS rate year. The percent increase in
estimated payments per discharge from the 2008 LTCH PPS rate year to
the 2009 LTCH PPS rate year for all regions is largely attributable to
the proposed increase in the standard Federal rate.
Of the 9 census regions, we project that the increase in proposed
2009 LTCH PPS rate year estimated payments per discharge in comparison
to the 2008 LTCH PPS rate year would have the largest impact on LTCHs
in the New England and Pacific regions (3.8 percent and 3.7 percent,
respectively; see Table 9). LTCHs located in both the New England and
Pacific regions are expected to experience a larger than average
increase in estimated payments due to the proposed changes in the area
wage adjustment (0.7 percent for the New England region, and 0.6
percent for the Pacific region, as shown in Table 9). This is because
approximately 85 percent of LTCHs located in the New England region and
all of the LTCHs in the Pacific region are projected to experience an
increase in their wage index values for proposed RY 2009 as compared to
RY 2008.
We project that in comparison to the 2008 LTCH PPS rate year, the
proposed 2009 LTCH PPS rate year estimated payments per discharge for
LTCHs in the East North Central region would increase by approximately
2.8 percent (nearly average). For LTCHs located in the South Atlantic
and West North Central regions, we estimate that the slightly higher
than average projected increase (3.1 percent for each region) in
estimated payments per discharge for the 2009 LTCH PPS rate year
compared to the 2008 LTCH PPS rate year is largely a result of the
proposed changes to the area wage adjustment. That is, we estimate that
approximately 58 percent of hospitals in the South Atlantic region and
approximately 55 percent of hospitals in the West North Central region
would experience an increase in their wage index values from RY 2008 to
RY 2009. For LTCHs located in the Middle Atlantic, East South Central
and West South Central regions, we estimate that the somewhat lower
than average projected increase (2.4 percent, 2.5 percent, and 2.6
percent, respectively) in estimated payments per discharge for the 2009
LTCH PPS rate year compared to the 2008 LTCH PPS rate year is largely a
result of the proposed changes to the area wage adjustment.
Specifically, nearly all LTCHs in the Middle Atlantic region
(approximately 89 percent) and the majority of the hospitals in the
East South Central region (approximately 67 percent) and West South
Central region (approximately 75 percent) would experience a decrease
in their wage index value from RY 2008 to RY 2009. Furthermore, because
a significant number of hospitals in these categories have a wage index
of less than 1.0, the proposed increase to the labor-related share
(from 75.788 percent to 75.920 percent) would also contribute to the
lower than average estimated increase in payments from RY 2008 to RY
2009.

[[Page 5383]]

e. Bed Size
LTCHs were grouped into seven categories based on bed size: 0-24
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; greater than
200 beds; and unknown bed size.
We are projecting an increase in estimated 2009 LTCH PPS rate year
payments per discharge in comparison to the 2008 LTCH PPS rate year for
all bed size categories. Most LTCHs are in bed size categories where
estimated 2009 LTCH PPS rate year payments per discharge are projected
to increase at or near the average increase of 2.9 percent for all
LTCHs, in comparison to the 2008 LTCH PPS rate year (that is, all LTCH
bed size categories except the category of LTCHs with 0-24 beds).
Specifically, estimated payments per discharge for the 2009 LTCH PPS
rate year are projected to increase for LTCHs with 25-49 and 50-74 beds
at 2.8 percent, for LTCHs with 75-124 beds at 3.1 percent, for LTCHs
with 125-199 beds at 2.9 percent, and for LTCHs with more than 200
beds, at 3.0 percent.
Estimated payments per discharge for the 2009 LTCH PPS rate year
for LTCHs with 0-24 beds are projected to have a somewhat lower than
average increase in comparison to all hospitals (2.6 percent; see Table
9). This lower than average increase in estimated payments per
discharge for LTCHs with 0-24 beds is largely due to the proposed
changes to the area wage adjustment. Specifically, LTCHs in this
category are expected to experience a larger than average decrease in
their payments from RY 2008 to RY 2009 due to the proposed changes to
the area wage adjustment primarily because approximately 73 percent of
the hospitals in this category are projected to experience a decrease
in their wage index value from RY 2008 to RY 2009. In addition, because
the majority (approximately 91 percent) of hospitals in this category
have a wage index of less than 1.0, the proposed increase to the labor-
related share (from 75.788 percent to 75.920 percent) would also
contribute to the smaller than average increase in estimated payments
from RY 2008 to RY 2009 shown in Table 9.
5. Effect on the Medicare Program
Based on actuarial projections, an estimate of Medicare spending
(total estimated Medicare program payments) for LTCH services over the
next 5 years based on current LTCH PPS policy (as established in
previous LTCH PPS final rules) is shown in Table 4 in section IV.D. of
the preamble of this proposed rule. As noted previously, we project
that the provisions of this proposed rule would result in an increase
in estimated aggregate LTCH PPS payments in RY 2009 of approximately
124 million (or about 2.9 percent) for the 394 LTCHs in our database.
Consistent with the statutory requirement for BN, as we discussed
in the August 30, 2002 final rule that implemented the LTCH PPS, in
developing the LTCH PPS, we intended estimated aggregate payments under
the LTCH PPS in FY 2003 be projected 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 BN calculations for determining the FY 2003 standard Federal rate
used the best available data and necessarily reflects assumptions. As
discussed in section IV.D. of this proposed rule, section 114(c)(4) of
the Medicare, Medicaid and SCHIP Extension Act of 2007 provides that
the ``Secretary shall not, for the 3-year period beginning on the date
of the enactment of this Act, make the one-time prospective adjustment
to long-term care hospital prospective payment rates provided for in
section 412.523(d)(3) of title 42, Code of Federal Regulations, or any
similar provision.'' That provision delays the effective date of any
one-time budget neutrality adjustment until no earlier than December
29, 2010. However, prior to the enactment of the MMSEA of 2007, we had
developed a methodology for evaluating the appropriateness of proposing
a one-time budget neutrality adjustment under existing Sec.
412.523(d)(3). In order to inform the public of our thinking, and to
stimulate comments for our consideration during the three-year delay in
implementing any adjustment under the recent legislation, we have
presented our analysis and its results in section IV.D. of the preamble
of this proposed rule.
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 would enhance the efficiency of the
Medicare program.

D. Accounting Statement

As discussed in section XVI.A.1., the impact analysis of this
proposed rule results in an increase in estimated aggregate payments of
approximately $124 million (or about 2.9 percent) for the 394 LTCHs in
our database. Therefore, as required by OMB Circular A-4 (available at
http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 10, we

have prepared an accounting statement showing the classification of the
expenditures associated with the provisions of this proposed rule.
Table 10 provides our best estimate of the proposed increase in
Medicare payments under the LTCH PPS as a result of the provisions
presented in this proposed rule based on the data for the 394 LTCHs in
our database. All expenditures are classified as transfers to Medicare
providers (that is, LTCHs).

Table 10.--Accounting Statement: Classification of Estimated
Expenditures, from the 2008 LTCH PPS Rate Year to the 2009 LTCH PPS Rate
Year
[In millions]
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... Positive transfer--Estimated
increase in expenditures: $124
million.
From Whom To Whom?..................... Federal Government To LTCH
Medicare Providers.
------------------------------------------------------------------------

In accordance with the provisions of Executive Order 12866, this
proposed 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.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services would amend 42 CFR chapter IV as set forth below:

[[Page 5384]]

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

1. The authority citation for part 412 continues to read as
follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh) and section 124 of Pub. L. 106-113 (113
Stat. 1501A-332).

Subpart O--Prospective Payment System for Long Term Care Hospitals

2. Section 412.503 is amended by--
A. Revising the definition of ``Long-term care hospital prospective
payment system rate year''.
B. Adding new definitions of ``rural'' and ``urban'' in
alphabetical order.
The revision and additions read as follows:

Sec. 412.503 Definitions.

* * * * *
Long-term care hospital prospective payment system rate year
means--
(1) From July 1, 2003 and ending on or before June 30, 2008, the
12-month period of July 1 through June 30.
(2) From July 1, 2008 and ending on September 30, 2009, the 15-
month period of July 1, 2008 through September 30, 2009.
(3) Beginning on or after October 1, 2009, the 12-month period of
October 1 through September 30.
* * * * *
Rural area means--(1) For cost reporting periods beginning on or
after October 1, 2002, with respect to discharges occurring during the
period covered by such cost reports but before July 1, 2005, an area
defined in Sec. 412.62(f)(1)(iii);
(2) For discharges occurring on or after July 1, 2005, and before
July 1, 2008, an area as defined in Sec. 412.64(b)(1)(ii)(C); and
(3) For discharges occurring on or after July 1, 2008, any area
outside an urban area.
Urban area means--(1) For cost reporting periods beginning on or
after October 1, 2002, with respect to discharges occurring during the
period covered by such cost reports but before July 1, 2005, an area
defined in Sec. 412.62(f)(1)(ii);
(2) For discharges occurring on or after July 1, 2005, and before
July 1, 2008, an urban area means an area as defined in Sec.
412.64(b)(1)(ii)(A) and (B); and
(3) For discharges occurring on or after July 1, 2008, a
Metropolitan Statistical Area, as defined by the Executive Office of
Management and Budget.
3. Section 412.523 is amended by--
A. Adding new paragraph (c)(3)(v).
B. Revising paragraph (d)(2) by removing the phrase ``sections
1886(b)(2) and (b)(3) of the Act'' and adding ``section 1886(b)(2)(E)
and (b)(3)(J) of the Act'' in its place.
C. Revising paragraph (d)(3).
The addition and revisions read as follows:

Sec. 412.523 Methodology for calculating the Federal prospective
payment rates.

* * * * *
(c) * * *
(3) * * *
(v) For long-term care hospital prospective payment system rate
year beginning July 1, 2008 and ending September 30, 2009. The standard
Federal rate for long-term care hospital prospective payment system
rate year beginning July 1, 2008 and ending September 30, 2009 is the
standard Federal rate for the previous long-term care hospital
prospective payment system rate year updated by 2.6 percent. The
standard Federal rate is adjusted, as appropriate, as described in
paragraph (d) of this section.
* * * * *
(d)(3) The Secretary reviews payments under this prospective
payment system and may make a one-time prospective adjustment to the
long-term care hospital prospective payment system rates no earlier
than December 29, 2010, so that the effect of any significant
difference between the data used in the original computations and more
recent data to determine budget neutrality is not perpetuated in the
prospective payment rates for future years.
* * * * *
4. Section 412.525 is amended by revising paragraph (c) to read as
follows:

Sec. 412.525 Adjustments to the Federal prospective payment.

* * * * *
(c) Adjustments for area levels. The labor portion of a long-term
care hospital's Federal prospective payment is adjusted to account for
geographical differences in the area wage levels using an appropriate
wage index (established by CMS), which reflects the relative level of
hospital wages and wage-related costs in the geographic area (that is,
urban or rural area as determined in accordance with the definitions
set forth in Sec. 412.503) of the hospital compared to the national
average level of hospital wages and wage-related costs. The appropriate
wage index (established by CMS) is updated annually.
5. Section 412.529 is amended by revising paragraphs (d)(4)(ii)(B)
and (d)(4)(iii)(B) to read as follows:

Sec. 412.529 Special payment provision for short-stay outliers.

* * * * *
(d) * * *
(4) * * *
(ii) * * *
(B) Is adjusted for different area wage levels based on the
geographic classifications set forth at Sec. 412.503 and the
applicable hospital inpatient prospective payment system labor-related
share, using the applicable hospital inpatient prospective payment
system wage index value for nonreclassified hospitals. For LTCHs
located in Alaska and Hawaii, this amount is also adjusted by the
applicable hospital inpatient prospective payment system cost of living
adjustment factors.
* * * * *
(iii) * * *
(B) Is adjusted for the applicable geographic adjustment factors,
including local cost variation based on the geographic classifications
set forth at Sec. 412.503 and the applicable full hospital inpatient
prospective payment system wage index value for nonreclassified
hospitals, and applicable large urban location cost of living
adjustment factors for LTCHs in Alaska and Hawaii, if applicable.
* * * * *
6. Section 412.534 is amended by revising paragraphs (d)(1),
(f)(2)(ii), and (f)(3)(ii) to read as follows:

Sec. 412.534 Special payment provisions for long-term care hospitals
within hospitals and satellites of long-term care hospitals.

* * * * *
(d) * * *
(1) Subject to paragraphs (g) and (h) of this section, in the case
of a long-term care hospital or satellite facility that is located in a
rural area as defined in Sec. 412.503 and is co-located with another
hospital for any cost reporting period beginning on or after October 1,
2004 in which the long-term care hospital or satellite facility has a
discharged Medicare inpatient population of whom more than 50 percent
were admitted to the long-term care hospital or satellite facility from
the co-located hospital, payments for the patients who are admitted
from the co-located hospital and who cause the long-term care hospital
or satellite facility to exceed the 50 percent threshold for discharged
patients who were admitted from the co-located hospital are the lesser
of the amount otherwise payable under this subpart or the amount
payable under this subpart that is equivalent, as set forth in
paragraph (f) of this section, to the amount that were otherwise
payable under subpart A, Sec. 412.1(a). Payments

[[Page 5385]]

for the remainder of the long-term care hospital's or satellite
facility's patients are made under the rules in this subpart at Sec.
412.500 through Sec. 412.541 with no adjustment under this section.
* * * * *
(f) * * *
(2) * * *
(ii) Is adjusted for different area wage levels based on the
geographic classifications set forth at Sec. 412.503 and the
applicable hospital inpatient prospective payment system labor-related
share, using the applicable hospital inpatient prospective payment
system wage index value for non-reclassified hospitals. For LTCHs
located in Alaska and Hawaii, this amount is also adjusted by the
applicable hospital inpatient prospective payment system cost of living
adjustment factors;
* * * * *
(3) * * *
(ii) Is adjusted by the applicable geographic adjustment factors,
including local cost variation based on the applicable geographic
classifications set forth at Sec. 412.503 and the applicable full
hospital inpatient prospective payment system wage index value for
nonreclassified hospitals, applicable large urban location and cost of
living adjustment factors for LTCHs for Alaska and Hawaii, if
applicable;
* * * * *
7. Section 412.535 is amended by--
A. Revising the introductory text.
B. Revising paragraph (a).
C. Redesignating paragraph (b) as paragraph (d).
D. Adding new paragraphs (b) and (c).
The revisions and additions read as follows:

Sec. 412.535 Publication of the Federal prospective payment rates.

Except as specified in paragraph (b) of this section, CMS publishes
information pertaining to the long-term care hospital prospective
payment system effective for each annual update in the Federal
Register.
(a) For the period beginning on or after July 1, 2003, and ending
on June 30, 2008, information on the unadjusted Federal payment rates
and a description of the methodology and data used to calculate the
payment rates are published on or before May 1 prior to the start of
each long term care hospital prospective payment system rate year which
begins July 1, unless for good cause it is published after May 1, but
before June 1.
(b) For the period beginning on July 1, 2008 and ending on
September 30, 2009, information of the unadjusted Federal payment rates
and a description of the methodology and data used to calculate the
payment rates are published on or before May 1 prior to the start of
the long-term care hospital prospective payment system rate year which
begins July 1, unless for good cause it is published after May 1, but
before June 1.
(c) For the period beginning on or after October 1, 2009,
information on the unadjusted Federal payment rates and a description
of the methodology and data used to calculate the payment rates are
published on or before August 1 prior to the start of the Federal
fiscal year which begins October 1, unless for good cause it is
published after August 1, but before September 1.
* * * * *
7. Section 412.536 is amended by revising paragraphs (c)(1),
(e)(2)(ii), and (e)(3)(ii) to read as follows.

Sec. 412.536 Special payment provisions for long-term care hospitals
and satellites of long-term care hospitals that discharged Medicare
patients admitted from a hospital not located in the same building or
on the same campus as the long term care hospital or satellite of the
long-term care hospital.

* * * * *
(c) Special treatment of rural hospitals. (1) Subject to paragraph
(f) of this section, in the case of a long-term care hospital or long-
term care hospital satellite facility that is located in a rural area
as defined in Sec. 412.503 that has a discharged Medicare inpatient
population of whom more than 50 percent were admitted to the long-term
care hospital or long term care hospital satellite facility from a
hospital not co-located with the long-term care hospital or with the
satellite of a long-term care hospital, payment for the Medicare
discharges who are admitted from that hospital and who cause the long-
term care hospital or satellite facility to exceed the 50 percent
threshold for Medicare discharges is determined at the lesser of the
amount otherwise payable under this subpart or the amount payable under
this subpart that is equivalent, as set forth in paragraph (e) of this
section, to the amount that is otherwise payable under subpart A, Sec.
412.1(a). Payments for the remainder of the long-term care hospital's
or long-term care hospital satellite facility's Medicare discharges
admitted from that referring hospital are made under the rules in this
subpart at Sec. 412.500 through Sec. 412.541 with no adjustment under
this section.
* * * * *
(e) * * *
(2) * * *
(ii) Is adjusted for different area wage levels based on the
geographic classifications defined at Sec. 412.503 and the applicable
hospital inpatient prospective payment system labor-related share,
using the applicable hospital inpatient prospective payment system wage
index value for non-reclassified hospitals. For long-term care
hospitals located in Alaska and Hawaii, this amount is also adjusted by
the applicable hospital inpatient prospective payment system cost of
living adjustment factors;
* * * * *
(3) * * *
(ii) Is adjusted by the applicable geographic adjustment factors,
including local cost variation based on the applicable geographic
classifications set forth at Sec. 412.503 and the applicable full
hospital inpatient prospective payment system wage index value for
nonreclassified hospitals, applicable large urban location and cost of
living adjustment factors for long-term care hospitals for Alaska and
Hawaii, if applicable;
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

Dated: December 13, 2007.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: January 16, 2008.
Michael O. Leavitt,
Secretary.
The following addenda will not appear in the Code of Federal
Regulations.

Addendum

Addendum A contains the tables referred to throughout the preamble
to this proposed rule. The tables presented below are as follows:

Table 1.--Proposed Long-Term Care Hospital Wage Index for Urban Areas
for Discharges Occurring from July 1, 2008 through September 30, 2009
Table 2.--Proposed Long-Term Care Hospital Wage Index for Rural Areas
for Discharges Occurring from July 1, 2008 through September 30, 2009
Table 3.--FY 2008 MS-LTC-DRG Relative Weights, Geometric Average Length
of Stay, Short-Stay Outlier Threshold and IPPS-Comparable Threshold
(for Short-Stay Outlier Cases) (effective for discharges occurring on
or after July 1, 2008 through September 30, 2009). (Note: This table is
the same information provided in Table 11 of the FY 2008

[[Page 5386]]

IPPS final rule (72 FR 48143 through 48157), which has been reprinted
here for convenience.)

Table 1.--Proposed Long-Term Care Hospital Wage Index for Urban Areas
for Discharges Occurring From July 1, 2008 Through September 30, 2009
------------------------------------------------------------------------
Proposed
CBSA code Urban area (constituent counties) wage index
------------------------------------------------------------------------
10180.......... Abilene, TX............................... 0.7957
Callahan County, TX......................
Jones County, TX.........................
Taylor County, TX........................
10380.......... Aguadilla-Isabela-San Sebasti[aacute]n, PR 0.3448
Aguada Municipio, PR.....................
Aguadilla Municipio, PR..................
A[ntilde]asco Municipio, PR..............
Isabela Municipio, PR....................
Lares Municipio, PR......................
Moca Municipio, PR.......................
Rinc[oacute]n Municipio, PR..............
San Sebasti[aacute]n Municipio, PR.......
10420.......... Akron, OH................................. 0.8794
Portage County, OH.......................
Summit County, OH........................
10500.......... Albany, GA................................ 0.8514
Baker County, GA.........................
Dougherty County, GA.....................
Lee County, GA...........................
Terrell County, GA.......................
Worth County, GA.........................
10580.......... Albany-Schenectady-Troy, NY............... 0.8588
Albany County, NY........................
Rensselaer County, NY....................
Saratoga County, NY......................
Schenectady County, NY...................
Schoharie County, NY.....................
10740.......... Albuquerque, NM........................... 0.9554
Bernalillo County, NM....................
Sandoval County, NM......................
Torrance County, NM......................
Valencia County, NM......................
10780.......... Alexandria, LA............................ 0.7979
Grant Parish, LA.........................
Rapides Parish, LA.......................
10900.......... Allentown-Bethlehem-Easton, PA-NJ......... 0.9865
Warren County, NJ........................
Carbon County, PA........................
Lehigh County, PA........................
Northampton County, PA...................
11020.......... Altoona, PA............................... 0.8618
Blair County, PA.........................
11100.......... Amarillo, TX.............................. 0.9116
Armstrong County, TX.....................
Carson County, TX........................
Potter County, TX........................
Randall County, TX.......................
11180.......... Ames, IA.................................. 1.0046
Story County, IA.........................
11260.......... Anchorage, AK............................. 1.1913
Anchorage Municipality, AK...............
Matanuska-Susitna Borough, AK............
11300.......... Anderson, IN.............................. 0.8827
Madison County, IN.......................
11340.......... Anderson, SC.............................. 0.9086
Anderson County, SC......................
11460.......... Ann Arbor, MI............................. 1.0539
Washtenaw County, MI.....................
11500.......... Anniston-Oxford, AL....................... 0.7926
Calhoun County, AL.......................
11540.......... Appleton, WI.............................. 0.9598
Calumet County, WI.......................
Outagamie County, WI.....................
11700.......... Asheville, NC............................. 0.9185
Buncombe County, NC......................
Haywood County, NC.......................

[[Page 5387]]

Henderson County, NC.....................
Madison County, NC.......................
12020.......... Athens-Clarke County, GA.................. 1.0517
Clarke County, GA........................
Madison County, GA.......................
Oconee County, GA........................
Oglethorpe County, GA....................
12060.......... Atlanta-Sandy Springs-Marietta, GA........ 0.9828
Barrow County, GA........................
Bartow County, GA........................
Butts County, GA.........................
Carroll County, GA.......................
Cherokee County, GA......................
Clayton County, GA.......................
Cobb County, GA..........................
Coweta County, GA........................
Dawson County, GA........................
DeKalb County, GA........................
Douglas County, GA.......................
Fayette County, GA.......................
Forsyth County, GA.......................
Fulton County, GA........................
Gwinnett County, GA......................
Haralson County, GA......................
Heard County, GA.........................
Henry County, GA.........................
Jasper County, GA........................
Lamar County, GA.........................
Meriwether County, GA....................
Newton County, GA........................
Paulding County, GA......................
Pickens County, GA.......................
Pike County, GA..........................
Rockdale County, GA......................
Spalding County, GA......................
Walton County, GA........................
12100.......... Atlantic City, NJ......................... 1.2198
Atlantic County, NJ......................
12220.......... Auburn-Opelika, AL........................ 0.8090
Lee County, AL...........................
12260.......... Augusta-Richmond County, GA-SC............ 0.9645
Burke County, GA.........................
Columbia County, GA......................
McDuffie County, GA......................
Richmond County, GA......................
Aiken County, SC.........................
Edgefield County, SC.....................
12420.......... Austin-Round Rock, TX..................... 0.9544
Bastrop County, TX.......................
Caldwell County, TX......................
Hays County, TX..........................
Travis County, TX........................
Williamson County, TX....................
12540.......... Bakersfield, CA........................... 1.1051
Kern County, CA..........................
12580.......... Baltimore-Towson, MD...................... 1.0134
Anne Arundel County, MD..................
Baltimore County, MD.....................
Carroll County, MD.......................
Harford County, MD.......................
Howard County, MD........................
Queen Anne's County, MD..................
Baltimore City, MD.......................
12620.......... Bangor, ME................................ 0.9978
Penobscot County, ME.....................
12700.......... Barnstable Town, MA....................... 1.2603
Barnstable County, MA....................
12940.......... Baton Rouge, LA........................... 0.8034
Ascension Parish, LA.....................
East Baton Rouge Parish, LA..............

[[Page 5388]]

East Feliciana Parish, LA................
Iberville Parish, LA.....................
Livingston Parish, LA....................
Pointe Coupee Parish, LA.................
St. Helena Parish, LA....................
West Baton Rouge Parish, LA..............
West Feliciana Parish, LA................
12980.......... Battle Creek, MI.......................... 1.0179
Calhoun County, MI.......................
13020.......... Bay City, MI.............................. 0.8897
Bay County, MI...........................
13140.......... Beaumont-Port Arthur, TX.................. 0.8531
Hardin County, TX........................
Jefferson County, TX.....................
Orange County, TX........................
13380.......... Bellingham, WA............................ 1.1474
Whatcom County, WA.......................
13460.......... Bend, OR.................................. 1.0942
Deschutes County, OR.....................
13644.......... Bethesda-Gaithersburg-Frederick, MD....... 1.0511
Frederick County, MD.....................
Montgomery County, MD....................
13740.......... Billings, MT.............................. 0.8666
Carbon County, MT........................
Yellowstone County, MT...................
13780.......... Binghamton, NY............................ 0.8949
Broome County, NY........................
Tioga County, NY.........................
13820.......... Birmingham-Hoover, AL..................... 0.8898
Bibb County, AL..........................
Blount County, AL........................
Chilton County, AL.......................
Jefferson County, AL.....................
St. Clair County, AL.....................
Shelby County, AL........................
Walker County, AL........................
13900.......... Bismarck, ND.............................. 0.7225
Burleigh County, ND......................
Morton County, ND........................
13980.......... Blacksburg-Christiansburg-Radford, VA..... 0.8192
Giles County, VA.........................
Montgomery County, VA....................
Pulaski County, VA.......................
Radford City, VA.........................
14020.......... Bloomington, IN........................... 0.8915
Greene County, IN........................
Monroe County, IN........................
Owen County, IN..........................
14060.......... Bloomington-Normal, IL.................... 0.9325
McLean County, IL........................
14260.......... Boise City-Nampa, ID...................... 0.9465
Ada County, ID...........................
Boise County, ID.........................
Canyon County, ID........................
Gem County, ID...........................
Owyhee County, ID........................
14484.......... Boston-Quincy, MA......................... 1.1792
Norfolk County, MA.......................
Plymouth County, MA......................
Suffolk County, MA.......................
14500.......... Boulder, CO............................... 1.0426
Boulder County, CO.......................
14540.......... Bowling Green, KY......................... 0.8159
Edmonson County, KY......................
Warren County, KY........................
14740.......... Bremerton-Silverdale, WA.................. 1.0904
Kitsap County, WA........................
14860.......... Bridgeport-Stamford-Norwalk, CT........... 1.2735
Fairfield County, CT.....................
15180.......... Brownsville-Harlingen, TX................. 0.8914

[[Page 5389]]

Cameron County, TX.......................
15260.......... Brunswick, GA............................. 0.9475
Brantley County, GA......................
Glynn County, GA.........................
McIntosh County, GA......................
15380.......... Buffalo-Niagara Falls, NY................. 0.9568
Erie County, NY..........................
Niagara County, NY.......................
15500.......... Burlington, NC............................ 0.8747
Alamance County, NC......................
15540.......... Burlington-South Burlington, VT........... 0.9660
Chittenden County, VT....................
Franklin County, VT......................
Grand Isle County, VT....................
15764.......... Cambridge-Newton-Framingham, MA........... 1.1215
Middlesex County, MA.....................
15804.......... Camden, NJ................................ 1.0411
Burlington County, NJ....................
Camden County, NJ........................
Gloucester County, NJ....................
15940.......... Canton-Massillon, OH...................... 0.8935
Carroll County, OH.......................
Stark County, OH.........................
15980.......... Cape Coral-Fort Myers, FL................. 0.9396
Lee County, FL...........................
16180.......... Carson City, NV........................... 1.0003
Carson City, NV..........................
16220.......... Casper, WY................................ 0.9385
Natrona County, WY.......................
16300.......... Cedar Rapids, IA.......................... 0.8852
Benton County, IA........................
Jones County, IA.........................
Linn County, IA..........................
16580.......... Champaign-Urbana, IL...................... 0.9392
Champaign County, IL.....................
Ford County, IL..........................
Piatt County, IL.........................
16620.......... Charleston, WV............................ 0.8289
Boone County, WV.........................
Clay County, WV..........................
Kanawha County, WV.......................
Lincoln County, WV.......................
Putnam County, WV........................
16700.......... Charleston-North Charleston, SC........... 0.9124
Berkeley County, SC......................
Charleston County, SC....................
Dorchester County, SC....................
16740.......... Charlotte-Gastonia-Concord, NC-SC......... 0.9520
Anson County, NC.........................
Cabarrus County, NC......................
Gaston County, NC........................
Mecklenburg County, NC...................
Union County, NC.........................
York County, SC..........................
16820.......... Charlottesville, VA....................... 0.9277
Albemarle County, VA.....................
Fluvanna County, VA......................
Greene County, VA........................
Nelson County, VA........................
Charlottesville City, VA.................
16860.......... Chattanooga, TN-GA........................ 0.8994
Catoosa County, GA.......................
Dade County, GA..........................
Walker County, GA........................
Hamilton County, TN......................
Marion County, TN........................
Sequatchie County, TN....................
16940.......... Cheyenne, WY.............................. 0.9308
Laramie County, WY.......................
16974.......... Chicago-Naperville-Joliet, IL............. 1.0715

[[Page 5390]]

Cook County, IL..........................
DeKalb County, IL........................
DuPage County, IL........................
Grundy County, IL........................
Kane County, IL..........................
Kendall County, IL.......................
McHenry County, IL.......................
Will County, IL..........................
17020.......... Chico, CA................................. 1.1290
Butte County, CA.........................
17140.......... Cincinnati-Middletown, OH-KY-IN........... 0.9784
Dearborn County, IN......................
Franklin County, IN......................
Ohio County, IN..........................
Boone County, KY.........................
Bracken County, KY.......................
Campbell County, KY......................
Gallatin County, KY......................
Grant County, KY.........................
Kenton County, KY........................
Pendleton County, KY.....................
Brown County, OH.........................
Butler County, OH........................
Clermont County, OH......................
Hamilton County, OH......................
Warren County, OH........................
17300.......... Clarksville, TN-KY........................ 0.8251
Christian County, KY.....................
Trigg County, KY.........................
Montgomery County, TN....................
Stewart County, TN.......................
17420.......... Cleveland, TN............................. 0.8052
Bradley County, TN.......................
Polk County, TN..........................
17460.......... Cleveland-Elyria-Mentor, OH............... 0.9339
Cuyahoga County, OH......................
Geauga County, OH........................
Lake County, OH..........................
Lorain County, OH........................
Medina County, OH........................
17660.......... Coeur d'Alene, ID......................... 0.9532
Kootenai County, ID......................
17780.......... College Station-Bryan, TX................. 0.9358
Brazos County, TX........................
Burleson County, TX......................
Robertson County, TX.....................
17820.......... Colorado Springs, CO...................... 0.9719
El Paso County, CO.......................
Teller County, CO........................
17860.......... Columbia, MO.............................. 0.8658
Boone County, MO.........................
Howard County, MO........................
17900.......... Columbia, SC.............................. 0.8800
Calhoun County, SC.......................
Fairfield County, SC.....................
Kershaw County, SC.......................
Lexington County, SC.....................
Richland County, SC......................
Saluda County, SC........................
17980.......... Columbus, GA-AL........................... 0.8729
Russell County, AL.......................
Chattahoochee County, GA.................
Harris County, GA........................
Marion County, GA........................
Muscogee County, GA......................
18020.......... Columbus, IN.............................. 0.9537
Bartholomew County, IN...................
18140.......... Columbus, OH.............................. 1.0085
Delaware County, OH......................
Fairfield County, OH.....................

[[Page 5391]]

Franklin County, OH......................
Licking County, OH.......................
Madison County, OH.......................
Morrow County, OH........................
Pickaway County, OH......................
Union County, OH.........................
18580.......... Corpus Christi, TX........................ 0.8588
Aransas County, TX.......................
Nueces County, TX........................
San Patricio County, TX..................
18700.......... Corvallis, OR............................. 1.0959
Benton County, OR........................
19060.......... Cumberland, MD-WV......................... 0.8294
Allegany County, MD......................
Mineral County, WV.......................
19124.......... Dallas-Plano-Irving, TX................... 0.9915
Collin County, TX........................
Dallas County, TX........................
Delta County, TX.........................
Denton County, TX........................
Ellis County, TX.........................
Hunt County, TX..........................
Kaufman County, TX.......................
Rockwall County, TX......................
19140.......... Dalton, GA................................ 0.8760
Murray County, GA........................
Whitfield County, GA.....................
19180.......... Danville, IL.............................. 0.8957
Vermilion County, IL.....................
19260.......... Danville, VA.............................. 0.8240
Pittsylvania County, VA..................
Danville City, VA........................
19340.......... Davenport-Moline-Rock Island, IA-IL....... 0.8830
Henry County, IL.........................
Mercer County, IL........................
Rock Island County, IL...................
Scott County, IA.........................
19380.......... Dayton, OH................................ 0.9190
Greene County, OH........................
Miami County, OH.........................
Montgomery County, OH....................
Preble County, OH........................
19460.......... Decatur, AL............................... 0.7885
Lawrence County, AL......................
Morgan County, AL........................
19500.......... Decatur, IL............................... 0.8074
Macon County, IL.........................
19660.......... Deltona-Daytona Beach-Ormond Beach, FL.... 0.9031
Volusia County, FL.......................
19740.......... Denver-Aurora, CO......................... 1.0718
Adams County, CO.........................
Arapahoe County, CO......................
Broomfield County, CO....................
Clear Creek County, CO...................
Denver County, CO........................
Douglas County, CO.......................
Elbert County, CO........................
Gilpin County, CO........................
Jefferson County, CO.....................
Park County, CO..........................
19780.......... Des Moines-West Des Moines, IA............ 0.9226
Dallas County, IA........................
Guthrie County, IA.......................
Madison County, IA.......................
Polk County, IA..........................
Warren County, IA........................
19804.......... Detroit-Livonia-Dearborn, MI.............. 0.9999
Wayne County, MI.........................
20020.......... Dothan, AL................................ 0.7270
Geneva County, AL........................

[[Page 5392]]

Henry County, AL.........................
Houston County, AL.......................
20100.......... Dover, DE................................. 1.0099
Kent County, DE..........................
20220.......... Dubuque, IA............................... 0.9058
Dubuque County, IA.......................
20260.......... Duluth, MN-WI............................. 0.9975
Carlton County, MN.......................
St. Louis County, MN.....................
Douglas County, WI.......................
20500.......... Durham, NC................................ 0.9816
Chatham County, NC.......................
Durham County, NC........................
Orange County, NC........................
Person County, NC........................
20740.......... Eau Claire, WI............................ 0.9475
Chippewa County, WI......................
Eau Claire County, WI....................
20764.......... Edison, NJ................................ 1.1181
Middlesex County, NJ.....................
Monmouth County, NJ......................
Ocean County, NJ.........................
Somerset County, NJ......................
20940.......... El Centro, CA............................. 0.8914
Imperial County, CA......................
21060.......... Elizabethtown, KY......................... 0.8711
Hardin County, KY........................
Larue County, KY.........................
21140.......... Elkhart-Goshen, IN........................ 0.9611
Elkhart County, IN.......................
21300.......... Elmira, NY................................ 0.8264
Chemung County, NY.......................
21340.......... El Paso, TX............................... 0.8989
El Paso County, TX.......................
21500.......... Erie, PA.................................. 0.8495
Erie County, PA..........................
21660.......... Eugene-Springfield, OR.................... 1.0932
Lane County, OR..........................
21780.......... Evansville, IN-KY......................... 0.8662
Gibson County, IN........................
Posey County, IN.........................
Vanderburgh County, IN...................
Warrick County, IN.......................
Henderson County, KY.....................
Webster County, KY.......................
21820.......... Fairbanks, AK............................. 1.1050
Fairbanks North Star Borough, AK.........
21940.......... Fajardo, PR............................... 0.4375
Ceiba Municipio, PR......................
Fajardo Municipio, PR....................
Luquillo Municipio, PR...................
22020.......... Fargo, ND-MN.............................. 0.8042
Cass County, ND..........................
Clay County, MN..........................
22140.......... Farmington, NM............................ 0.9587
San Juan County, NM......................
22180.......... Fayetteville, NC.......................... 0.9368
Cumberland County, NC....................
Hoke County, NC..........................
22220.......... Fayetteville-Springdale-Rogers, AR-MO..... 0.8742
Benton County, AR........................
Madison County, AR.......................
Washington County, AR....................
McDonald County, MO......................
22380.......... Flagstaff, AZ............................. 1.1687
Coconino County, AZ......................
22420.......... Flint, MI................................. 1.1220
Genesee County, MI.......................
22500.......... Florence, SC.............................. 0.8249
Darlington County, SC....................

[[Page 5393]]

Florence County, SC......................
22520.......... Florence-Muscle Shoals, AL................ 0.7680
Colbert County, AL.......................
Lauderdale County, AL....................
22540.......... Fond du Lac, WI........................... 0.9667
Fond du Lac County, WI...................
22660.......... Fort Collins-Loveland, CO................. 0.9897
Larimer County, CO.......................
22744.......... Fort Lauderdale-Pompano Beach-Deerfield 1.0229
Beach, FL.
Broward County, FL.......................
22900.......... Fort Smith, AR-OK......................... 0.7933
Crawford County, AR......................
Franklin County, AR......................
Sebastian County, AR.....................
Le Flore County, OK......................
Sequoyah County, OK......................
23020.......... Fort Walton Beach-Crestview-Destin, FL.... 0.8743
Okaloosa County, FL......................
23060.......... Fort Wayne, IN............................ 0.9284
Allen County, IN.........................
Wells County, IN.........................
Whitley County, IN.......................
23104.......... Fort Worth-Arlington, TX.................. 0.9693
Johnson County, TX.......................
Parker County, TX........................
Tarrant County, TX.......................
Wise County, TX..........................
23420.......... Fresno, CA................................ 1.0993
Fresno County, CA........................
23460.......... Gadsden, AL............................... 0.8159
Etowah County, AL........................
23540.......... Gainesville, FL........................... 0.9196
Alachua County, FL.......................
Gilchrist County, FL.....................
23580.......... Gainesville, GA........................... 0.9216
Hall County, GA..........................
23844.......... Gary, IN.................................. 0.9224
Jasper County, IN........................
Lake County, IN..........................
Newton County, IN........................
Porter County, IN........................
24020.......... Glens Falls, NY........................... 0.8256
Warren County, NY........................
Washington County, NY....................
24140.......... Goldsboro, NC............................. 0.9288
Wayne County, NC.........................
24220.......... Grand Forks, ND-MN........................ 0.7881
Polk County, MN..........................
Grand Forks County, ND...................
24300.......... Grand Junction, CO........................ 0.9864
Mesa County, CO..........................
24340.......... Grand Rapids-Wyoming, MI.................. 0.9315
Barry County, MI.........................
Ionia County, MI.........................
Kent County, MI..........................
Newaygo County, MI.......................
24500.......... Great Falls, MT........................... 0.8675
Cascade County, MT.......................
24540.......... Greeley, CO............................... 0.9658
Weld County, CO..........................
24580.......... Green Bay, WI............................. 0.9727
Brown County, WI.........................
Kewaunee County, WI......................
Oconto County, WI........................
24660.......... Greensboro-High Point, NC................. 0.9010
Guilford County, NC......................
Randolph County, NC......................
Rockingham County, NC....................
24780.......... Greenville, NC............................ 0.9402
Greene County, NC........................

[[Page 5394]]

Pitt County, NC..........................
24860.......... Greenville-Mauldin-Easley, SC............. 0.9860
Greenville County, SC....................
Laurens County, SC.......................
Pickens County, SC.......................
25020.......... Guayama, PR............................... 0.3064
Arroyo Municipio, PR.....................
Guayama Municipio, PR....................
Patillas Municipio, PR...................
25060.......... Gulfport-Biloxi, MS....................... 0.8773
Hancock County, MS.......................
Harrison County, MS......................
Stone County, MS.........................
25180.......... Hagerstown-Martinsburg, MD-WV............. 0.9013
Washington County, MD....................
Berkeley County, WV......................
Morgan County, WV........................
25260.......... Hanford-Corcoran, CA...................... 1.0499
Kings County, CA.........................
25420.......... Harrisburg-Carlisle, PA................... 0.9280
Cumberland County, PA....................
Dauphin County, PA.......................
Perry County, PA.........................
25500.......... Harrisonburg, VA.......................... 0.8867
Rockingham County, VA....................
Harrisonburg City, VA....................
25540.......... Hartford-West Hartford-East Hartford, CT.. 1.0959
Hartford County, CT......................
Middlesex County, CT.....................
Tolland County, CT.......................
25620.......... Hattiesburg, MS........................... 0.7366
Forrest County, MS.......................
Lamar County, MS.........................
Perry County, MS.........................
25860.......... Hickory-Lenoir-Morganton, NC.............. 0.9028
Alexander County, NC.....................
Burke County, NC.........................
Caldwell County, NC......................
Catawba County, NC.......................
25980.......... Hinesville-Fort Stewart, GA............... 0.9187
Liberty County, GA.......................
Long County, GA..........................
26100.......... Holland-Grand Haven, MI................... 0.9006
Ottawa County, MI........................
26180.......... Honolulu, HI.............................. 1.1556
Honolulu County, HI......................
26300.......... Hot Springs, AR........................... 0.9109
Garland County, AR.......................
26380.......... Houma-Bayou Cane-Thibodaux, LA............ 0.7892
Lafourche Parish, LA.....................
Terrebonne Parish, LA....................
26420.......... Houston-Sugar Land-Baytown, TX............ 0.9939
Austin County, TX........................
Brazoria County, TX......................
Chambers County, TX......................
Fort Bend County, TX.....................
Galveston County, TX.....................
Harris County, TX........................
Liberty County, TX.......................
Montgomery County, TX....................
San Jacinto County, TX...................
Waller County, TX........................
26580.......... Huntington-Ashland, WV-KY-OH.............. 0.9041
Boyd County, KY..........................
Greenup County, KY.......................
Lawrence County, OH......................
Cabell County, WV........................
Wayne County, WV.........................
26620.......... Huntsville, AL............................ 0.9146
Limestone County, AL.....................

[[Page 5395]]

Madison County, AL.......................
26820.......... Idaho Falls, ID........................... 0.9264
Bonneville County, ID....................
Jefferson County, ID.....................
26900.......... Indianapolis-Carmel, IN................... 0.9844
Boone County, IN.........................
Brown County, IN.........................
Hamilton County, IN......................
Hancock County, IN.......................
Hendricks County, IN.....................
Johnson County, IN.......................
Marion County, IN........................
Morgan County, IN........................
Putnam County, IN........................
Shelby County, IN........................
26980.......... Iowa City, IA............................. 0.9568
Johnson County, IA.......................
Washington County, IA....................
27060.......... Ithaca, NY................................ 0.9630
Tompkins County, NY......................
27100.......... Jackson, MI............................... 0.9329
Jackson County, MI.......................
27140.......... Jackson, MS............................... 0.8011
Copiah County, MS........................
Hinds County, MS.........................
Madison County, MS.......................
Rankin County, MS........................
Simpson County, MS.......................
27180.......... Jackson, TN............................... 0.8676
Chester County, TN.......................
Madison County, TN.......................
27260.......... Jacksonville, FL.......................... 0.9021
Baker County, FL.........................
Clay County, FL..........................
Duval County, FL.........................
Nassau County, FL........................
St. Johns County, FL.....................
27340.......... Jacksonville, NC.......................... 0.8079
Onslow County, NC........................
27500.......... Janesville, WI............................ 0.9702
Rock County, WI..........................
27620.......... Jefferson City, MO........................ 0.8478
Callaway County, MO......................
Cole County, MO..........................
Moniteau County, MO......................
Osage County, MO.........................
27740.......... Johnson City, TN.......................... 0.7677
Carter County, TN........................
Unicoi County, TN........................
Washington County, TN....................
27780.......... Johnstown, PA............................. 0.7543
Cambria County, PA.......................
27860.......... Jonesboro, AR............................. 0.7790
Craighead County, AR.....................
Poinsett County, AR......................
27900.......... Joplin, MO................................ 0.8951
Jasper County, MO........................
Newton County, MO........................
28020.......... Kalamazoo-Portage, MI..................... 1.0433
Kalamazoo County, MI.....................
Van Buren County, MI.....................
28100.......... Kankakee-Bradley, IL...................... 1.0238
Kankakee County, IL......................
28140.......... Kansas City, MO-KS........................ 0.9504
Franklin County, KS......................
Johnson County, KS.......................
Leavenworth County, KS...................
Linn County, KS..........................
Miami County, KS.........................
Wyandotte County, KS.....................

[[Page 5396]]

Bates County, MO.........................
Caldwell County, MO......................
Cass County, MO..........................
Clay County, MO..........................
Clinton County, MO.......................
Jackson County, MO.......................
Lafayette County, MO.....................
Platte County, MO........................
Ray County, MO...........................
28420.......... Kennewick-Richland-Pasco, WA.............. 1.0075
Benton County, WA........................
Franklin County, WA......................
28660.......... Killeen-Temple-Fort Hood, TX.............. 0.8249
Bell County, TX..........................
Coryell County, TX.......................
Lampasas County, TX......................
28700.......... Kingsport-Bristol-Bristol, TN-VA.......... 0.7658
Hawkins County, TN.......................
Sullivan County, TN......................
Bristol City, VA.........................
Scott County, VA.........................
Washington County, VA....................
28740.......... Kingston, NY.............................. 0.9556
Ulster County, NY........................
28940.......... Knoxville, TN............................. 0.8036
Anderson County, TN......................
Blount County, TN........................
Knox County, TN..........................
Loudon County, TN........................
Union County, TN.........................
29020.......... Kokomo, IN................................ 0.9591
Howard County, IN........................
Tipton County, IN........................
29100.......... La Crosse, WI-MN.......................... 0.9685
Houston County, MN.......................
La Crosse County, WI.....................
29140.......... Lafayette, IN............................. 0.8869
Benton County, IN........................
Carroll County, IN.......................
Tippecanoe County, IN....................
29180.......... Lafayette, LA............................. 0.8247
Lafayette Parish, LA.....................
St. Martin Parish, LA....................
29340.......... Lake Charles, LA.......................... 0.7777
Calcasieu Parish, LA.....................
Cameron Parish, LA.......................
29404.......... Lake County-Kenosha County, IL-WI......... 1.0603
Lake County, IL..........................
Kenosha County, WI.......................
29420.......... Lake Havasu City-Kingman, AZ.............. 0.9333
Mohave County, AZ........................
29460.......... Lakeland, FL.............................. 0.8661
Polk County, FL..........................
29540.......... Lancaster, PA............................. 0.9252
Lancaster County, PA.....................
29620.......... Lansing-East Lansing, MI.................. 1.0119
Clinton County, MI.......................
Eaton County, MI.........................
Ingham County, MI........................
29700.......... Laredo, TX................................ 0.8093
Webb County, TX..........................
29740.......... Las Cruces, NM............................ 0.8676
Dona Ana County, NM......................
29820.......... Las Vegas-Paradise, NV.................... 1.1799
Clark County, NV.........................
29940.......... Lawrence, KS.............................. 0.8227
Douglas County, KS.......................
30020.......... Lawton, OK................................ 0.8025
Comanche County, OK......................
30140.......... Lebanon, PA............................... 0.8192

[[Page 5397]]

Lebanon County, PA.......................
30300.......... Lewiston, ID-WA........................... 0.9454
Nez Perce County, ID.....................
Asotin County, WA........................
30340.......... Lewiston-Auburn, ME....................... 0.9193
Androscoggin County, ME..................
30460.......... Lexington-Fayette, KY..................... 0.9191
Bourbon County, KY.......................
Clark County, KY.........................
Fayette County, KY.......................
Jessamine County, KY.....................
Scott County, KY.........................
Woodford County, KY......................
30620.......... Lima, OH.................................. 0.9424
Allen County, OH.........................
30700.......... Lincoln, NE............................... 1.0051
Lancaster County, NE.....................
Seward County, NE........................
30780.......... Little Rock-North Little Rock-Conway, AR.. 0.8863
Faulkner County, AR......................
Grant County, AR.........................
Lonoke County, AR........................
Perry County, AR.........................
Pulaski County, AR.......................
Saline County, AR........................
30860.......... Logan, UT-ID.............................. 0.9183
Franklin County, ID......................
Cache County, UT.........................
30980.......... Longview, TX.............................. 0.8717
Gregg County, TX.........................
Rusk County, TX..........................
Upshur County, TX........................
31020.......... Longview, WA.............................. 1.0827
Cowlitz County, WA.......................
31084.......... Los Angeles-Long Beach-Glendale, CA....... 1.1771
Los Angeles County, CA...................
31140.......... Louisville-Jefferson County, KY-IN........ 0.9065
Clark County, IN.........................
Floyd County, IN.........................
Harrison County, IN......................
Washington County, IN....................
Bullitt County, KY.......................
Henry County, KY.........................
Jefferson County, KY.....................
Meade County, KY.........................
Nelson County, KY........................
Oldham County, KY........................
Shelby County, KY........................
Spencer County, KY.......................
Trimble County, KY.......................
31180.......... Lubbock, TX............................... 0.8680
Crosby County, TX........................
Lubbock County, TX.......................
31340.......... Lynchburg, VA............................. 0.8732
Amherst County, VA.......................
Appomattox County, VA....................
Bedford County, VA.......................
Campbell County, VA......................
Bedford City, VA.........................
Lynchburg City, VA.......................
31420.......... Macon, GA................................. 0.9541
Bibb County, GA..........................
Crawford County, GA......................
Jones County, GA.........................
Monroe County, GA........................
Twiggs County, GA........................
31460.......... Madera, CA................................ 0.8069
Madera County, CA........................
31540.......... Madison, WI............................... 1.0935
Columbia County, WI......................

[[Page 5398]]

Dane County, WI..........................
Iowa County, WI..........................
31700.......... Manchester-Nashua, NH..................... 1.0273
Hillsborough County, NH..................
31900.......... Mansfield, OH............................. 0.9271
Richland County, OH......................
32420.......... Mayag[uuml]ez, PR......................... 0.3711
Hormigueros Municipio, PR................
Mayag[uuml]ez Municipio, PR..............
32580.......... McAllen-Edinburg-Mission, TX.............. 0.9123
Hidalgo County, TX.......................
32780.......... Medford, OR............................... 1.0318
Jackson County, OR.......................
32820.......... Memphis, TN-MS-AR......................... 0.9250
Crittenden County, AR....................
DeSoto County, MS........................
Marshall County, MS......................
Tate County, MS..........................
Tunica County, MS........................
Fayette County, TN.......................
Shelby County, TN........................
Tipton County, TN........................
32900.......... Merced, CA................................ 1.2120
Merced County, CA........................
33124.......... Miami-Miami Beach-Kendall, FL............. 1.0002
Miami-Dade County, FL....................
33140.......... Michigan City-La Porte, IN................ 0.8914
LaPorte County, IN.......................
33260.......... Midland, TX............................... 1.0017
Midland County, TX.......................
33340.......... Milwaukee-Waukesha-West Allis, WI......... 1.0214
Milwaukee County, WI.....................
Ozaukee County, WI.......................
Washington County, WI....................
Waukesha County, WI......................
33460.......... Minneapolis-St. Paul-Bloomington, MN-WI... 1.1093
Anoka County, MN.........................
Carver County, MN........................
Chisago County, MN.......................
Dakota County, MN........................
Hennepin County, MN......................
Isanti County, MN........................
Ramsey County, MN........................
Scott County, MN.........................
Sherburne County, MN.....................
Washington County, MN....................
Wright County, MN........................
Pierce County, WI........................
St. Croix County, WI.....................
33540.......... Missoula, MT.............................. 0.8953
Missoula County, MT......................
33660.......... Mobile, AL................................ 0.8033
Mobile County, AL........................
33700.......... Modesto, CA............................... 1.1962
Stanislaus County, CA....................
33740.......... Monroe, LA................................ 0.7832
Ouachita Parish, LA......................
Union Parish, LA.........................
33780.......... Monroe, MI................................ 0.9414
Monroe County, MI........................
33860.......... Montgomery, AL............................ 0.8088
Autauga County, AL.......................
Elmore County, AL........................
Lowndes County, AL.......................
Montgomery County, AL....................
34060.......... Morgantown, WV............................ 0.8321
Monongalia County, WV....................
Preston County, WV.......................
34100.......... Morristown, TN............................ 0.7388
Grainger County, TN......................

[[Page 5399]]

Hamblen County, TN.......................
Jefferson County, TN.....................
34580.......... Mount Vernon-Anacortes, WA................ 1.0529
Skagit County, WA........................
34620.......... Muncie, IN................................ 0.8214
Delaware County, IN......................
34740.......... Muskegon-Norton Shores, MI................ 0.9836
Muskegon County, MI......................
34820.......... Myrtle Beach-Conway-North Myrtle Beach, SC 0.8634
Horry County, SC.........................
34900.......... Napa, CA.................................. 1.4476
Napa County, CA..........................
34940.......... Naples-Marco Island, FL................... 0.9487
Collier County, FL.......................
34980.......... Nashville-Davidson-Murfreesboro-Franklin, 0.9689
TN.
Cannon County, TN........................
Cheatham County, TN......................
Davidson County, TN......................
Dickson County, TN.......................
Hickman County, TN.......................
Macon County, TN.........................
Robertson County, TN.....................
Rutherford County, TN....................
Smith County, TN.........................
Sumner County, TN........................
Trousdale County, TN.....................
Williamson County, TN....................
Wilson County, TN........................
35004.......... Nassau-Suffolk, NY........................ 1.2640
Nassau County, NY........................
Suffolk County, NY.......................
35084.......... Newark-Union, NJ-PA....................... 1.1862
Essex County, NJ.........................
Hunterdon County, NJ.....................
Morris County, NJ........................
Sussex County, NJ........................
Union County, NJ.........................
Pike County, PA..........................
35300.......... New Haven-Milford, CT..................... 1.1871
New Haven County, CT.....................
35380.......... New Orleans-Metairie-Kenner, LA........... 0.8897
Jefferson Parish, LA.....................
Orleans Parish, LA.......................
Plaquemines Parish, LA...................
St. Bernard Parish, LA...................
St. Charles Parish, LA...................
St. John the Baptist Parish, LA..........
St. Tammany Parish, LA...................
35644.......... New York-White Plains-Wayne, NY-NJ........ 1.3115
Bergen County, NJ........................
Hudson County, NJ........................
Passaic County, NJ.......................
Bronx County, NY.........................
Kings County, NY.........................
New York County, NY......................
Putnam County, NY........................
Queens County, NY........................
Richmond County, NY......................
Rockland County, NY......................
Westchester County, NY...................
35660.......... Niles-Benton Harbor, MI................... 0.9141
Berrien County, MI.......................
35980.......... Norwich-New London, CT.................... 1.1432
New London County, CT....................
36084.......... Oakland-Fremont-Hayward, CA............... 1.5685
Alameda County, CA.......................
Contra Costa County, CA..................
36100.......... Ocala, FL................................. 0.8627
Marion County, FL........................
36140.......... Ocean City, NJ............................ 1.0988

[[Page 5400]]

Cape May County, NJ......................
36220.......... Odessa, TX................................ 1.0042
Ector County, TX.........................
36260.......... Ogden-Clearfield, UT...................... 0.9000
Davis County, UT.........................
Morgan County, UT........................
Weber County, UT.........................
36420.......... Oklahoma City, OK......................... 0.8815
Canadian County, OK......................
Cleveland County, OK.....................
Grady County, OK.........................
Lincoln County, OK.......................
Logan County, OK.........................
McClain County, OK.......................
Oklahoma County, OK......................
36500.......... Olympia, WA............................... 1.1512
Thurston County, WA......................
36540.......... Omaha-Council Bluffs, NE-IA............... 0.9561
Harrison County, IA......................
Mills County, IA.........................
Pottawattamie County, IA.................
Cass County, NE..........................
Douglas County, NE.......................
Sarpy County, NE.........................
Saunders County, NE......................
Washington County, NE....................
36740.......... Orlando-Kissimmee, FL..................... 0.9226
Lake County, FL..........................
Orange County, FL........................
Osceola County, FL.......................
Seminole County, FL......................
36780.......... Oshkosh-Neenah, WI........................ 0.9551
Winnebago County, WI.....................
36980.......... Owensboro, KY............................. 0.8652
Daviess County, KY.......................
Hancock County, KY.......................
McLean County, KY........................
37100.......... Oxnard-Thousand Oaks-Ventura, CA.......... 1.1852
Ventura County, CA.......................
37340.......... Palm Bay-Melbourne-Titusville, FL......... 0.9325
Brevard County, FL.......................
37380.......... Palm Coast, FL............................ 0.8945
Flager County, FL........................
37460.......... Panama City-Lynn Haven, FL................ 0.8313
Bay County, FL...........................
37620.......... Parkersburg-Marietta-Vienna, WV-OH........ 0.8105
Washington County, OH....................
Pleasants County, WV.....................
Wirt County, WV..........................
Wood County, WV..........................
37700.......... Pascagoula, MS............................ 0.8647
George County, MS........................
Jackson County, MS.......................
37764.......... Peabody, MA............................... 1.0650
Essex County, MA.........................
37860.......... Pensacola-Ferry Pass-Brent, FL............ 0.8281
Escambia County, FL......................
Santa Rosa County, FL....................
37900.......... Peoria, IL................................ 0.9299
Marshall County, IL......................
Peoria County, IL........................
Stark County, IL.........................
Tazewell County, IL......................
Woodford County, IL......................
37964.......... Philadelphia, PA.......................... 1.0925
Bucks County, PA.........................
Chester County, PA.......................
Delaware County, PA......................
Montgomery County, PA....................
Philadelphia County, PA..................

[[Page 5401]]

38060.......... Phoenix-Mesa-Scottsdale, AZ............... 1.0264
Maricopa County, AZ......................
Pinal County, AZ.........................
38220.......... Pine Bluff, AR............................ 0.7839
Cleveland County, AR.....................
Jefferson County, AR.....................
Lincoln County, AR.......................
38300.......... Pittsburgh, PA............................ 0.8525
Allegheny County, PA.....................
Armstrong County, PA.....................
Beaver County, PA........................
Butler County, PA........................
Fayette County, PA.......................
Washington County, PA....................
Westmoreland County, PA..................
38340.......... Pittsfield, MA............................ 1.0091
Berkshire County, MA.....................
38540.......... Pocatello, ID............................. 0.9465
Bannock County, ID.......................
Power County, ID.........................
38660.......... Ponce, PR................................. 0.4450
Juana D[iacute]az Municipio, PR..........
Ponce Municipio, PR......................
Villalba Municipio, PR...................
38860.......... Portland-South Portland-Biddeford, ME..... 1.0042
Cumberland County, ME....................
Sagadahoc County, ME.....................
York County, ME..........................
38900.......... Portland-Vancouver-Beaverton, OR-WA....... 1.1498
Clackamas County, OR.....................
Columbia County, OR......................
Multnomah County, OR.....................
Washington County, OR....................
Yamhill County, OR.......................
Clark County, WA.........................
Skamania County, WA......................
38940.......... Port St. Lucie, FL........................ 1.0016
Martin County, FL........................
St. Lucie County, FL.....................
39100.......... Poughkeepsie-Newburgh-Middletown, NY...... 1.0982
Dutchess County, NY......................
Orange County, NY........................
39140.......... Prescott, AZ.............................. 1.0020
Yavapai County, AZ.......................
39300.......... Providence-New Bedford-Fall River, RI-MA.. 1.0574
Bristol County, MA.......................
Bristol County, RI.......................
Kent County, RI..........................
Newport County, RI.......................
Providence County, RI....................
Washington County, RI....................
39340.......... Provo-Orem, UT............................ 0.9557
Juab County, UT..........................
Utah County, UT..........................
39380.......... Pueblo, CO................................ 0.8851
Pueblo County, CO........................
39460.......... Punta Gorda, FL........................... 0.9254
Charlotte County, FL.....................
39540.......... Racine, WI................................ 0.9498
Racine County, WI........................
39580.......... Raleigh-Cary, NC.......................... 0.9839
Franklin County, NC......................
Johnston County, NC......................
Wake County, NC..........................
39660.......... Rapid City, SD............................ 0.8811
Meade County, SD.........................
Pennington County, SD....................
39740.......... Reading, PA............................... 0.9356
Berks County, PA.........................
39820.......... Redding, CA............................... 1.3541

[[Page 5402]]

Shasta County, CA........................
39900.......... Reno-Sparks, NV........................... 1.0715
Storey County, NV........................
Washoe County, NV........................
40060.......... Richmond, VA.............................. 0.9425
Amelia County, VA........................
Caroline County, VA......................
Charles City County, VA..................
Chesterfield County, VA..................
Cumberland County, VA....................
Dinwiddie County, VA.....................
Goochland County, VA.....................
Hanover County, VA.......................
Henrico County, VA.......................
King and Queen County, VA................
King William County, VA..................
Louisa County, VA........................
New Kent County, VA......................
Powhatan County, VA......................
Prince George County, VA.................
Sussex County, VA........................
Colonial Heights City, VA................
Hopewell City, VA........................
Petersburg City, VA......................
Richmond City, VA........................
40140.......... Riverside-San Bernardino-Ontario, CA...... 1.1100
Riverside County, CA.....................
San Bernardino County, CA................
40220.......... Roanoke, VA............................... 0.8691
Botetourt County, VA.....................
Craig County, VA.........................
Franklin County, VA......................
Roanoke County, VA.......................
Roanoke City, VA.........................
Salem City, VA...........................
40340.......... Rochester, MN............................. 1.0755
Dodge County, MN.........................
Olmsted County, MN.......................
Wabasha County, MN.......................
40380.......... Rochester, NY............................. 0.8858
Livingston County, NY....................
Monroe County, NY........................
Ontario County, NY.......................
Orleans County, NY.......................
Wayne County, NY.........................
40420.......... Rockford, IL.............................. 0.9814
Boone County, IL.........................
Winnebago County, IL.....................
40484.......... Rockingham County-Strafford County, NH.... 1.0111
Rockingham County, NH....................
Strafford County, NH.....................
40580.......... Rocky Mount, NC........................... 0.9001
Edgecombe County, NC.....................
Nash County, NC..........................
40660.......... Rome, GA.................................. 0.9042
Floyd County, GA.........................
40900.......... Sacramento-Arden-Arcade-Roseville, CA..... 1.3505
El Dorado County, CA.....................
Placer County, CA........................
Sacramento County, CA....................
Yolo County, CA..........................
40980.......... Saginaw-Saginaw Township North, MI........ 0.8812
Saginaw County, MI.......................
41060.......... St. Cloud, MN............................. 1.0549
Benton County, MN........................
Stearns County, MN.......................
41100.......... St. George, UT............................ 0.9358
Washington County, UT....................
41140.......... St. Joseph, MO-KS......................... 0.8762
Doniphan County, KS......................

[[Page 5403]]

Andrew County, MO........................
Buchanan County, MO......................
DeKalb County, MO........................
41180.......... St. Louis, MO-IL.......................... 0.9024
Bond County, IL..........................
Calhoun County, IL.......................
Clinton County, IL.......................
Jersey County, IL........................
Macoupin County, IL......................
Madison County, IL.......................
Monroe County, IL........................
St. Clair County, IL.....................
Crawford County, MO......................
Franklin County, MO......................
Jefferson County, MO.....................
Lincoln County, MO.......................
St. Charles County, MO...................
St. Louis County, MO.....................
Warren County, MO........................
Washington County, MO....................
St. Louis City, MO.......................
41420.......... Salem, OR................................. 1.0572
Marion County, OR........................
Polk County, OR..........................
41500.......... Salinas, CA............................... 1.4775
Monterey County, CA......................
41540.......... Salisbury, MD............................. 0.8994
Somerset County, MD......................
Wicomico County, MD......................
41620.......... Salt Lake City, UT........................ 0.9399
Salt Lake County, UT.....................
Summit County, UT........................
Tooele County, UT........................
41660.......... San Angelo, TX............................ 0.8579
Irion County, TX.........................
Tom Green County, TX.....................
41700.......... San Antonio, TX........................... 0.8834
Atascosa County, TX......................
Bandera County, TX.......................
Bexar County, TX.........................
Comal County, TX.........................
Guadalupe County, TX.....................
Kendall County, TX.......................
Medina County, TX........................
Wilson County, TX........................
41740.......... San Diego-Carlsbad-San Marcos, CA......... 1.1492
San Diego County, CA.....................
41780.......... Sandusky, OH.............................. 0.8822
Erie County, OH..........................
41884.......... San Francisco-San Mateo-Redwood City, CA.. 1.5195
Marin County, CA.........................
San Francisco County, CA.................
San Mateo County, CA.....................
41900.......... San Germ[aacute]n-Cabo Rojo, PR........... 0.4729
Cabo Rojo Municipio, PR..................
Lajas Municipio, PR......................
Sabana Grande Municipio, PR..............
San Germ[aacute]n Municipio, PR..........
41940.......... San Jose-Sunnyvale-Santa Clara, CA........ 1.5735
San Benito County, CA....................
Santa Clara County, CA...................
41980.......... San Juan-Caguas-Guaynabo, PR.............. 0.4528
Aguas Buenas Municipio, PR...............
Aibonito Municipio, PR...................
Arecibo Municipio, PR....................
Barceloneta Municipio, PR................
Barranquitas Municipio, PR...............
Bayam[oacute]n Municipio, PR.............
Caguas Municipio, PR.....................
Camuy Municipio, PR......................

[[Page 5404]]

Can[oacute]vanas Municipio, PR...........
Carolina Municipio, PR...................
Cata[ntilde]o Municipio, PR..............
Cayey Municipio, PR......................
Ciales Municipio, PR.....................
Cidra Municipio, PR......................
Comer[iacute]o Municipio, PR.............
Corozal Municipio, PR....................
Dorado Municipio, PR.....................
Florida Municipio, PR....................
Guaynabo Municipio, PR...................
Gurabo Municipio, PR.....................
Hatillo Municipio, PR....................
Humacao Municipio, PR....................
Juncos Municipio, PR.....................
Las Piedras Municipio, PR................
Lo[iacute]za Municipio, PR...............
Manat[iacute] Municipio, PR..............
Maunabo Municipio, PR....................
Morovis Municipio, PR....................
Naguabo Municipio, PR....................
Naranjito Municipio, PR..................
Orocovis Municipio, PR...................
Quebradillas Municipio, PR...............
R[iacute]o Grande Municipio, PR..........
San Juan Municipio, PR...................
San Lorenzo Municipio, PR................
Toa Alta Municipio, PR...................
Toa Baja Municipio, PR...................
Trujillo Alto Municipio, PR..............
Vega Alta Municipio, PR..................
Vega Baja Municipio, PR..................
Yabucoa Municipio, PR....................
42020.......... San Luis Obispo-Paso Robles, CA........... 1.2488
San Luis Obispo County, CA...............
42044.......... Santa Ana-Anaheim-Irvine, CA.............. 1.1766
Orange County, CA........................
42060.......... Santa Barbara-Santa Maria-Goleta, CA...... 1.1714
Santa Barbara County, CA.................
42100.......... Santa Cruz-Watsonville, CA................ 1.6122
Santa Cruz County, CA....................
42140.......... Santa Fe, NM.............................. 1.0734
Santa Fe County, NM......................
42220.......... Santa Rosa-Petaluma, CA................... 1.4696
Sonoma County, CA........................
42260.......... Sarasota-Bradenton-Venice, FL............. 0.9933
Manatee County, FL.......................
Sarasota County, FL......................
42340.......... Savannah, GA.............................. 0.9131
Bryan County, GA.........................
Chatham County, GA.......................
Effingham County, GA.....................
42540.......... Scranton-Wilkes-Barre, PA................. 0.8457
Lackawanna County, PA....................
Luzerne County, PA.......................
Wyoming County, PA.......................
42644.......... Seattle-Bellevue-Everett, WA.............. 1.1572
King County, WA..........................
Snohomish County, WA.....................
42680.......... Sebastian-Vero Beach, FL.................. 0.9412
Indian River County, FL..................
43100.......... Sheboygan, WI............................. 0.8975
Sheboygan County, WI.....................
43300.......... Sherman-Denison, TX....................... 0.8320
Grayson County, TX.......................
43340.......... Shreveport-Bossier City, LA............... 0.8476
Bossier Parish, LA.......................
Caddo Parish, LA.........................
De Soto Parish, LA.......................
43580.......... Sioux City, IA-NE-SD...................... 0.9251

[[Page 5405]]

Woodbury County, IA......................
Dakota County, NE........................
Dixon County, NE.........................
Union County, SD.........................
43620.......... Sioux Falls, SD........................... 0.9563
Lincoln County, SD.......................
McCook County, SD........................
Minnehaha County, SD.....................
Turner County, SD........................
43780.......... South Bend-Mishawaka, IN-MI............... 0.9617
St. Joseph County, IN....................
Cass County, MI..........................
43900.......... Spartanburg, SC........................... 0.9422
Spartanburg County, SC...................
44060.......... Spokane, WA............................... 1.0455
Spokane County, WA.......................
44100.......... Springfield, IL........................... 0.8944
Menard County, IL........................
Sangamon County, IL......................
44140.......... Springfield, MA........................... 1.0366
Franklin County, MA......................
Hampden County, MA.......................
Hampshire County, MA.....................
44180.......... Springfield, MO........................... 0.8695
Christian County, MO.....................
Dallas County, MO........................
Greene County, MO........................
Polk County, MO..........................
Webster County, MO.......................
44220.......... Springfield, OH........................... 0.8694
Clark County, OH.........................
44300.......... State College, PA......................... 0.8768
Centre County, PA........................
44700.......... Stockton, CA.............................. 1.1855
San Joaquin County, CA...................
44940.......... Sumter, SC................................ 0.8599
Sumter County, SC........................
45060.......... Syracuse, NY.............................. 0.9910
Madison County, NY.......................
Onondaga County, NY......................
Oswego County, NY........................
45104.......... Tacoma, WA................................ 1.1055
Pierce County, WA........................
45220.......... Tallahassee, FL........................... 0.9025
Gadsden County, FL.......................
Jefferson County, FL.....................
Leon County, FL..........................
Wakulla County, FL.......................
45300.......... Tampa-St. Petersburg-Clearwater, FL....... 0.9020
Hernando County, FL......................
Hillsborough County, FL..................
Pasco County, FL.........................
Pinellas County, FL......................
45460.......... Terre Haute, IN........................... 0.8805
Clay County, IN..........................
Sullivan County, IN......................
Vermillion County, IN....................
Vigo County, IN..........................
45500.......... Texarkana, TX-Texarkana, AR............... 0.7770
Miller County, AR........................
Bowie County, TX.........................
45780.......... Toledo, OH................................ 0.9431
Fulton County, OH........................
Lucas County, OH.........................
Ottawa County, OH........................
Wood County, OH..........................
45820.......... Topeka, KS................................ 0.8538
Jackson County, KS.......................
Jefferson County, KS.....................
Osage County, KS.........................

[[Page 5406]]

Shawnee County, KS.......................
Wabaunsee County, KS.....................
45940.......... Trenton-Ewing, NJ......................... 1.0699
Mercer County, NJ........................
46060.......... Tucson, AZ................................ 0.9245
Pima County, AZ..........................
46140.......... Tulsa, OK................................. 0.8340
Creek County, OK.........................
Okmulgee County, OK......................
Osage County, OK.........................
Pawnee County, OK........................
Rogers County, OK........................
Tulsa County, OK.........................
Wagoner County, OK.......................
46220.......... Tuscaloosa, AL............................ 0.8303
Greene County, AL........................
Hale County, AL..........................
Tuscaloosa County, AL....................
46340.......... Tyler, TX................................. 0.9114
Smith County, TX.........................
46540.......... Utica-Rome, NY............................ 0.8486
Herkimer County, NY......................
Oneida County, NY........................
46660.......... Valdosta, GA.............................. 0.8098
Brooks County, GA........................
Echols County, GA........................
Lanier County, GA........................
Lowndes County, GA.......................
46700.......... Vallejo-Fairfield, CA..................... 1.4666
Solano County, CA........................
47020.......... Victoria, TX.............................. 0.8302
Calhoun County, TX.......................
Goliad County, TX........................
Victoria County, TX......................
47220.......... Vineland-Millville-Bridgeton, NJ.......... 1.0133
Cumberland County, NJ....................
47260.......... Virginia Beach-Norfolk-Newport News, VA-NC 0.8818
Currituck County, NC.....................
Gloucester County, VA....................
Isle of Wight County, VA.................
James City County, VA....................
Mathews County, VA.......................
Surry County, VA.........................
York County, VA..........................
Chesapeake City, VA......................
Hampton City, VA.........................
Newport News City, VA....................
Norfolk City, VA.........................
Poquoson City, VA........................
Portsmouth City, VA......................
Suffolk City, VA.........................
Virginia Beach City, VA..................
Williamsburg City, VA....................
47300.......... Visalia-Porterville, CA................... 1.0091
Tulare County, CA........................
47380.......... Waco, TX.................................. 0.8518
McLennan County, TX......................
47580.......... Warner Robins, GA......................... 0.9128
Houston County, GA.......................
47644.......... Warren-Troy-Farmington Hills, MI.......... 1.0001
Lapeer County, MI........................
Livingston County, MI....................
Macomb County, MI........................
Oakland County, MI.......................
St. Clair County, MI.....................
47894.......... Washington-Arlington-Alexandria, DC-VA-MD- 1.0855
WV.
District of Columbia, DC.................
Calvert County, MD.......................
Charles County, MD.......................
Prince George's County, MD...............

[[Page 5407]]

Arlington County, VA.....................
Clarke County, VA........................
Fairfax County, VA.......................
Fauquier County, VA......................
Loudoun County, VA.......................
Prince William County, VA................
Spotsylvania County, VA..................
Stafford County, VA......................
Warren County, VA........................
Alexandria City, VA......................
Fairfax City, VA.........................
Falls Church City, VA....................
Fredericksburg City, VA..................
Manassas City, VA........................
Manassas Park City, VA...................
Jefferson County, WV.....................
47940.......... Waterloo-Cedar Falls, IA.................. 0.8519
Black Hawk County, IA....................
Bremer County, IA........................
Grundy County, IA........................
48140.......... Wausau, WI................................ 0.9679
Marathon County, WI......................
48260.......... Weirton-Steubenville, WV-OH............... 0.7924
Jefferson County, OH.....................
Brooke County, WV........................
Hancock County, WV.......................
48300.......... Wenatchee, WA............................. 1.1469
Chelan County, WA........................
Douglas County, WA.......................
48424.......... West Palm Beach-Boca Raton-Boynton Beach, 0.9728
FL.
Palm Beach County, FL....................
48540.......... Wheeling, WV-OH........................... 0.6961
Belmont County, OH.......................
Marshall County, WV......................
Ohio County, WV..........................
48620.......... Wichita, KS............................... 0.9062
Butler County, KS........................
Harvey County, KS........................
Sedgwick County, KS......................
Sumner County, KS........................
48660.......... Wichita Falls, TX......................... 0.7920
Archer County, TX........................
Clay County, TX..........................
Wichita County, TX.......................
48700.......... Williamsport, PA.......................... 0.8043
Lycoming County, PA......................
48864.......... Wilmington, DE-MD-NJ...................... 1.0824
New Castle County, DE....................
Cecil County, MD.........................
Salem County, NJ.........................
48900.......... Wilmington, NC............................ 0.9410
Brunswick County, NC.....................
New Hanover County, NC...................
Pender County, NC........................
49020.......... Winchester, VA-WV......................... 0.9913
Frederick County, VA.....................
Winchester City, VA......................
Hampshire County, WV.....................
49180.......... Winston-Salem, NC......................... 0.9118
Davie County, NC.........................
Forsyth County, NC.......................
Stokes County, NC........................
Yadkin County, NC........................
49340.......... Worcester, MA............................. 1.1287
Worcester County, MA.....................
49420.......... Yakima, WA................................ 1.0267
Yakima County, WA........................
49500.......... Yauco, PR................................. 0.3284
Gu[aacute]nica Municipio, PR.............
Guayanilla Municipio, PR.................

[[Page 5408]]

Pe[ntilde]uelas Municipio, PR............
Yauco Municipio, PR......................
49620.......... York-Hanover, PA.......................... 0.9359
York County, PA..........................
49660.......... Youngstown-Warren-Boardman, OH-PA......... 0.9002
Mahoning County, OH......................
Trumbull County, OH......................
Mercer County, PA........................
49700.......... Yuba City, CA............................. 1.0756
Sutter County, CA........................
Yuba County, CA..........................
49740.......... Yuma, AZ.................................. 0.9488
Yuma County, AZ..........................
------------------------------------------------------------------------

Table 2.--Proposed Long-Term Care Hospital Wage Index for Rural Areas
for Discharges Occurring From July 1, 2008 Through September 30, 2009
------------------------------------------------------------------------
Proposed
CBSA code Nonurban area wage
index
------------------------------------------------------------------------
01.................................. Alabama................ 0.7533
02.................................. Alaska................. 1.2109
03.................................. Arizona................ 0.8479
04.................................. Arkansas............... 0.7371
05.................................. California............. 1.2023
06.................................. Colorado............... 0.9704
07.................................. Connecticut............ 1.1119
08.................................. Delaware............... 0.9727
10.................................. Florida................ 0.8465
11.................................. Georgia................ 0.7659
12.................................. Hawaii................. 1.0612
13.................................. Idaho.................. 0.7920
14.................................. Illinois............... 0.8335
15.................................. Indiana................ 0.8576
16.................................. Iowa................... 0.8566
17.................................. Kansas................. 0.7981
18.................................. Kentucky............... 0.7793
19.................................. Louisiana.............. 0.7373
20.................................. Maine.................. 0.8476
21.................................. Maryland............... 0.9034
22.................................. Massachusetts.......... 1.1589
23.................................. Michigan............... 0.8953
24.................................. Minnesota.............. 0.9079
25.................................. Mississippi............ 0.7700
26.................................. Missouri............... 0.7930
27.................................. Montana................ 0.8379
28.................................. Nebraska............... 0.8849
29.................................. Nevada................. 0.9272
30.................................. New Hampshire.......... 1.0470
31.................................. New Jersey *........... .........
32.................................. New Mexico............. 0.8940
33.................................. New York............... 0.8268
34.................................. North Carolina......... 0.8603
35.................................. North Dakota........... 0.7182
36.................................. Ohio................... 0.8714
37.................................. Oklahoma............... 0.7492
38.................................. Oregon................. 0.9906
39.................................. Pennsylvania........... 0.8385
41.................................. Rhode Island *......... .........
42.................................. South Carolina......... 0.8656
43.................................. South Dakota........... 0.8549
44.................................. Tennessee.............. 0.7723
45.................................. Texas.................. 0.7968
46.................................. Utah................... 0.8116
47.................................. Vermont................ 0.9919
49.................................. Virginia............... 0.7896
50.................................. Washington............. 1.0259
51.................................. West Virginia.......... 0.7454
52.................................. Wisconsin.............. 0.9667
53.................................. Wyoming................ 0.9287
------------------------------------------------------------------------
* All counties within the State are classified as urban.

Table 3.--FY 2008 MS-LTC-DRGs, Relative Weights, Geometric Average Length of Stay, Short-Stay Outlier Threshold
and IPPS-Comparable Threshold
----------------------------------------------------------------------------------------------------------------
Geometric Short stay IPPS
Relative average outlier comparable
MS-LTC-DRG MS-DRG title weight \1\ length of threshold threshold
stay \2\ \3\
----------------------------------------------------------------------------------------------------------------
001......................... Heart transplant or implant of 0.0000 0.0 0.0 0.0
heart assist system w MCC.
002......................... Heart transplant or implant of 0.0000 0.0 0.0 0.0
heart assist system w/o MCC.
003......................... ECMO or trach w MV 96+ hrs or 4.2380 64.3 53.6 53.6
PDX exc face, mouth & neck w
maj O.R.
004......................... Trach w MV 96+ hrs or PDX exc 3.0249 46.7 38.9 38.9
face, mouth & neck w/o maj
O.R.
005......................... Liver transplant w MCC or 0.0000 0.0 0.0 0.0
intestinal transplant.
006......................... Liver transplant w/o MCC...... 0.0000 0.0 0.0 0.0
007......................... Lung transplant............... 0.0000 0.0 0.0 0.0
008......................... Simultaneous pancreas/kidney 0.0000 0.0 0.0 0.0
transplant.
009......................... Bone marrow transplant........ 1.1417 29.0 24.2 24.2
010......................... Pancreas transplant........... 1.1417 29.0 24.2 0.0
011......................... Tracheostomy for face, mouth & 1.5545 35.2 29.3 25.2
neck diagnoses w MCC.
012......................... Tracheostomy for face, mouth & 1.5545 35.2 29.3 16.7
neck diagnoses w CC.
013......................... Tracheostomy for face, mouth & 1.5545 35.2 29.3 11.2
neck diagnoses w/o CC/MCC.
020......................... Intracranial vascular 1.5545 35.2 29.3 29.3
procedures w PDX hemorrhage w
MCC.
021......................... Intracranial vascular 0.5472 20.3 16.9 16.9
procedures w PDX hemorrhage w
CC.

[[Page 5409]]

022......................... Intracranial vascular 0.5472 20.3 16.9 16.1
procedures w PDX hemorrhage w/
o CC/MCC.
023......................... Cranio w major dev impl/acute 1.5545 35.2 29.3 22.2
complex CNS PDX w MCC or
chemo implant.
024......................... Cranio w major dev impl/acute 0.5472 20.3 16.9 15.8
complex CNS PDX w/o MCC.
025......................... Craniotomy & endovascular 1.5545 35.2 29.3 22.1
intracranial procedures w MCC.
026......................... Craniotomy & endovascular 1.5545 35.2 29.3 13.2
intracranial procedures w CC.
027......................... Craniotomy & endovascular 1.5545 35.2 29.3 7.5
intracranial procedures w/o
CC/MCC.
028......................... Spinal procedures w MCC....... 1.1417 29.0 24.2 24.2
029......................... Spinal procedures w CC or 1.1417 29.0 24.2 12.4
spinal neurostimulators.
030......................... Spinal procedures w/o CC/MCC.. 0.5472 20.3 16.9 5.9
031......................... Ventricular shunt procedures w 1.5545 35.2 29.3 22.9
MCC.
032......................... Ventricular shunt procedures w 0.5472 20.3 16.9 9.4
CC.
033......................... Ventricular shunt procedures w/ 0.5472 20.3 16.9 4.7
o CC/MCC.
034......................... Carotid artery stent procedure 1.5545 35.2 29.3 12.5
w MCC.
035......................... Carotid artery stent procedure 1.1417 29.0 24.2 4.4
w CC.
036......................... Carotid artery stent procedure 1.1417 29.0 24.2 2.2
w/o CC/MCC.
037......................... Extracranial procedures w MCC. 1.5545 35.2 29.3 14.9
038......................... Extracranial procedures w CC.. 1.1417 29.0 24.2 5.8
039......................... Extracranial procedures w/o CC/ 1.1417 29.0 24.2 2.6
MCC.
040......................... Periph/cranial nerve & other 1.2704 36.2 30.2 22.7
nerv syst proc w MCC.
041......................... Periph/cranial nerve & other 1.0810 34.3 28.6 12.3
nerv syst proc w CC or periph
neurostim.
042......................... Periph/cranial nerve & other 0.7305 22.9 19.1 5.7
nerv syst proc w/o CC/MCC.
052......................... Spinal disorders & injuries w 1.0629 32.3 26.9 10.7
CC/MCC.
053......................... Spinal disorders & injuries w/ 1.0629 32.3 26.9 6.4
o CC/MCC.
054......................... Nervous system neoplasms w MCC 0.7205 23.6 19.7 11.7
055......................... Nervous system neoplasms w/o 0.6779 22.0 18.3 8.1
MCC.
056......................... Degenerative nervous system 0.7407 26.4 22.0 12.3
disorders w MCC.
057......................... Degenerative nervous system 0.6309 24.4 20.3 7.6
disorders w/o MCC.
058......................... Multiple sclerosis & 0.7305 22.9 19.1 12.5
cerebellar ataxia w MCC.
059......................... Multiple sclerosis & 0.5595 22.6 18.8 8.0
cerebellar ataxia w CC.
060......................... Multiple sclerosis & 0.5472 20.3 16.9 6.2
cerebellar ataxia w/o CC/MCC.
061......................... Acute ischemic stroke w use of 0.7897 24.2 20.2 16.0
thrombolytic agent w MCC.
062......................... Acute ischemic stroke w use of 0.6563 22.7 18.9 9.6
thrombolytic agent w CC.
063......................... Acute ischemic stroke w use of 0.5472 20.3 16.9 6.8
thrombolytic agent w/o CC/MCC.
064......................... Intracranial hemorrhage or 0.7746 25.1 20.9 12.7
cerebral infarction w MCC.
065......................... Intracranial hemorrhage or 0.6691 23.3 19.4 8.2
cerebral infarction w CC.
066......................... Intracranial hemorrhage or 0.5472 20.3 16.9 5.8
cerebral infarction w/o CC/
MCC.
067......................... Nonspecific cva & precerebral 0.5472 20.3 16.9 10.1
occlusion w/o infarct w MCC.
068......................... Nonspecific cva & precerebral 0.5472 20.3 16.9 5.6
occlusion w/o infarct w/o MCC.
069......................... Transient ischemia............ 0.5472 20.3 16.9 4.7
070......................... Nonspecific cerebrovascular 0.7897 24.2 20.2 12.7
disorders w MCC.
071......................... Nonspecific cerebrovascular 0.6563 22.7 18.9 8.8
disorders w CC.
072......................... Nonspecific cerebrovascular 0.5472 20.3 16.9 5.8
disorders w/o CC/MCC.
073......................... Cranial & peripheral nerve 0.7849 25.6 21.3 10.2
disorders w MCC.
074......................... Cranial & peripheral nerve 0.6260 23.4 19.5 6.9
disorders w/o MCC.
075......................... Viral meningitis w CC/MCC..... 0.7305 22.9 19.1 12.1
076......................... Viral meningitis w/o CC/MCC... 0.5472 20.3 16.9 6.5
077......................... Hypertensive encephalopathy w 0.7305 22.9 19.1 11.4
MCC.
078......................... Hypertensive encephalopathy w 0.7305 22.9 19.1 7.2
CC.
079......................... Hypertensive encephalopathy w/ 0.5472 20.3 16.9 5.3
o CC/MCC.
080......................... Nontraumatic stupor & coma w 0.6312 24.6 20.5 7.8
MCC.
081......................... Nontraumatic stupor & coma w/o 0.5618 23.1 19.3 5.3
MCC.
082......................... Traumatic stupor & coma, coma 0.8864 29.5 24.6 10.9
>1 hr w MCC.
083......................... Traumatic stupor & coma, coma 0.7305 22.9 19.1 8.6
>1 hr w CC.
084......................... Traumatic stupor & coma, coma 0.7305 22.9 19.1 4.9
>1 hr w/o CC/MCC.
085......................... Traumatic stupor & coma, coma 0.9044 28.3 23.6 13.2
< 1 hr w MCC.
086......................... Traumatic stupor & coma, coma 0.7437 25.1 20.9 8.2
< 1 hr w CC.
087......................... Traumatic stupor & coma, coma 0.6361 20.4 17.0 5.3
< 1 hr w/o CC/MCC.
088......................... Concussion w MCC.............. 1.1417 29.0 24.2 9.9
089......................... Concussion w CC............... 1.1417 29.0 24.2 6.0
090......................... Concussion w/o CC/MCC......... 1.1417 29.0 24.2 3.7
091......................... Other disorders of nervous 0.8019 25.6 21.3 10.7
system w MCC.
092......................... Other disorders of nervous 0.6704 22.0 18.3 6.9
system w CC.
093......................... Other disorders of nervous 0.5811 20.1 16.8 4.9
system w/o CC/MCC.
094......................... Bacterial & tuberculous 1.0328 27.9 23.3 20.8
infections of nervous system
w MCC.
095......................... Bacterial & tuberculous 0.9306 27.0 22.5 14.9
infections of nervous system
w CC.
096......................... Bacterial & tuberculous 0.9306 27.0 22.5 10.1
infections of nervous system
w/o CC/MCC.
097......................... Non-bacterial infect of 0.9289 26.8 22.3 19.6
nervous sys exc viral
meningitis w MCC.

[[Page 5410]]

098......................... Non-bacterial infect of 0.8629 22.7 18.9 13.7
nervous sys exc viral
meningitis w CC.
099......................... Non-bacterial infect of 0.7305 22.9 19.1 10.1
nervous sys exc viral
meningitis w/o CC/MCC.
100......................... Seizures w MCC................ 0.7904 26.5 22.1 10.1
101......................... Seizures w/o MCC.............. 0.6177 21.4 17.8 5.8
102......................... Headaches w MCC............... 0.8249 25.0 20.8 8.1
103......................... Headaches w/o MCC............. 0.8249 25.0 20.8 5.0
113......................... Orbital procedures w CC/MCC... 0.7305 22.9 19.1 9.2
114......................... Orbital procedures w/o CC/MCC. 0.7305 22.9 19.1 4.1
115......................... Extraocular procedures except 0.8249 25.0 20.8 7.2
orbit.
116......................... Intraocular procedures w CC/ 0.8249 25.0 20.8 5.2
MCC.
117......................... Intraocular procedures w/o CC/ 0.8249 25.0 20.8 2.8
MCC.
121......................... Acute major eye infections w 0.7305 22.9 19.1 9.1
CC/MCC.
122......................... Acute major eye infections w/o 0.5472 20.3 16.9 6.3
CC/MCC.
123......................... Neurological eye disorders.... 0.5472 20.3 16.9 4.5
124......................... Other disorders of the eye w 1.1417 29.0 24.2 8.4
MCC.
125......................... Other disorders of the eye w/o 0.8249 25.0 20.8 5.5
MCC.
129......................... Major head & neck procedures w 1.1977 26.4 22.0 8.1
CC/MCC or major device.
130......................... Major head & neck procedures w/ 0.7305 22.9 19.1 4.8
o CC/MCC.
131......................... Cranial/facial procedures w CC/ 1.5545 35.2 29.3 9.5
MCC.
132......................... Cranial/facial procedures w/o 1.5545 35.2 29.3 4.0
CC/MCC.
133......................... Other ear, nose, mouth & 0.7305 22.9 19.1 9.4
throat O.R. procedures w CC/
MCC.
134......................... Other ear, nose, mouth & 0.7305 22.9 19.1 3.2
throat O.R. procedures w/o CC/
MCC.
135......................... Sinus & mastoid procedures w 0.7305 22.9 19.1 10.8
CC/MCC.
136......................... Sinus & mastoid procedures w/o 0.7305 22.9 19.1 3.9
CC/MCC.
137......................... Mouth procedures w CC/MCC..... 1.5545 35.2 29.3 8.7
138......................... Mouth procedures w/o CC/MCC... 1.5545 35.2 29.3 3.7
139......................... Salivary gland procedures..... 1.5545 35.2 29.3 2.5
146......................... Ear, nose, mouth & throat 1.1977 26.4 22.0 16.9
malignancy w MCC.
147......................... Ear, nose, mouth & throat 1.0416 24.9 20.8 9.3
malignancy w CC.
148......................... Ear, nose, mouth & throat 0.7305 22.9 19.1 5.6
malignancy w/o CC/MCC.
149......................... Dysequilibrium................ 0.5472 20.3 16.9 4.2
150......................... Epistaxis w MCC............... 0.7305 22.9 19.1 8.8
151......................... Epistaxis w/o MCC............. 0.7305 22.9 19.1 4.5
152......................... Otitis media & URI w MCC...... 0.7305 22.9 19.1 7.4
153......................... Otitis media & URI w/o MCC.... 0.7305 22.9 19.1 5.2
154......................... Nasal trauma & deformity w MCC 0.7703 21.0 17.5 10.5
155......................... Nasal trauma & deformity w CC. 0.7703 21.0 17.5 7.2
156......................... Nasal trauma & deformity w/o 0.7305 22.9 19.1 4.9
CC/MCC.
157......................... Dental & Oral Diseases w MCC.. 0.8249 25.0 20.8 11.3
158......................... Dental & Oral Diseases w CC... 0.8249 25.0 20.8 7.1
159......................... Dental & Oral Diseases w/o CC/ 0.5472 20.3 16.9 4.8
MCC.
163......................... Major chest procedures w MCC.. 2.2157 39.7 33.1 23.6
164......................... Major chest procedures w CC... 1.5545 35.2 29.3 13.0
165......................... Major chest procedures w/o CC/ 1.5545 35.2 29.3 8.3
MCC.
166......................... Other resp system O.R. 2.4392 42.3 35.3 20.6
procedures w MCC.
167......................... Other resp system O.R. 2.1594 38.0 31.7 13.1
procedures w CC.
168......................... Other resp system O.R. 1.1417 29.0 24.2 8.9
procedures w/o CC/MCC.
175......................... Pulmonary embolism w MCC...... 0.7160 22.0 18.3 11.6
176......................... Pulmonary embolism w/o MCC.... 0.5989 20.1 16.8 8.4
177......................... Respiratory infections & 0.8393 23.5 19.6 14.9
inflammations w MCC.
178......................... Respiratory infections & 0.7671 22.2 18.5 11.7
inflammations w CC.
179......................... Respiratory infections & 0.6885 19.0 15.8 8.9
inflammations w/o CC/MCC.
180......................... Respiratory neoplasms w MCC... 0.8140 20.2 16.8 13.1
181......................... Respiratory neoplasms w CC.... 0.7103 19.3 16.1 9.7
182......................... Respiratory neoplasms w/o CC/ 0.5472 20.3 16.9 6.9
MCC.
183......................... Major chest trauma w MCC...... 0.5472 20.3 16.9 11.5
184......................... Major chest trauma w CC....... 0.5472 20.3 16.9 7.3
185......................... Major chest trauma w/o CC/MCC. 0.5472 20.3 16.9 5.0
186......................... Pleural effusion w MCC........ 0.8259 23.6 19.7 12.2
187......................... Pleural effusion w CC......... 0.7042 21.1 17.6 8.8
188......................... Pleural effusion w/o CC/MCC... 0.7042 21.1 17.6 6.5
189......................... Pulmonary edema & respiratory 0.9743 24.0 20.0 10.1
failure.
190......................... Chronic obstructive pulmonary 0.6858 20.9 17.4 10.2
disease w MCC.
191......................... Chronic obstructive pulmonary 0.6256 19.5 16.3 7.9
disease w CC.
192......................... Chronic obstructive pulmonary 0.5832 17.2 14.3 6.2
disease w/o CC/MCC.
193......................... Simple pneumonia & pleurisy w 0.7088 21.6 18.0 10.9
MCC.
194......................... Simple pneumonia & pleurisy w 0.6429 19.8 16.5 8.2
CC.
195......................... Simple pneumonia & pleurisy w/ 0.5962 18.2 15.2 6.3
o CC/MCC.

[[Page 5411]]

196......................... Interstitial lung disease w 0.6529 20.0 16.7 11.6
MCC.
197......................... Interstitial lung disease w CC 0.6133 19.6 16.3 8.5
198......................... Interstitial lung disease w/o 0.5956 19.7 16.4 6.7
CC/MCC.
199......................... Pneumothorax w MCC............ 0.8249 25.0 20.8 13.8
200......................... Pneumothorax w CC............. 0.7305 22.9 19.1 8.3
201......................... Pneumothorax w/o CC/MCC....... 0.5472 20.3 16.9 6.5
202......................... Bronchitis & asthma w CC/MCC.. 0.6903 21.1 17.6 6.9
203......................... Bronchitis & asthma w/o CC/MCC 0.5650 17.1 14.3 5.3
204......................... Respiratory signs & symptoms.. 0.8187 22.0 18.3 4.4
205......................... Other respiratory system 0.8207 22.4 18.7 9.0
diagnoses w MCC.
206......................... Other respiratory system 0.7667 21.5 17.9 5.5
diagnoses w/o MCC.
207......................... Respiratory system diagnosis w 2.0266 34.3 28.6 22.6
ventilator support 96+ hours.
208......................... Respiratory system diagnosis w 1.5514 27.8 23.2 12.5
ventilator support < 96 hours.
215......................... Other heart assist system 0.8249 25.0 20.8 20.5
implant.
216......................... Cardiac valve & oth maj 1.5545 35.2 29.3 28.7
cardiothoracic proc w card
cath w MCC.
217......................... Cardiac valve & oth maj 0.8249 25.0 20.8 17.7
cardiothoracic proc w card
cath w CC.
218......................... Cardiac valve & oth maj 0.8249 25.0 20.8 12.7
cardiothoracic proc w card
cath w/o CC/MCC.
219......................... Cardiac valve & oth maj 1.5545 35.2 29.3 22.6
cardiothoracic proc w/o card
cath w MCC.
220......................... Cardiac valve & oth maj 0.8249 25.0 20.8 12.5
cardiothoracic proc w/o card
cath w CC.
221......................... Cardiac valve & oth maj 0.8249 25.0 20.8 8.7
cardiothoracic proc w/o card
cath w/o CC/MCC.
222......................... Cardiac defib implant w 1.5545 35.2 29.3 20.9
cardiac cath w AMI/HF/shock w
MCC.
223......................... Cardiac defib implant w 1.5545 35.2 29.3 11.0
cardiac cath w AMI/HF/shock w/
o MCC.
224......................... Cardiac defib implant w 1.5545 35.2 29.3 18.2
cardiac cath w/o AMI/HF/shock
w MCC.
225......................... Cardiac defib implant w 1.5545 35.2 29.3 9.2
cardiac cath w/o AMI/HF/shock
w/o MCC.
226......................... Cardiac defibrillator implant 1.5545 35.2 29.3 16.8
w/o cardiac cath w MCC.
227......................... Cardiac defibrillator implant 1.5545 35.2 29.3 4.1
w/o cardiac cath w/o MCC.
228......................... Other cardiothoracic 1.5410 35.0 29.2 23.2
procedures w MCC.
229......................... Other cardiothoracic 1.2681 30.8 25.7 13.5
procedures w CC.
230......................... Other cardiothoracic 0.8249 25.0 20.8 10.2
procedures w/o CC/MCC.
231......................... Coronary bypass w PTCA w MCC.. 1.5545 35.2 29.3 20.9
232......................... Coronary bypass w PTCA w/o MCC 0.8249 25.0 20.8 13.1
233......................... Coronary bypass w cardiac cath 1.5545 35.2 29.3 21.0
w MCC.
234......................... Coronary bypass w cardiac cath 0.8249 25.0 20.8 12.2
w/o MCC.
235......................... Coronary bypass w/o cardiac 1.5545 35.2 29.3 17.0
cath w MCC.
236......................... Coronary bypass w/o cardiac 0.8249 25.0 20.8 9.0
cath w/o MCC.
237......................... Major cardiovasc procedures w 1.5545 35.2 29.3 19.6
MCC or thoracic aortic
anuerysm repair.
238......................... Major cardiovasc procedures w/ 0.8249 25.0 20.8 8.1
o MCC.
239......................... Amputation for circ sys 1.3794 37.4 31.2 24.7
disorders exc upper limb &
toe w MCC.
240......................... Amputation for circ sys 1.2872 36.1 30.1 16.6
disorders exc upper limb &
toe w CC.
241......................... Amputation for circ sys 1.1417 29.0 24.2 10.7
disorders exc upper limb &
toe w/o CC/MCC.
242......................... Permanent cardiac pacemaker 1.5545 35.2 29.3 14.5
implant w MCC.
243......................... Permanent cardiac pacemaker 1.5545 35.2 29.3 8.5
implant w CC.
244......................... Permanent cardiac pacemaker 1.1417 29.0 24.2 4.6
implant w/o CC/MCC.
245......................... AICD lead & generator 0.7305 22.9 19.1 4.9
procedures.
246......................... Perc cardiovasc proc w drug- 0.8249 25.0 20.8 9.1
eluting stent w MCC or 4+
vessels/stents.
247......................... Perc cardiovasc proc w drug- 0.8249 25.0 20.8 3.3
eluting stent w/o MCC.
248......................... Perc cardiovasc proc w non- 1.5545 35.2 29.3 10.3
drug-eluting stent w MCC or
4+ ves/stents.
249......................... Perc cardiovasc proc w non- 1.5545 35.2 29.3 3.9
drug-eluting stent w/o MCC.
250......................... Perc cardiovasc proc w/o 0.8249 25.0 20.8 12.7
coronary artery stent or AMI
w MCC.
251......................... Perc cardiovasc proc w/o 0.8249 25.0 20.8 4.6
coronary artery stent or AMI
w/o MCC.
252......................... Other vascular procedures w 1.5410 35.0 29.2 15.1
MCC.
253......................... Other vascular procedures w CC 1.2681 30.8 25.7 10.2
254......................... Other vascular procedures w/o 0.8249 25.0 20.8 4.3
CC/MCC.
255......................... Upper limb & toe amputation 1.1713 33.7 28.1 16.7
for circ system disorders w
MCC.
256......................... Upper limb & toe amputation 0.9516 29.4 24.5 12.3
for circ system disorders w
CC.
257......................... Upper limb & toe amputation 0.9516 29.4 24.5 8.2
for circ system disorders w/o
CC/MCC.
258......................... Cardiac pacemaker device 1.5545 35.2 29.3 12.6
replacement w MCC.
259......................... Cardiac pacemaker device 1.5545 35.2 29.3 4.0
replacement w/o MCC.
260......................... Cardiac pacemaker revision 1.5545 35.2 29.3 17.4
except device replacement w
MCC.
261......................... Cardiac pacemaker revision 0.5472 20.3 16.9 6.4
except device replacement w
CC.
262......................... Cardiac pacemaker revision 0.5472 20.3 16.9 3.7
except device replacement w/o
CC/MCC.
263......................... Vein ligation & stripping..... 0.8249 25.0 20.8 9.2
264......................... Other circulatory system O.R. 1.0667 31.6 26.3 15.4
procedures.
280......................... Acute myocardial infarction, 0.7263 21.4 17.8 12.0
discharged alive w MCC.
281......................... Acute myocardial infarction, 0.6931 22.8 19.0 7.8
discharged alive w CC.
282......................... Acute myocardia infarction, 0.6931 22.8 19.0 5.1
discharged alive w/o CC/MCC.
283......................... Acute myocardial infarction, 0.6609 17.0 14.2 9.0
expired w MCC.
284......................... Acute myocardial infarction, 0.6609 17.0 14.2 5.4
expired w CC.

[[Page 5412]]

285......................... Acute myocardial infarction, 0.6609 17.0 14.2 3.3
expired w/o CC/MCC.
286......................... Circulatory disorders except 1.1417 29.0 24.2 11.6
AMI, w card cath w MCC.
287......................... Circulatory disorders except 0.8249 25.0 20.8 5.0
AMI, w card cath w/o MCC.
288......................... Acute & subacute endocarditis 0.9082 26.4 22.0 19.7
w MCC.
289......................... Acute & subacute endocarditis 0.8580 26.4 22.0 13.7
w CC.
290......................... Acute & subacute endocarditis 0.7664 25.5 21.3 10.6
w/o CC/MCC.
291......................... Heart failure & shock w MCC... 0.6968 21.4 17.8 10.7
292......................... Heart failure & shock w CC.... 0.6252 20.4 17.0 7.7
293......................... Heart failure & shock w/o CC/ 0.5775 18.5 15.4 5.6
MCC.
294......................... Deep vein thrombophlebitis w 0.8249 25.0 20.8 8.6
CC/MCC.
295......................... Deep vein thrombophlebitis w/o 0.8249 25.0 20.8 6.7
CC/MCC.
296......................... Cardiac arrest, unexplained w 0.6609 17.0 14.2 4.8
MCC.
297......................... Cardiac arrest, unexplained w 0.6609 17.0 14.2 2.7
CC.
298......................... Cardiac arrest, unexplained w/ 0.6609 17.0 14.2 1.9
o CC/MCC.
299......................... Peripheral vascular disorders 0.7152 24.8 20.7 11.2
w MCC.
300......................... Peripheral vascular disorders 0.6150 22.2 18.5 8.2
w CC.
301......................... Peripheral vascular disorders 0.5557 19.4 16.2 6.0
w/o CC/MCC.
302......................... Atherosclerosis w MCC......... 0.6170 21.9 18.3 6.9
303......................... Atherosclerosis w/o MCC....... 0.5673 20.5 17.1 3.9
304......................... Hypertension w MCC............ 0.8249 25.0 20.8 8.3
305......................... Hypertension w/o MCC.......... 0.5856 22.6 18.8 4.4
306......................... Cardiac congenital & valvular 0.8786 24.2 20.2 10.2
disorders w MCC.
307......................... Cardiac congenital & valvular 0.7767 23.1 19.3 5.5
disorders w/o MCC.
308......................... Cardiac arrhythmia & 0.7431 24.7 20.6 9.3
conduction disorders w MCC.
309......................... Cardiac arrhythmia & 0.5940 20.4 17.0 6.2
conduction disorders w CC.
310......................... Cardiac arrhythmia & 0.5184 17.0 14.2 4.2
conduction disorders w/o CC/
MCC.
311......................... Angina pectoris............... 0.7305 22.9 19.1 3.5
312......................... Syncope & collapse............ 0.5336 19.7 16.4 4.9
313......................... Chest pain.................... 0.5472 20.3 16.9 3.1
314......................... Other circulatory system 0.8123 23.1 19.3 11.8
diagnoses w MCC.
315......................... Other circulatory system 0.7114 21.6 18.0 7.3
diagnoses w CC.
316......................... Other circulatory system 0.6243 18.9 15.8 4.7
diagnoses w/o CC/MCC.
326......................... Stomach, esophageal & duodenal 1.8646 36.2 30.2 28.1
proc w MCC.
327......................... Stomach, esophageal & duodenal 1.5545 35.2 29.3 16.8
proc w CC.
328......................... Stomach, esophageal & duodenal 0.5472 20.3 16.9 7.2
proc w/o CC/MCC.
329......................... Major small & large bowel 1.5545 35.2 29.3 25.3
procedures w MCC.
330......................... Major small & large bowel 1.5545 35.2 29.3 14.6
procedures w CC.
331......................... Major small & large bowel 0.5472 20.3 16.9 8.7
procedures w/o CC/MCC.
332......................... Rectal resection w MCC........ 1.5057 36.1 30.1 22.6
333......................... Rectal resection w CC......... 1.3309 30.7 25.6 13.0
334......................... Rectal resection w/o CC/MCC... 0.8249 25.0 20.8 8.6
335......................... Peritoneal adhesiolysis w MCC. 1.5545 35.2 29.3 22.9
336......................... Peritoneal adhesiolysis w CC.. 0.7305 22.9 19.1 14.6
337......................... Peritoneal adhesiolysis w/o CC/ 0.7305 22.9 19.1 9.3
MCC.
338......................... Appendectomy w complicated 0.8884 24.1 20.1 16.7
principal diag w MCC.
339......................... Appendectomy w complicated 0.7667 22.2 18.5 10.8
principal diag w CC.
340......................... Appendectomy w complicated 0.6856 19.9 16.6 6.6
principal diag w/o CC/MCC.
341......................... Appendectomy w/o complicated 0.8884 24.1 20.1 12.0
principal diag w MCC.
342......................... Appendectomy w/o complicated 0.7667 22.2 18.5 6.8
principal diag w CC.
343......................... Appendectomy w/o complicated 0.6856 19.9 16.6 3.4
principal diag w/o CC/MCC.
344......................... Minor small & large bowel 0.8884 24.1 20.1 19.1
procedures w MCC.
345......................... Minor small & large bowel 0.7667 22.2 18.5 10.9
procedures w CC.
346......................... Minor small & large bowel 0.6856 19.9 16.6 7.4
procedures w/o CC/MCC.
347......................... Anal & stomal procedures w MCC 1.1417 29.0 24.2 13.8
348......................... Anal & stomal procedures w CC. 0.8249 25.0 20.8 8.9
349......................... Anal & stomal procedures w/o 0.5472 20.3 16.9 4.7
CC/MCC.
350......................... Inguinal & femoral hernia 1.5545 35.2 29.3 13.6
procedures w MCC.
351......................... Inguinal & femoral hernia 1.1417 29.0 24.2 7.4
procedures w CC.
352......................... Inguinal & femoral hernia 0.8249 25.0 20.8 3.7
procedures w/o CC/MCC.
353......................... Hernia procedures except 0.8249 25.0 20.8 14.5
inguinal & femoral w MCC.
354......................... Hernia procedures except 0.8249 25.0 20.8 8.2
inguinal & femoral w CC.
355......................... Hernia procedures except 0.8249 25.0 20.8 4.4
inguinal & femoral w/o CC/MCC.
356......................... Other digestive system O.R. 1.5057 36.1 30.1 22.5
procedures w MCC.
357......................... Other digestive system O.R. 1.3309 30.7 25.6 13.3
procedures w CC.
358......................... Other digestive system O.R. 0.8249 25.0 20.8 7.6
procedures w/o CC/MCC.
368......................... Major esophageal disorders w 1.1417 29.0 24.2 10.5
MCC.
369......................... Major esophageal disorders w 1.1417 29.0 24.2 7.1
CC.
370......................... Major esophageal disorders w/o 1.1417 29.0 24.2 5.2
CC/MCC.

[[Page 5413]]

371......................... Major gastrointestinal 0.8884 24.1 20.1 14.1
disorders & peritoneal
infections w MCC.
372......................... Major gastrointestinal 0.7667 22.2 18.5 10.6
disorders & peritoneal
infections w CC.
373......................... Major gastrointestinal 0.6856 19.9 16.6 7.7
disorders & peritoneal
infections w/o CC/MCC.
374......................... Digestive malignancy w MCC.... 0.8340 22.9 19.1 14.4
375......................... Digestive malignancy w CC..... 0.7563 19.7 16.4 9.7
376......................... Digestive malignancy w/o CC/ 0.5472 20.3 16.9 6.5
MCC.
377......................... G.I. hemorrhage w MCC......... 0.7032 22.5 18.8 10.3
378......................... G.I. hemorrhage w CC.......... 0.6334 21.5 17.9 6.8
379......................... G.I. hemorrhage w/o CC/MCC.... 0.5472 20.3 16.9 5.2
380......................... Complicated peptic ulcer w MCC 0.8249 25.0 20.8 11.4
381......................... Complicated peptic ulcer w CC. 0.8249 25.0 20.8 7.9
382......................... Complicated peptic ulcer w/o 0.7305 22.9 19.1 5.5
CC/MCC.
383......................... Uncomplicated peptic ulcer w 0.8249 25.0 20.8 9.1
MCC.
384......................... Uncomplicated peptic ulcer w/o 0.7305 22.9 19.1 5.9
MCC.
385......................... Inflammatory bowel disease w 0.8874 24.6 20.5 14.4
MCC.
386......................... Inflammatory bowel disease w 0.7655 22.9 19.1 9.0
CC.
387......................... Inflammatory bowel disease w/o 0.7655 22.9 19.1 6.9
CC/MCC.
388......................... G.I. obstruction w MCC........ 0.8967 22.8 19.0 12.0
389......................... G.I. obstruction w CC......... 0.7893 21.9 18.3 8.0
390......................... G.I. obstruction w/o CC/MCC... 0.7893 21.9 18.3 5.5
391......................... Esophagitis, gastroent & misc 0.8509 24.4 20.3 8.7
digest disorders w MCC.
392......................... Esophagitis, gastroent & misc 0.6943 20.4 17.0 5.5
digest disorders w/o MCC.
393......................... Other digestive system 0.9915 25.5 21.3 11.4
diagnoses w MCC.
394......................... Other digestive system 0.8523 22.0 18.3 7.7
diagnoses w CC.
395......................... Other digestive system 0.7214 20.9 17.4 5.3
diagnoses w/o CC/MCC.
405......................... Pancreas, liver & shunt 1.5545 35.2 29.3 29.0
procedures w MCC.
406......................... Pancreas, liver & shunt 1.5545 35.2 29.3 16.0
procedures w CC.
407......................... Pancreas, liver & shunt 1.1417 29.0 24.2 9.2
procedures w/o CC/MCC.
408......................... Biliary tract proc except only 1.5545 35.2 29.3 23.7
cholecyst w or w/o c.d.e. w
MCC.
409......................... Biliary tract proc except only 1.5545 35.2 29.3 15.4
cholecyst w or w/o c.d.e. w
CC.
410......................... Biliary tract proc except only 1.5545 35.2 29.3 10.6
cholecyst w or w/o c.d.e. w/o
CC/MCC.
411......................... Cholecystectomy w c.d.e. w MCC 1.1417 29.0 24.2 20.3
412......................... Cholecystectomy w c.d.e. w CC. 1.1417 29.0 24.2 13.5
413......................... Cholecystectomy w c.d.e. w/o 1.1417 29.0 24.2 9.3
CC/MCC.
414......................... Cholecystectomy except by 1.1417 29.0 24.2 18.4
laparoscope w/o c.d.e. w MCC.
415......................... Cholecystectomy except by 1.1417 29.0 24.2 11.6
laparoscope w/o c.d.e. w CC.
416......................... Cholecystectomy except by 1.1417 29.0 24.2 7.5
laparoscope w/o c.d.e. w/o CC/
MCC.
417......................... Laparoscopic cholecystectomy w/ 1.5545 35.2 29.3 13.5
o c.d.e. w MCC.
418......................... Laparoscopic cholecystectomy w/ 1.1417 29.0 24.2 9.0
o c.d.e. w CC.
419......................... Laparoscopic cholecystectomy w/ 1.1417 29.0 24.2 5.0
o c.d.e. w/o CC/MCC.
420......................... Hepatobiliary diagnostic 1.1417 29.0 24.2 24.2
procedures w MCC.
421......................... Hepatobiliary diagnostic 0.8249 25.0 20.8 12.9
procedures w CC.
422......................... Hepatobiliary diagnostic 0.8249 25.0 20.8 7.3
procedures w/o CC/MCC.
423......................... Other hepatobiliary or 1.1417 29.0 24.2 24.2
pancreas O.R. procedures w
MCC.
424......................... Other hepatobiliary or 0.8249 25.0 20.8 17.1
pancreas O.R. procedures w CC.
425......................... Other hepatobiliary or 0.8249 25.0 20.8 9.2
pancreas O.R. procedures w/o
CC/MCC.
432......................... Cirrhosis & alcoholic 0.6223 19.0 15.8 11.1
hepatitis w MCC.
433......................... Cirrhosis & alcoholic 0.6223 19.0 15.8 7.7
hepatitis w CC.
434......................... Cirrhosis & alcoholic 0.5472 20.3 16.9 5.7
hepatitis w/o CC/MCC.
435......................... Malignancy of hepatobiliary 0.7422 20.2 16.8 12.6
system or pancreas w MCC.
436......................... Malignancy of hepatobiliary 0.7086 19.6 16.3 9.5
system or pancreas w CC.
437......................... Malignancy of hepatobiliary 0.7086 19.6 16.3 7.1
system or pancreas w/o CC/MCC.
438......................... Disorders of pancreas except 1.0057 24.3 20.3 12.5
malignancy w MCC.
439......................... Disorders of pancreas except 0.8437 21.9 18.3 8.5
malignancy w CC.
440......................... Disorders of pancreas except 0.7204 18.8 15.7 5.9
malignancy w/o CC/MCC.
441......................... Disorders of liver except 0.7588 21.8 18.2 11.3
malig,cirr,alc hepa w MCC.
442......................... Disorders of liver except 0.6925 21.2 17.7 8.1
malig, cirr, alc hepa w CC.
443......................... Disorders of liver except 0.6925 21.2 17.7 6.0
malig,cirr,alc hepa w/o CC/
MCC.
444......................... Disorders of the biliary tract 0.8181 24.0 20.0 10.7
w MCC.
445......................... Disorders of the biliary tract 0.6977 21.7 18.1 7.6
w CC.
446......................... Disorders of the biliary tract 0.5472 20.3 16.9 5.2
w/o CC/MCC.
453......................... Combined anterior/posterior 1.5545 35.2 29.3 24.9
spinal fusion w MCC.
454......................... Combined anterior/posterior 1.5545 35.2 29.3 12.7
spinal fusion w CC.
455......................... Combined anterior/posterior 1.5545 35.2 29.3 7.1
spinal fusion w/o CC/MCC.
456......................... Spinal fus exc cerv w spinal 1.5545 35.2 29.3 24.9
curv/malig/infec or 9+ fus w
MCC.
457......................... Spinal fus exc cerv w spinal 1.5545 35.2 29.3 11.6
curv/malig/infec or 9+ fus w
CC.
458......................... Spinal fus exc cerv w spinal 1.5545 35.2 29.3 6.8
curv/malig/infec or 9+ fus w/
o CC/MCC.
459......................... Spinal fusion except cervical 1.5545 35.2 29.3 14.7
w MCC.

[[Page 5414]]

460......................... Spinal fusion except cervical 1.5545 35.2 29.3 6.4
w/o MCC.
461......................... Bilateral or multiple major 1.5545 35.2 29.3 12.6
joint procs of lower
extremity w MCC.
462......................... Bilateral or multiple major 1.1417 29.0 24.2 5.8
joint procs of lower
extremity w/o MCC.
463......................... Wnd debrid & skn grft exc 1.3514 38.8 32.3 27.4
hand, for musculo-conn tiss
dis w MCC.
464......................... Wnd debrid & skn grft exc 1.1906 36.3 30.3 16.8
hand, for musculo-conn tiss
dis w CC.
465......................... Wnd debrid & skn grft exc 1.0747 29.6 24.7 10.0
hand, for musculo-conn tiss
dis w/o CC/MCC.
466......................... Revision of hip or knee 1.5545 35.2 29.3 14.5
replacement w MCC.
467......................... Revision of hip or knee 1.5545 35.2 29.3 8.0
replacement w CC.
468......................... Revision of hip or knee 1.5545 35.2 29.3 5.5
replacement w/o CC/MCC.
469......................... Major joint replacement or 1.5545 35.2 29.3 12.6
reattachment of lower
extremity w MCC.
470......................... Major joint replacement or 1.5545 35.2 29.3 5.4
reattachment of lower
extremity w/o MCC.
471......................... Cervical spinal fusion w MCC.. 1.5545 35.2 29.3 17.3
472......................... Cervical spinal fusion w CC... 1.5545 35.2 29.3 7.0
473......................... Cervical spinal fusion w/o CC/ 1.5545 35.2 29.3 2.9
MCC.
474......................... Amputation for musculoskeletal 1.3338 36.6 30.5 20.4
sys & conn tissue dis w MCC.
475......................... Amputation for musculoskeletal 1.1390 32.7 27.3 13.9
sys & conn tissue dis w CC.
476......................... Amputation for musculoskeletal 1.1390 32.7 27.3 8.0
sys & conn tissue dis w/o CC/
MCC.
477......................... Biopsies of musculoskeletal 1.5545 35.2 29.3 20.7
system & connective tissue w
MCC.
478......................... Biopsies of musculoskeletal 1.1417 29.0 24.2 11.9
system & connective tissue w
CC.
479......................... Biopsies of musculoskeletal 1.1417 29.0 24.2 4.3
system & connective tissue w/
o CC/MCC.
480......................... Hip & femur procedures except 1.5545 35.2 29.3 14.1
major joint w MCC.
481......................... Hip & femur procedures except 1.5545 35.2 29.3 8.4
major joint w CC.
482......................... Hip & femur procedures except 1.1417 29.0 24.2 6.8
major joint w/o CC/MCC.
483......................... Major joint & limb 1.5545 35.2 29.3 6.6
reattachment proc of upper
extremity w CC/MCC.
484......................... Major joint & limb 1.1417 29.0 24.2 3.6
reattachment proc of upper
extremity w/o CC/MCC.
485......................... Knee procedures w pdx of 1.5545 35.2 29.3 18.9
infection w MCC.
486......................... Knee procedures w pdx of 1.1417 29.0 24.2 12.3
infection w CC.
487......................... Knee procedures w pdx of 1.1417 29.0 24.2 8.5
infection w/o CC/MCC.
488......................... Knee procedures w/o pdx of 1.5545 35.2 29.3 7.8
infection w CC/MCC.
489......................... Knee procedures w/o pdx of 1.5545 35.2 29.3 4.7
infection w/o CC/MCC.
490......................... Back & neck proc exc spinal 1.1417 29.0 24.2 7.6
fusion w CC/MCC or disc
device/neurostim.
491......................... Back & neck proc exc spinal 1.1417 29.0 24.2 3.4
fusion w/o CC/MCC.
492......................... Lower extrem & humer proc 1.5545 35.2 29.3 13.6
except hip, foot, femur w MCC.
493......................... Lower extrem & humer proc 1.1417 29.0 24.2 8.2
except hip, foot, femur w CC.
494......................... Lower extrem & humer proc 0.8249 25.0 20.8 5.1
except hip, foot, femur w/o
CC/MCC.
495......................... Local excision & removal int 1.3650 38.1 31.8 18.2
fix devices exc hip & femur w
MCC.
496......................... Local excision & removal int 1.1981 36.8 30.7 9.8
fix devices exc hip & femur w
CC.
497......................... Local excision & removal int 1.1417 29.0 24.2 4.9
fix devices exc hip & femur w/
o CC/MCC.
498......................... Local excision & removal int 1.5545 35.2 29.3 13.4
fix devices of hip & femur w
CC/MCC.
499......................... Local excision & removal int 0.7305 22.9 19.1 4.9
fix devices of hip & femur w/
o CC/MCC.
500......................... Soft tissue procedures w MCC.. 1.3212 35.2 29.3 18.8
501......................... Soft tissue procedures w CC... 1.2903 30.7 25.6 9.6
502......................... Soft tissue procedures w/o CC/ 0.8249 25.0 20.8 4.5
MCC.
503......................... Foot procedures w MCC......... 1.1417 29.0 24.2 14.6
504......................... Foot procedures w CC.......... 0.8249 25.0 20.8 10.5
505......................... Foot procedures w/o CC/MCC.... 0.5472 20.3 16.9 5.3
506......................... Major thumb or joint 0.7305 22.9 19.1 5.0
procedures.
507......................... Major shoulder or elbow joint 0.8249 25.0 20.8 8.4
procedures w CC/MCC.
508......................... Major shoulder or elbow joint 0.8249 25.0 20.8 3.0
procedures w/o CC/MCC.
509......................... Arthroscopy................... 0.5472 20.3 16.9 4.2
510......................... Shoulder,elbow or forearm 1.1417 29.0 24.2 10.7
proc,exc major joint proc w
MCC.
511......................... Shoulder,elbow or forearm 1.1417 29.0 24.2 6.2
proc,exc major joint proc w
CC.
512......................... Shoulder,elbow or forearm 0.5472 20.3 16.9 3.1
proc,exc major joint proc w/o
CC/MCC.
513......................... Hand or wrist proc, except 1.5545 35.2 29.3 8.4
major thumb or joint proc w
CC/MCC.
514......................... Hand or wrist proc, except 0.7305 22.9 19.1 4.0
major thumb or joint proc w/o
CC/MCC.
515......................... Other musculoskelet sys & conn 1.3230 34.8 29.0 18.1
tiss O.R. proc w MCC.
516......................... Other musculoskelet sys & conn 1.1417 29.0 24.2 10.1
tiss O.R. proc w CC.
517......................... Other musculoskelet sys & conn 0.8249 25.0 20.8 4.5
tiss O.R. proc w/o CC/MCC.
533......................... Fractures of femur w MCC...... 0.8249 25.0 20.8 11.2
534......................... Fractures of femur w/o MCC.... 0.7305 22.9 19.1 6.3
535......................... Fractures of hip & pelvis w 0.7305 22.9 19.1 10.1
MCC.
536......................... Fractures of hip & pelvis w/o 0.5998 23.7 19.8 6.0
MCC.
537......................... Sprains, strains, & 0.5472 20.3 16.9 7.3
dislocations of hip, pelvis &
thigh w CC/MCC.
538......................... Sprains, strains, & 0.5472 20.3 16.9 4.8
dislocations of hip, pelvis &
thigh w/o CC/MCC.
539......................... Osteomyelitis w MCC........... 0.9013 29.7 24.8 16.2
540......................... Osteomyelitis w CC............ 0.8107 28.7 23.9 11.3
541......................... Osteomyelitis w/o CC/MCC...... 0.7787 26.9 22.4 8.9
542......................... Pathological fractures & 0.7359 21.7 18.1 14.0
musculoskelet & conn tiss
malig w MCC.

[[Page 5415]]

543......................... Pathological fractures & 0.6347 21.3 17.8 9.4
musculoskelet & conn tiss
malig w CC.
544......................... Pathological fractures & 0.5472 20.3 16.9 6.8
musculoskelet & conn tiss
malig w/o CC/MCC.
545......................... Connective tissue disorders w 0.8501 23.9 19.9 14.7
MCC.
546......................... Connective tissue disorders w 0.6492 20.7 17.3 8.7
CC.
547......................... Connective tissue disorders w/ 0.5472 20.3 16.9 6.1
o CC/MCC.
548......................... Septic arthritis w MCC........ 0.8584 28.2 23.5 15.0
549......................... Septic arthritis w CC......... 0.7347 26.4 22.0 9.8
550......................... Septic arthritis w/o CC/MCC... 0.6704 23.5 19.6 7.2
551......................... Medical back problems w MCC... 0.7305 26.6 22.2 11.6
552......................... Medical back problems w/o MCC. 0.6022 22.8 19.0 6.5
553......................... Bone diseases & arthropathies 0.8249 25.0 20.8 9.6
w MCC.
554......................... Bone diseases & arthropathies 0.4822 20.5 17.1 5.8
w/o MCC.
555......................... Signs & symptoms of 0.7305 22.9 19.1 7.8
musculoskeletal system & conn
tissue w MCC.
556......................... Signs & symptoms of 0.7305 22.9 19.1 5.0
musculoskeletal system & conn
tissue w/o MCC.
557......................... Tendonitis, myositis & 0.8177 25.9 21.6 11.0
bursitis w MCC.
558......................... Tendonitis, myositis & 0.6919 21.4 17.8 6.6
bursitis w/o MCC.
559......................... Aftercare, musculoskeletal 0.7157 26.2 21.8 11.9
system & connective tissue w
MCC.
560......................... Aftercare, musculoskeletal 0.6393 24.6 20.5 7.5
system & connective tissue w
CC.
561......................... Aftercare, musculoskeletal 0.5889 21.7 18.1 4.2
system & connective tissue w/
o CC/MCC.
562......................... Fx, sprn, strn & disl except 1.1417 29.0 24.2 10.4
femur, hip, pelvis & thigh w
MCC.
563......................... Fx, sprn, strn & disl except 0.5472 20.3 16.9 5.7
femur, hip, pelvis & thigh w/
o MCC.
564......................... Other musculoskeletal sys & 0.8134 24.9 20.8 11.6
connective tissue diagnoses w
MCC.
565......................... Other musculoskeletal sys & 0.7382 24.8 20.7 8.1
connective tissue diagnoses w
CC.
566......................... Other musculoskeletal sys & 0.6862 22.1 18.4 5.9
connective tissue diagnoses w/
o CC/MCC.
573......................... Skin graft &/or debrid for skn 1.3068 38.0 31.7 22.2
ulcer or cellulitis w MCC.
574......................... Skin graft &/or debrid for skn 1.1567 37.1 30.9 14.9
ulcer or cellulitis w CC.
575......................... Skin graft &/or debrid for skn 0.9938 31.7 26.4 9.4
ulcer or cellulitis w/o CC/
MCC.
576......................... Skin graft &/or debrid exc for 1.5545 35.2 29.3 20.3
skin ulcer or cellulitis w
MCC.
577......................... Skin graft &/or debrid exc for 1.1417 29.0 24.2 9.9
skin ulcer or cellulitis w CC.
578......................... Skin graft &/or debrid exc for 0.7305 22.9 19.1 5.4
skin ulcer or cellulitis w/o
CC/MCC.
579......................... Other skin, subcut tiss & 1.2793 36.8 30.7 18.5
breast proc w MCC.
580......................... Other skin, subcut tiss & 1.1001 34.8 29.0 9.0
breast proc w CC.
581......................... Other skin, subcut tiss & 0.9100 29.9 24.9 3.9
breast proc w/o CC/MCC.
582......................... Mastectomy for malignancy w CC/ 1.5545 35.2 29.3 4.3
MCC.
583......................... Mastectomy for malignancy w/o 1.5545 35.2 29.3 2.6
CC/MCC.
584......................... Breast biopsy, local excision 1.1417 29.0 24.2 9.5
& other breast procedures w
CC/MCC.
585......................... Breast biopsy, local excision 1.1417 29.0 24.2 3.2
& other breast procedures w/o
CC/MCC.
592......................... Skin ulcers w MCC............. 0.8875 27.1 22.6 14.2
593......................... Skin ulcers w CC.............. 0.7877 26.8 22.3 10.0
594......................... Skin ulcers w/o CC/MCC........ 0.7342 24.3 20.3 7.7
595......................... Major skin disorders w MCC.... 0.7525 24.5 20.4 13.2
596......................... Major skin disorders w/o MCC.. 0.6155 23.8 19.8 7.6
597......................... Malignant breast disorders w 0.8249 25.0 20.8 13.7
MCC.
598......................... Malignant breast disorders w 0.7305 22.9 19.1 9.0
CC.
599......................... Malignant breast disorders w/o 0.7305 22.9 19.1 5.7
CC/MCC.
600......................... Non-malignant breast disorders 0.7305 22.9 19.1 8.5
w CC/MCC.
601......................... Non-malignant breast disorders 0.7305 22.9 19.1 6.0
w/o CC/MCC.
602......................... Cellulitis w MCC.............. 0.6643 22.5 18.8 11.1
603......................... Cellulitis w/o MCC............ 0.5528 19.4 16.2 7.3
604......................... Trauma to the skin, subcut 0.8249 25.0 20.8 8.8
tiss & breast w MCC.
605......................... Trauma to the skin, subcut 0.5685 21.2 17.7 5.4
tiss & breast w/o MCC.
606......................... Minor skin disorders w MCC.... 0.8324 23.2 19.3 9.5
607......................... Minor skin disorders w/o MCC.. 0.6776 22.6 18.8 5.9
614......................... Adrenal & pituitary procedures 1.2008 33.1 27.6 11.6
w CC/MCC.
615......................... Adrenal & pituitary procedures 0.7305 22.9 19.1 5.1
w/o CC/MCC.
616......................... Amputat of lower limb for 1.4505 41.0 34.2 24.2
endocrine, nutrit, & metabol
dis w MCC.
617......................... Amputat of lower limb for 1.2414 33.3 27.8 14.5
endocrine, nutrit, & metabol
dis w CC.
618......................... Amputat of lower limb for 0.8249 25.0 20.8 9.9
endocrine, nutrit, & metabol
dis w/o CC/MCC.
619......................... O.R. procedures for obesity w 0.8249 25.0 20.8 14.6
MCC.
620......................... O.R. procedures for obesity w 0.8249 25.0 20.8 6.3
CC.
621......................... O.R. procedures for obesity w/ 0.8249 25.0 20.8