[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR412.23]

[Page 378-381]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES--Table of Contents
 
     Subpart B--Hospital Services Subject to and Excluded From the 
Prospective Payment Systems for Inpatient Operating Costs and Inpatient 
                          Capital-Related Costs
 
Sec. 412.23  Excluded hospitals: Classifications.

    Hospitals that meet the requirements for the classifications set 
forth in this section are not reimbursed under the prospective payment 
systems specified in Sec. 412.1(a)(1):
    (a) Psychiatric hospitals. A psychiatric hospital must--

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    (1) Be primarily engaged in providing, by or under the supervision 
of a psychiatrist, psychiatric services for the diagnosis and treatment 
of mentally ill persons; and
    (2) Meet the conditions of participation for hospitals and special 
conditions of participation for psychiatric hospitals set forth in part 
482 of this chapter.
    (b) Rehabilitation hospitals. A rehabilitation hospital must meet 
the following requirements to be excluded from the prospective payment 
systems specified in Sec. 412.1(a)(1) and to be paid under the 
prospective payment system specified in Sec. 412.1(a)(2) and in Subpart 
P of this part:
    (1) Have a provider agreement under part 489 of this chapter to 
participate as a hospital.
    (2) Except in the case of a newly participating hospital seeking 
classification under this paragraph as a rehabilitation hospital for its 
first 12-month cost reporting period, as described in paragraph (b)(8) 
of this section, show that during its most recent 12-month cost 
reporting period, it served an inpatient population of whom at least 75 
percent required intensive rehabilitative services for treatment of one 
or more of the following conditions:
    (i) Stroke.
    (ii) Spinal cord injury.
    (iii) Congenital deformity.
    (iv) Amputation.
    (v) Major multiple trauma.
    (vi) Fracture of femur (hip fracture).
    (vii) Brain injury.
    (viii) Polyarthritis, including rheumatoid arthritis.
    (ix) Neurological disorders, including multiple sclerosis, motor 
neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson's 
disease.
    (x) Burns.
    (3) Have in effect a preadmission screening procedure under which 
each prospective patient's condition and medical history are reviewed to 
determine whether the patient is likely to benefit significantly from an 
intensive inpatient hospital program or assessment.
    (4) Ensure that the patients receive close medical supervision and 
furnish, through the use of qualified personnel, rehabilitation nursing, 
physical therapy, and occupational therapy, plus, as needed, speech 
therapy, social or psychological services, and orthotic and prosthetic 
services.
    (5) Have a director of rehabilitation who--
    (i) Provides services to the hospital and its inpatients on a full-
time basis;
    (ii) Is a doctor of medicine or osteopathy;
    (iii) Is licensed under State law to practice medicine or surgery; 
and
    (iv) Has had, after completing a one-year hospital internship, at 
least two years of training or experience in the medical-management of 
inpatients requiring rehabilitation services.
    (6) Have a plan of treatment for each inpatient that is established, 
reviewed, and revised as needed by a physician in consultation with 
other professional personnel who provide services to the patient.
    (7) Use a coordinated multidisciplinary team approach in the 
rehabilitation of each inpatient, as documented by periodic clinical 
entries made in the patient's medical record to note the patient's 
status in relationship to goal attainment, and that team conferences are 
held at least every two weeks to determine the appropriateness of 
treatment.
    (8) A hospital that seeks classification under this paragraph as a 
rehabilitation hospital for the first full 12-month cost reporting 
period that occurs after it becomes a Medicare-participating hospital 
may provide a written certification that the inpatient population it 
intends to serve meets the requirements of paragraph (b)(2) of this 
section, instead of showing that it has treated that population during 
its most recent 12-month cost reporting period. The written 
certification is also effective for any cost reporting period of not 
less than one month and not more than 11 months occurring between the 
date the hospital began participating in Medicare and the start of the 
hospital's regular 12-month cost reporting period.
    (9) For cost reporting periods beginning on or after October 1, 
1991, if a hospital is excluded from the prospective payment systems 
specified in Sec. 412.1(a)(1) or is paid under the prospective payment 
system specified in

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Sec. 412.1(a)(2) for a cost reporting period under paragraph (b)(8) of 
this section, but the inpatient population it actually treated during 
that period does not meet the requirements of paragraph (b)(2) of this 
section, we adjust payments to the hospital retroactively in accordance 
with the provisions in Sec. 412.130.
    (c) [Reserved]
    (d) Children's hospitals. A children's hospital must--
    (1) Have a provider agreement under part 489 of this chapter to 
participate as a hospital; and
    (2) Be engaged in furnishing services to inpatients who are 
predominantly individuals under the age of 18.
    (e) Long-term care hospitals. A long-term care hospital must meet 
the requirements of paragraph (e)(1) and (e)(2) of this section and, 
where applicable, the additional requirements of Sec. 412.22(e), to be 
excluded from the prospective payment systems specified in 
Sec. 412.1(a)(1) and to be paid under the prospective payment system 
specified in Sec. 412.1(a)(3) and in Subpart O of this part.
    (1) Provider agreements. The hospital must have a provider agreement 
under Part 489 of this chapter to participate as a hospital; and
    (2) Average length of stay. (i) The hospital must have an average 
Medicare inpatient length of stay of greater than 25 days (which 
includes all covered and noncovered days of stay of Medicare patients) 
as calculated under paragraph (e)(3) of this section; or
    (ii) For cost reporting periods beginning on or after August 5, 
1997, a hospital that was first excluded from the prospective payment 
system under this section in 1986 meets the length of stay criterion if 
it has an average inpatient length of stay for all patients, including 
both Medicare and non-Medicare inpatients, of greater than 20 days and 
demonstrates that at least 80 percent of its annual Medicare inpatient 
discharges in the 12-month cost reporting period ending in fiscal year 
1997 have a principal diagnosis that reflects a finding of neoplastic 
disease as defined in paragraph (f)(1)(iv) of this section.
    (3) Calculation of average length of stay. (i) Subject to the 
provisions of paragraphs (e)(3)(ii) and (e)(3)(iii) of this section, the 
average Medicare inpatient length of stay is calculated by dividing the 
total number of covered and noncovered days of stay of Medicare 
inpatients (less leave or pass days) by the number of total Medicare 
discharges for the hospital's most recent complete cost reporting 
period.
    (ii) If a change in the hospital's Medicare average length of stay 
is indicated, the calculation is made by the same method for the 
immediately preceding 6-month period.
    (iii) If a hospital has undergone a change of ownership (as 
described in Sec. 489.18 of this chapter) at the start of a cost 
reporting period or at any time within the preceding 6 months, the 
hospital may be excluded from the prospective payment system as a long-
term care hospital for a cost reporting period if, for the 6 months 
immediately preceding the start of the period (including time before the 
change of ownership), the hospital has the required Medicare average 
length of stay, continuously operated as a hospital, and continuously 
participated as a hospital in Medicare.
    (4) Definition of new long-term care hospital. For purposes of 
payment under the long-term care hospital prospective payment system 
under Subpart O of this part, a new long-term care hospital is a 
provider of inpatient hospital services that meets the qualifying 
criteria in paragraphs (e)(1) and (e)(2) of this section and, under 
present or previous ownership (or both), its first cost reporting period 
as a LTCH begins on or after October 1, 2002.
    (f) Cancer hospitals--(1) General rule. Except as provided in 
paragraph (f)(2) of this section, if a hospital meets the following 
criteria, it is classified as a cancer hospital and is excluded from the 
prospective payment systems beginning with its first cost reporting 
period beginning on or after October 1, 1989. A hospital classified 
after December 19, 1989, is excluded beginning with its first cost 
reporting period beginning after the date of its classification.
    (i) It was recognized as a comprehensive cancer center or clinical 
cancer research center by the National Cancer Institute of the National 
Institutes of Health as of April 20, 1983.

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    (ii) It is classified on or before December 31, 1990, or, if on 
December 19, 1989, the hospital was located in a State operating a 
demonstration project under section 1814(b) of the Act, the 
classification is made on or before December 31, 1991.
    (iii) It demonstrates that the entire facility is organized 
primarily for treatment of and research on cancer (that is, the facility 
is not a subunit of an acute general hospital or university-based 
medical center).
    (iv) It shows that at least 50 percent of its total discharges have 
a principal diagnosis that reflects a finding of neoplastic disease. 
(The principal diagnosis for this purpose is defined as the condition 
established after study to be chiefly responsible for occasioning the 
admission of the patient to the hospital. For the purposes of meeting 
this definition, only discharges with ICD-9-CM principal diagnosis codes 
of 140 through 239, V58.0, V58.1, V66.1, V66.2, or 990 will be 
considered to reflect neoplastic disease.)
    (2) Alternative. A hospital that applied for and was denied, on or 
before December 31, 1990, classification as a cancer hospital under the 
criteria set forth in paragraph (f)(1) of this section is classified as 
a cancer hospital and is excluded from the prospective payment systems 
beginning with its first cost reporting period beginning on or after 
January 1, 1991, if it meets the criterion set forth in paragraph 
(f)(1)(i) of this section and the hospital is--
    (i) Licensed for fewer than 50 acute care beds as of August 5, 1997;
    (ii) Is located in a State that as of December 19, 1989, was not 
operating a demonstration project under section 1814(b) of the Act; and
    (iii) Demonstrates that, for the 4-year period ending on December 
31, 1996, at least 50 percent of its total discharges have a principal 
diagnosis that reflects a finding of neoplastic disease as defined in 
paragraph (f)(1)(iv) of this section.
    (g) Hospitals outside the 50 States, the District of Columbia, or 
Puerto Rico. A hospital is excluded from the prospective payment systems 
if it is not located in one of the fifty States, the District of 
Columbia, or Puerto Rico.
    (h) Hospitals reimbursed under special arrangements. A hospital must 
be excluded from prospective payment for inpatient hospital services if 
it is reimbursed under special arrangement as provided in 
Sec. 412.22(c).
    (i) Changes in classification of hospitals. For purposes of 
exclusions from the prospective payment system, the classification of a 
hospital is effective for the hospital's entire cost reporting period. 
Any changes in the classification of a hospital are made only at the 
start of a cost reporting period.

[50 FR 12741, Mar. 29, 1985, as amended at 50 FR 35688, Sept. 3, 1985; 
51 FR 22041, June 17, 1986; 51 FR 31496, Sept. 3, 1986; 52 FR 33057, 
Sept. 1, 1987; 55 FR 36068, Sept. 4, 1990; 55 FR 46887, Nov. 7, 1990; 56 
FR 43240, Aug. 30, 1991; 57 FR 39820, Sept. 1, 1992; 59 FR 45396, Sept. 
1, 1994; 60 FR 45846, Sept. 1, 1995; 62 FR 46026, Aug. 29, 1997; 66 FR 
39933, Aug. 1, 2001; 66 FR 41386, Aug. 7, 2001; 67 FR 56048, Aug. 30, 
2002]