[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: 42CFR412.92] [Page 411-414] TITLE 42--PUBLIC HEALTH HUMAN SERVICES PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES--Table of Contents Subpart G--Special Treatment of Certain Facilities Under the Prospective Payment System for Inpatient Operating Costs Sec. 412.92 Special treatment: Sole community hospitals. (a) Criteria for classification as a sole community hospital. CMS classifies a hospital as a sole community hospital if it is located more than 35 miles from other like hospitals, or it is located in a rural area (as defined in Sec. 412.83(b)) and meets one of the following conditions: (1) The hospital is located between 25 and 35 miles from other like hospitals and meets one of the following criteria: (i) No more than 25 percent of residents who become hospital inpatients or no more than 25 percent of the Medicare beneficiaries who become hospital inpatients in the hospital's service area are admitted to other like hospitals located within a 35-mile radius of the hospital, or, if larger, within its service area; (ii) The hospital has fewer than 50 beds and the intermediary certifies that the hospital would have met the criteria in paragraph (a)(1)(i) of this section were it not for the fact that some beneficiaries or residents were forced to seek care outside the service area due to the unavailability of necessary specialty services at the community hospital; or (iii) Because of local topography or periods of prolonged severe weather [[Page 412]] conditions, the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years. (2) The hospital is located between 15 and 25 miles from other like hospitals but because of local topography or periods of prolonged severe weather conditions, the other like hospitals are inaccessible for at least 30 days in each 2 out of 3 years. (3) Because of distance, posted speed limits, and predictable weather conditions, the travel time between the hospital and the nearest like hospital is at least 45 minutes. (b) Classification procedures. (1) Request for classification as sole community hospital. (i) The hospital must make its request to its fiscal intermediary. (ii) If a hospital is seeking sole community hospital classification under paragraph (a)(1)(i) or (a)(1)(ii) of this section, the hospital must include the following information with its request: (A) The hospital must provide patient origin data (for example, the number of patients from each zip code from which the hospital draws inpatients) for all inpatient discharges to document the boundaries of its service area. (B) The hospital must provide patient origin data from all other hospitals located within a 35 mile radius of it or, if larger, within its service area, to document that no more than 25 percent of either all of the population or the Medicare beneficiaries residing in the hospital's service area and hospitalized for inpatient care were admitted to other like hospitals for care. (iii)(A) If the hospital is unable to obtain the information required under paragraph (b)(1)(ii)(A) of this section concerning the residences of Medicare beneficiaries who were inpatients in other hospitals located within a 35 mile radius of the hospital or, if larger, within the hospital's service area, the hospital may request that CMS provide this information. (B) If a hospital obtains the information as requested under paragraph (b)(1)(iii)(A) of this section, that information is used by both the intermediary and CMS in making the determination of the residences of Medicare beneficiaries under paragraphs (b)(1)(iii) and (b)(1)(iv) of this section, regardless of any other information concerning the residences of Medicare beneficiaries submitted by the hospital. (iv) The intermediary reviews the request and send the request, with its recommendation, to CMS. (v) CMS reviews the request and the intermediary's recommendation and forward its approval or disapproval to the intermediary. (2) Effective dates of classification. (i) Sole community hospital status is effective 30 days after the date of CMS's written notification of approval. (ii) When a court order or a determination by the Provider Reimbursement Review Board (PRRB) reverses an CMS denial of sole community hospital status and no further appeal is made, the sole community hospital status is effective as follows: (A) If the hospital's application was submitted prior to October 1, 1983, its status as a sole community hospital is effective at the start of the cost reporting period for which it sought exemption from the cost limits. (B) If the hospital's application for sole community hospital status was filed on or after October 1, 1983, the effective date is 30 days after the date of CMS's original written notification of denial. (iii) When a hospital is granted retroactive approval of sole community hospital status by a court order or a PRRB decision and the hospital wishes its sole community hospital status terminated before the date of the court order or PRRB determination, it must submit written notice to the CMS regional office within 90 days of the court order or PRRB decision. A written request received after the 90-day period is effective no later than 30 days after the request is submitted. (iv) A hospital classified as a sole community hospital receives a payment djustment, as described in paragraph (d) of this section, effective with discharges occurring on or after 30 days after the date of CMS's approval of the classification. (3) Duration of classification. An approved classification as a sole community hospital remains in effect without need for reapproval unless there is a [[Page 413]] change in the circumstances under which the classification was approved. (4) Cancellation of classification. (i) A hospital may at any time request cancellation of its classification as a sole community hospital, and be paid at rates determined under subparts D and E of this part, as appropriate. (ii) The cancellation becomes effective no later than 30 days after the date the hospital submits its request. (iii) If a hospital requests that its sole community hospital classification be cancelled, it may not be reclassified as a sole community hospital unless it meets the following conditions: (A) At least one full year has passed since the effective date of its cancellation. (B) The hospital meets the qualifying criteria set forth in paragraph (a) of this section in effect at the time it reapplies. (5) Automatic classification as a sole community hospital. A hospital that has been granted an exemption from the hospital cost limits before October 1, 1983, or whose request for the exemption was received by the appropriate intermediary before October 1, 1983, and was subsequently approved, is automatically classified as a sole community hospital unless that classification has been cancelled under paragraph (b)(3) of this section, or there is a change in the circumstances under which the classification was approved. (c) Terminology. As used in this section-- (1) The term miles means the shortest distance in miles measured over improved roads. An improved road for this purpose is any road that is maintained by a local, State, or Federal government entity and is available for use by the general public. An improved road includes the paved surface up to the front entrance of the hospital. (2) The term like hospital means a hospital furnishing short-term, acute care. Effective with cost reporting periods beginning on or after October 1, 2002, for purposes of a hospital seeking sole community hospital designation, CMS will not consider the nearby hospital to be a like hospital if the total inpatient days attributable to units of the nearby hospital that provides a level of care characteristic of the level of care payable under the acute care hospital inpatient prospective payment system are less than or equal to 8 percent of the similarly calculated total inpatient days of the hospital seeking sole community hospital designation. (3) The term service area means the area from which a hospital draws at least 75 percent of its inpatients during the most recent 12-month cost reporting period ending before it applies for classification as a sole community hospital. (d) Determining prospective payment rates for inpatient operating costs for sole community hospitals. (1) General rule. For cost reporting periods beginning on or after April 1, 1990, a sole community hospital is paid based on whichever of the following amounts yields the greatest aggregate payment for the cost reporting period: (i) The Federal payment rate applicable to the hospitals as determined under Sec. 412.63. (ii) The hospital-specific rate as determined under Sec. 412.73. (iii) The hospital-specific rate as determined under Sec. 412.75. (iv) For cost reporting periods beginning on or after October 1, 2000, the hospital-specific rate as determined under Sec. 412.77 (calculated under the transition schedule set forth in paragraph (d)(2) of this section). (2) Transition of FY 1996 hospital-specific rate. The intermediary calculates the hospital-specific rate determined on the basis of the fiscal year 1996 base period rate as follows: (i) For Federal fiscal year 2001, the hospital-specific rate is the sum of 75 percent of the greater of the amounts specified in paragraph (d)(1)(i), (d)(1)(ii), or (d)(1)(iii) of this section, plus 25 percent of the hospital-specific rate as determined under Sec. 412.77. (ii) For Federal fiscal year 2002, the hospital-specific rate is the sum of 50 percent of the greater of the amounts specified in paragraph (d)(1)(i), (d)(1)(ii), or (d)(1)(iii) of this section, plus 50 percent of the hospital-specific rate as determined under Sec. 412.77. (iii) For Federal fiscal year 2003, the hospital-specific rate is the sum of 25 percent of the greater of the amounts specified in paragraph (d)(1)(i), (d)(1)(ii), or (d)(1)(iii) of this section, [[Page 414]] plus 75 percent of the hospital-specific rate as determined under Sec. 412.77. (iv) For Federal fiscal year 2004 and any subsequent fiscal years, the hospital-specific rate is 100 percent of the hospital-specific rate specified in paragraph (d)(1)(iv) of this section. (3) Adjustments to payments. A sole community hospital may receive an adjustment to its payments to take into account a significant decrease in number of discharges or a significant increase in inpatient operating costs, as described in paragraphs (e) and (g) of this section respectively. (e) Additional payments to sole community hospitals experiencing a significant volume decrease. (1) For cost reporting periods beginning on or after October 1, 1983, the intermediary provides for a payment adjustment for a sole community hospital for any cost reporting period during which the hospital experiences, due to circumstances as described in paragraph (e)(2) of this section a more than five percent decrease in its total discharges of inpatients as compared to its immediately preceding cost reporting period. If either the cost reporting period in question or the immediately preceding cost reporting period is other than a 12-month cost reporting period, the intermediary must convert the discharges to a monthly figure and multiply this figure by 12 to estimate the total number of discharges for a 12-month cost reporting period. (2) To qualify for a payment adjustment on the basis of a decrease in discharges, a sole community hospital must submit its request no later than 180 days after the date on the intermediary's Notice of Amount of Program Reimbursement-- (i) Submit to the intermediary documentation demonstrating the size of the decrease in discharges, and the resulting effect on per discharge costs; and (ii) Show that the decrease is due to circumstances beyond the hospital's control. (3) The intermediary determines a lump sum adjustment amount not to exceed the difference between the hospital's Medicare inpatient operating costs and the hospital's total DRG revenue for inpatient operating costs based on DRG-adjusted prospective payment rates for inpatient operating costs (including outlier payments for inpatient operating costs determined under subpart F of this part and additional payments made for inpatient operating costs for hospitals that serve a disproportionate share of low-income patients as determined under Sec. 412.106 and for indirect medical education costs as determined under Sec. 412.105). (i) In determining the adjustment amount, the intermediary considers-- (A) The individual hospital's needs and circumstances, including the reasonable cost of maintaining necessary core staff and services in view of minimum staffing requirements imposed by State agencies; (B) The hospital's fixed (and semi-fixed) costs, other than those costs paid on a reasonable cost basis under part 413 of this chapter; and (C) The length of time the hospital has experienced a decrease in utilization. (ii) The intermediary makes its determination within 180 days from the date it receives the hospital's request and all other necessary information. (iii) The intermediary determination is subject to review under subpart R of part 405 of this chapter. [50 FR 12741, Mar. 29, 1985, as amended at 51 FR 31496, Sept. 3, 1986; 51 FR 34793, Sept. 30, 1986; 52 FR 30367, Aug. 14, 1987; 52 FR 33057, Sept. 1, 1987; 53 FR 38529, Sept. 30, 1988; 54 FR 36494, Sept. 1, 1989; 55 FR 14283, Apr. 17, 1990; 55 FR 15174, Apr. 20, 1990; 55 FR 36070, Sept. 4, 1990; 56 FR 25487, June 4, 1991; 57 FR 39823, Sept. 1, 1992; 60 FR 45848, Sept. 1, 1995; 65 FR 47107, Aug. 1, 2000; 66 FR 32193, June 13, 2001; 66 FR 39933, Aug. 1, 2001; 67 FR 50111, Aug. 1, 2002]