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Proposed Rule

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

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Start Preamble Start Printed Page 11234

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

In this proposed annual update of the payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs), we are proposing to change the annual period during which the updated payment rates for the LTCH PPS would be effective from October 1 through September 30 to July 1 through June 30. We also are proposing to change the publication schedule for these updates to allow for an effective date of July 1 (instead of August 1). The proposed payment amounts and factors used to determine the proposed updated Federal rates that are described in this proposed rule have been determined based on this proposed revised update rate year. In addition, we are proposing that the annual update of the long-term care diagnosis-related groups (LTC-DRG) classifications and relative weights will remain linked to the annual adjustments of the acute care hospital inpatient diagnosis-related group system, effective each October 1. The proposed outlier threshold for July 1, 2003 through June 30, 2004 would be derived from the proposed rate year calculations. In order to conform to a proposed change in the acute care hospital inpatient PPS (IPPS) outlier policy, we are proposing a change for outlier payments under the LTCH PPS.

We also are proposing a policy change eliminating bed-number restrictions for pre-1997 LTCHs that have established satellite facilities and that elect to be paid 100 percent of the Federal rate.

DATES:

Comments will be considered if received at the appropriate address, as provided below, no later than 5 p.m. on May 6, 2003.

ADDRESSES:

Mail written comments (an original and three copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1472-P, PO Box 8010, Baltimore, MD 21244-1850.

If you prefer, you may deliver, by hand or courier, your written comments (an original and three copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or

Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 21244-1850.

(Because access to the interior of the Humphrey 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 commenters who wish to retain proof of filing by stamping in and keeping an extra copy of the comments being filed.)

Comments mailed to those addresses specified as appropriate for courier delivery may be delayed and could be considered late.

Because of staffing and resource limitation, we cannot accept comments by facsimile (FAX) transmission. In commenting, please refer to file code CMS-1472-P.

For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section.

For comments that relate to information collection requirements, mail a copy of comments to the following address:

Centers for Medicare & Medicaid Services, Office of Strategic Operations and Regulatory Affairs, Security and Standards Group, Regulations Development and Issuances Group Standards, PRA Reports Clearance Office, 7500 Security Boulevard, Baltimore, MD 21244-1850. Attn: John Burke, CMS-1472-P; and

Office of Information and Regulatory Affairs, Office of Management and Budget, Room 3001, New Executive Office Building, Washington, DC 20503, Attn: Brenda Aguilar, CMS Desk Officer.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Tzvi Hefter, (410) 786-4487 (General information)

Judy Richter, (410) 786-2590 (General information, transition payments, payment adjustments, and onsite discharges and readmissions)

Michele Hudson, (410) 786-5490 (Calculation of the payment rates, relative weights and case-mix index, and payment adjustments)

Tiffany Eggers, (410) 786-0400 (Market basket update, short-stay outliers and interrupted stays)

Ann Fagan, (410) 786-5662 (Patient classification system)

Miechal Lefkowitz, (410) 786-5316 (High-cost outliers and budget neutrality)

Linda McKenna, (410) 786-4537 (Payment adjustments and transition period)

Kathryn McCann, (410) 786-7623 (Medigap)

Robert Nakielny, (410) 786-4466 (Medicaid)

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments

Comments received timely will be available for public inspection as they are processed, generally beginning approximately 4 weeks after publication of a document, in Room C5-12-08 of the Centers for Medicare & Medicaid Services, 7500 Security Blvd., Baltimore, MD, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 to schedule an appointment to view public comments.

Availability of Copies and Electronic Access

Copies: To order copies of the Federal Register containing this document, send your request to: New Orders, Superintendent of Documents, PO Box 371954, Pittsburgh, PA 15250-7954. Specify the date of the issue requested and enclose a check or money order payable to the Superintendent of Documents, or enclose your Visa or Master Card number and expiration date. Credit card orders can also be placed by calling the order desk at (202) 512-1800 or by faxing to (202) 512-2250. The cost for each copy is $10. As an alternative, you can view and photocopy the Federal Register document at most libraries designated as Federal Depository Libraries and at many other public and academic libraries throughout the country that receive the Federal Register.

This Federal Register document is also available from the Federal Register online database through GPO Access, a service of the U.S. Government Printing Office. The Web site address is: http://www.access.gpo.gov/​nara/​index.html.

To assist readers in referencing sections contained in this preamble, we are providing the following table of contents.

Table of Contents

I. Background

A. Legislative and Regulatory Authority

B. Criteria for Classification as a LTCH Start Printed Page 11235

C. Transition Period for Implementation of the LTCH PPS

D. Limitation on Charges to Beneficiaries

E. System Implementation for the LTCH PPS

II. Summary of the Major Contents of This Proposed Rule

A. Proposed Change in the Annual Update

B. Proposed Update Changes

III. Proposed Changes in the Annual Update of the LTCH PPS

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

A. Background

B. Patient Classifications into DRGs

C. Organization of DRGs

D. Update of LTC-DRGs

E. ICD-9-CM Coding System

1. Uniform Hospital Discharge Data Set (UHDDS) Definitions

2. Maintenance of the ICD-9-CM Coding System

3. Coding Rules and Use of ICD-9-CM Codes in LTCHs

F. Proposed Changes to the Method for Updating the LTC-DRG Relative Weights

V. Proposed Policy Change Relating to Payments to LTCHs That Are Satellite Facilities

VI. Proposed Changes to the LTCH PPS Rates for the Proposed 2004 LTCH PPS Rate Year

A. Overview of the Development of the Proposed Payment Rates

B. Proposed Update to the Standard Federal Rate for the Proposed 2004 LTCH PPS Rate Year

1. Proposed Standard Federal Rate Update

a. Description of the Proposed Market Basket for the Proposed 2004 LTCH PPS Rate Year

b. Proposed LTCH Market Basket Increase for the Proposed 2004 LTCH PPS Rate Year

2. Proposed Standard Federal Rate for the Proposed 2004 LTCH PPS Rate Year

C. Calculation of Proposed LTCH Prospective Payments for the Proposed 2004 LTCH PPS Rate Year

1. Proposed Adjustment for Area Wage Levels

2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii

3. Proposed Adjustment for High-Cost Outliers

4. Proposed Adjustment for Special Cases

a. General

b. Short-Stay Outlier Cases

c. Interrupted Stay

d. Onsite Discharges and Readmittances

e. Treatment of Swing Beds Under the Interrupted Stay and Onsite Discharge and Readmittance Policies

5. Other Proposed Payment Adjustments

6. Proposed Budget Neutrality Offset to Account for the Transition Methodology

VII. Computing the Proposed Adjusted Federal Prospective Payments

VIII. Transition Period

IX. Proposed Payments to New LTCHs

X. Method of Payment

XI. Monitoring

XII. Collection of Information Requirements

XIII. Regulatory Impact Analysis

A. Introduction

1. Executive Order 12866

2. Regulatory Flexibility Act (RFA)

3. Impact on Rural Hospitals

4. Unfunded Mandates

5. Federalism

B. Anticipated Effects

1. Budgetary Impact

2. Impact on Providers

3. Calculation of Prospective Payments

4. Results

5. Effect on the Medicare Program

6. Effect on Medicare Beneficiaries

C. Executive Order 12866

XIV. Response to Public Comments

Regulations Text

Addendum-Tables

Acronyms

Because of the many terms to which we refer by acronym in this proposed rule, we are listing the acronyms used and their corresponding terms in alphabetical order below:

BBA Balanced Budget Act of 1997, Pub. L. 105-33

BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113

BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106-554

CMS Centers for Medicare & Medicaid Services

DRGs Diagnosis-related groups

FY Federal fiscal year

HCRIS Hospital Cost Report Information System

HHA Home health agency

HIPAA Health Insurance Portability and Accountability Act, Pub. L. 104-191

IPPS Acute Care Hospital Inpatient Prospective Payment System

IRF Inpatient rehabilitation facility

LTC-DRG Long-term care diagnosis-related group

LTCH Long-term care hospital

MedPAC Medicare Payment Advisory Commission

MedPAR Medicare provider analysis and review file

OSCAR Online Survey Certification and Reporting (System)

PPS Prospective Payment System

QIO Quality Improvement Organization (formerly Peer Review Organization (PRO))

SNF Skilled nursing facility

TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248

I. Background

A. Legislative and Regulatory Authority

The Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) provide for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system 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 another definition of LTCHs: Specifically, a hospital that first received payment under section 1886(d) of the Act in 1986 and has an average inpatient length of stay (as determined by the Secretary) of greater than 20 days and has 80 percent or more of its annual Medicare inpatient discharges with a principal diagnosis that reflects a finding of neoplastic disease in the 12-month cost reporting period ending in FY 1997.

Section 123 of Pub. L. 106-113 requires the prospective payment system for LTCHs to be a per discharge system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs while maintaining budget neutrality. Section 123 also requires that the system be implemented for cost reporting periods beginning on or after October 1, 2002.

Section 307(b)(1) of Pub. L. 106-554 mandates the examination of the feasibility and the impact of basing payment under the LTCH prospective payment system (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. Further, section 307(b)(1) provides that the Secretary shall examine and may provide for adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment.

In a Federal Register document issued on August 30, 2002 (67 FR 55954), we implemented the LTCH PPS authorized under Pub. L. 106-113 and Pub. L. 106-554. This system uses Start Printed Page 11236information from LTCH patient records to classify patients into distinct long-term care diagnosis-related groups (LTC-DRGs) based on clinical characteristics and expected resource needs. Payments are calculated for each LTC-DRG and provisions are made for appropriate payment adjustments. Payment rates under the LTCH PPS are updated annually and published in the Federal Register.

The LTCH PPS replaced the reasonable cost-based payment system under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), 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 hospital payment provisions are located at 42 CFR part 413.) With the implementation of the prospective payment system for inpatient 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 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 ceiling on payments to each hospital excluded from the acute care hospital inpatient prospective payment system (IPPS) was determined by multiplying the hospital's updated target amount by the number of total current year Medicare discharges. The August 30, 2002 final rule further details payment policy under the TEFRA system (67 FR 55954).

In the August 30, 2002 final rule, we presented an in-depth discussion of the LTCH PPS, including the patient classification system, relative weights, payment rates, additional payments, and the budget neutrality requirements mandated by section 123 of Pub. L. 106-113. That same final rule, which established regulations for the LTCH PPS under 42 CFR part 412, Subpart O, also contained provisions related to covered inpatient services, limitation on charges to beneficiaries, medical review requirements, furnishing of inpatient hospital services directly or under arrangement, and reporting and recordkeeping requirements.

We refer readers to the August 30, 2002 final rule for a comprehensive discussion of the research and data that supported the establishment of the LTCH PPS.

B. Criteria for Classification as a LTCH

LTCHs must have a provider agreement with Medicare and must have an average Medicare inpatient length of stay of greater than 25 days, or, for cost reporting periods beginning on or after August 5, 1997, for a hospital that was first excluded from the PPS in 1986, must have an average inpatient length of stay for all patients, including both Medicare and non-Medicare inpatients, of greater than 20 days and 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 principle diagnosis that reflects a finding of neoplastic disease. Subject to the provisions of § 412.23(e)(3), the average Medicare inpatient length of stay is determined based on all covered and noncovered days of stay of Medicare patients as calculated by dividing the total number of covered and noncovered days of stay of Medicare inpatients (less leave or pass days) by the number of total Medicare discharges for the hospital's most recent complete cost reporting period. Fiscal intermediaries verify that LTCHs meet the average length of stay requirements.

The fiscal intermediary's determination of whether or not a hospital qualifies as an LTCH is based on the hospital's discharge data from its most recent cost reporting period and is effective at the start of the hospital's next cost reporting period, under § 412.22(d). If a hospital does not meet the length of stay requirement, the hospital may provide the intermediary with data indicating a change in the hospital's average length of stay by the same method for the immediately preceding 6-month period (§ 412.23(e)(3)(ii)). (For procedural efficiency and in order to comply with the timing requirement of § 412.22(d), we have a longstanding policy of allowing hospitals to submit data for a period greater than 5 months for this purpose.) Requirements for hospitals seeking classification as LTCHs that have undergone a change in ownership, as described in § 489.18, are set forth in § 412.23(e)(3)(iii).

LTCHs that exist as hospitals-within-hospitals or satellite facilities must also meet the criteria set forth in § 412.22(e) or § 412.22(h), respectively, to be excluded from the IPPS and paid under the LTCH PPS.

The following hospitals are paid under special payment provisions, as described in § 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 Pub. L. 90-248 (42 U.S.C. 1395b-1) or section 222(a) of 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 56038), we provided for a 5-year transition period from cost-based reimbursement to fully Federal prospective payment for LTCHs. During the 5-year period, two payment percentages are to be used to determine a LTCH's total payment under the PPS. The blend percentages are as follows:

Cost reporting periods beginning on or afterProspective payment federal rate percentageCost-based reimbursement rate percentage
Oct. 1, 20022080
Oct. 1, 20034060
Oct. 1, 20046040
Oct. 1, 20058020
Oct. 1, 20061000

The phase-in for payments to the full prospective payment Federal rate will apply according to each LTCH's cost reporting period.

D. Limitation on Charges to Beneficiaries

In the August 30, 2002 final rule, we presented an in-depth discussion of beneficiary liability under the LTCH prospective payment system (67 FR 55974-55975). Under § 412.507, as consistent with other established hospital prospective payment systems, a LTCH may not bill a Medicare beneficiary for more than the deductible and coinsurance amounts as specified under §§ 409.82, 409.83, and 409.87 and for items and services as specified under § 489.30(a), if the Medicare payment to the LTCH is the full LTC-DRG payment amount. However, if the Medicare payment was for a short-stay outlier case (§ 412.529) that was less than the full LTC-DRG payment amount, the LTCH could also charge the beneficiary for services for which the costs of those services or the days those services were provided were not a basis for calculating the Medicare short-stay outlier payment (§ 412.507).

Since the origin of the Medicare system, the intent of our regulations has been to set limits on beneficiary liability and to clearly establish the circumstances under which the Start Printed Page 11237beneficiary would be required to assume responsibility for payment; that is, upon exhausting benefits described in 42 CFR part 409, subpart F. The discussion in the August 30, 2002 final rule was not meant to establish rates or payments for, or define, Medicare-eligible expenses. While CMS regulates beneficiary liability for coinsurance and deductibles for hospital stays that are covered by Medicare, payments from Medigap insurers to providers for inpatient hospital coverage after Medicare benefits are exhausted are not regulated by CMS. Furthermore, regulations beginning at § 403.200 and the 1991 National Association of Insurance Commissioners (NAIC) Model Regulation for Medicare Supplemental Insurance, which was incorporated by reference into section 1882 of the Act, govern the relationship between Medigap insurers and beneficiaries.

E. System Implementation for the LTCH PPS

When we established the regulations to implement the LTCH PPS on August 30, 2002 (67 FR 55954), effective for cost reporting periods that began on or after October 1, 2002, we did not have computer system changes in place that were necessary to accommodate claims processing and payment under the system. However, after January 1, 2003, we made the necessary system changes. Accordingly, after January 1, 2003, the fiscal intermediary will reconcile the payment amounts that had been made to LTCHs for all covered inpatient hospital services furnished to Medicare beneficiaries from cost reporting periods that began on or after October 1, 2002, through January 1, 2003, with the amounts that were payable under the LTCH PPS methodology. Because the LTCH PPS was effective at the start of the LTCH's first cost reporting period that began on or after October 1, 2002, only those LTCHs with cost reporting periods that started October 1, 2002, through January 1, 2003, will experience the payment reconciliation necessitated by this 3-month period prior to systems implementation. The claims submission procedure of using ICD-9-CM codes has not changed following the systems implementation of the LTCH PPS.

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

II. Summary of the Major Contents of This Proposed Rule

In this proposed rule, we are setting forth the proposed annual update to the payment rates for the Medicare LTCH PPS and proposing other policy changes. The following is a summary of the major areas that we are addressing in this proposed rule:

A. Proposed Change in the Annual Update

We are proposing to change the annual update to the Federal payment rate under the LTCH PPS from the Federal fiscal year (October 1 through September 30) to a “LTCH rate year” of July 1 through June 30, beginning July 1, 2003, as discussed in section III. of this preamble. (In this proposed rule, we would define the LTCH rate year as the period of July 1 to June 30 for updates to the LTCH PPS.) We are proposing to publish information on the annual update in the Federal Register by June 1 of each year. We recognize that it may be necessary to address issues affecting LTCHs at a time that does not conform to this schedule and in those circumstances, we could utilize the IPPS proposed and final rule for this purpose.

B. Proposed Update Changes

  • In section IV. of this preamble, we are proposing that the annual update of the LTC-DRG classifications and relative weights would remain linked to the annual adjustments of the acute care hospital inpatient DRG system, which are based on the annual revisions to the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) codes, effective each October 1.
  • In section V. of this preamble, we discuss a proposed policy change in how Medicare payment under the LTCH PPS would be made to certain LTCHs that have satellite facilities.
  • In sections VI. through X. of this preamble, we discuss our proposed determination of the LTCH PPS rates that would be applicable to the proposed LTCH rate year of July 1, 2003 through June 30, 2004, including proposed revisions to the wage index, the proposed excluded hospital with capital market basket that would be applied to the current standard Federal rate to determine the prospective payment rates, the applicable adjustments to payments, the proposed outlier threshold, the transition period, and the proposed budget neutrality factor.
  • We are also proposing to revise § 412.525(a) and § 412.529(c)(4) regarding adjustments to outlier payments under the LTCH PPS in order to conform the regulation to a proposed policy change under the IPPS that is published in the Federal Register on March 4, 2003.
  • In section XI. of this preamble, we discuss our continuing monitoring efforts to evaluate the LTCH PPS.
  • In section XIII. of this preamble, we set forth an analysis of the impact of the proposed changes in this proposed rule on Medicare expenditures and on Medicare-participating LTCHs and Medicare beneficiaries.

III. Proposed Changes in the Annual Update of the LTCH PPS

In existing regulations at § 412.535 that were issued in the August 30, 2002 final rule, we specify a schedule for publishing information on the LTCH PPS on or before August 1, which coincided with the statutorily mandated publication schedule for the IPPS. We are proposing to revise § 412.535 to provide generally for a change in the annual rate update for the LTCH PPS, starting on July 1.

Section 1886(e)(5)(A) of the Act requires that, for the IPPS, the proposed rule be published in the Federal Register “not later than the April 1 before each fiscal year; and the final rule, not later than the August 1 before such fiscal year.” The statute imposes no such publication schedule for the LTCH PPS. In the August 30, 2002 final rule (67 FR 55977), we stated that we were considering changing the publication schedule of the LTCH PPS annual rulemaking cycle in order to avoid concurrent publication of annual rules for these two systems for purposes of administrative feasibility and efficiency. In considering a change in the publication schedule of the LTCH PPS final rule, we contemplated a change in the effective date for updating the Federal rates for the LTCH PPS. Therefore, in this proposed rule, we are proposing to change the effective date of the annual update for the LTCH PPS from October 1 to July 1 of each year in order to facilitate a timely publication of these two significant payment updates (acute care hospital inpatient and LTCH). Thus, the annual update of the Start Printed Page 11238LTCH PPS Federal rates would no longer be linked to the start of the Federal fiscal year, as is the update of the IPPS. This proposed change would necessitate publication of the final rule for the LTCH PPS by no later than June 1 of each year (proposed revised § 412.535).

We also are proposing to amend § 412.503 to include a definition of “long-term care hospital rate year”. A “long-term care hospital rate year” would mean the 12-month period of July 1 through June 30. We would use this period for those calculations related to updating the Federal rate for payments under the LTCH PPS. The determination of the proposed fixed-loss threshold for outlier payment calculations, under § 412.525(a), would also be calculated based on the proposed LTCH rate year. (Section VI.C. of this proposed rule includes a more detailed discussion of our proposed outlier policy.)

Proposing a change for the annual Federal rate update period for the LTCH PPS has also necessitated a proposed recalculation of the excluded hospital market basket with capital estimate for the proposed forthcoming payment year, July 1, 2003 through June 30, 2004. In the August 30, 2002 final rule, we adopted a Federal rate of $34,956 that was computed based on the excluded hospital with capital market basket calculated for the 12-month Federal fiscal year of October 1, 2002 through September 30, 2003. As already noted, we are proposing to change the Federal rate update for the LTCH PPS from the Federal fiscal year to a 12-month year of July 1 through June 30, and the proposed rates in this proposed rule are based on this period. Because the Federal rate of $34,956 was originally computed based on a 12-month year, but in actuality will only be utilized for 9 months, if the proposed change in the LTCH PPS rate update year is finalized, we are proposing a budget neutral adjustment to the market basket update taking this 3-month differential into account in setting the Federal rate for July 1, 2003 through June 30, 2004. In addition, we are proposing that the change in the proposed 2004 LTCH PPS rate year be budget neutral. In section VI.B.1 of this proposed rule, we describe this proposed adjustment in greater detail.

We are proposing to update the LTCH PPS wage index that adjusts for differences in area wages under § 412.525(c) using the FY 1999 IPPS wage data because these are the best available data (as discussed in section VI.C. of this preamble).

We also are proposing to recalculate the budget neutrality offset to account for the effect of the transition period and the policy allowing LTCHs to elect 100 percent Federal rate payments rather than the transition blend. In addition, we are proposing an updated fixed-loss amount for determining outlier payments based on the updated proposed Federal rate (as discussed in section VII. of this preamble).

As discussed in section IV.C. of this proposed rule, we are not proposing an update to the LTC-DRG classifications or relative weights at this time. Currently, the LTC-DRG patient classifications utilized by the LTCH PPS for FY 2003 are based directly on the same version of DRGs used by the IPPS, that is, GROUPER 20.0. Therefore, we are not proposing any change to the timing of the annual update of the LTC-DRG classifications and relative weights. They would remain linked to the annual adjustments of the acute care hospital inpatient DRG system, which are based on the annual revisions to the ICD-9-CM codes, effective each October 1. Table 3 of the Addendum to the August 30, 2002 final rule (67 FR 56076-56084), which we are reprinting as Table 3 of the Addendum to this proposed rule, contains the LTC-DRG classifications and relative weights that we propose to continue to apply to discharges occurring during the period of July 1, 2003 through September 30, 2003. As an aid in calculating payment under the short-stay outlier policy, under § 412.529, we also are including, in column 3 of Table 3, the proposed five-sixths average length of stay that would be applied to each LTC-DRG in determining whether the LTCH stay is a short-stay outlier. The average length of stay for each DRG based on the FY 2001 MedPAR data, which were used for the FY 2003 LTCH PPS final rule, are still the best available complete LTCH discharge data available at this time.

The revised LTC-DRG classifications and relative weights for discharges occurring from October 1, 2003 through September 30, 2004, for payments under the LTCH PPS during that period would continue to be based on the annual updates to the acute care hospital inpatient DRG system. The FY 2004 DRGs and relative weights for the IPPS have not yet been proposed and we are unable to propose updated LTC-DRGs and relative weights (which would be based on the proposed updated acute care hospital inpatient DRGs and relative weights) at this time. Thus, we are proposing that the LTC-DRG classifications and relative weights would be presented for public comment in the proposed rule for the IPPS and finalized in the IPPS final rule, for an effective date of October 1, 2003.

The proposed change in the rate year for the LTCH PPS from October 1 through September 30 to July 1 through June 30 means that, although the Federal rate calculations in the August 30, 2002 final rule were based on a 12-month year, only 9 months will elapse before the proposed July 1, 2003 update. We are proposing a prospective adjustment to the market basket update to take into account this 3-month differential in setting the proposed rates for July 1, 2003 through June 30, 2004.

Specifically, the proposed updates for the proposed 2004 LTCH PPS rate year would be affected as follows:

  • The proposed update to the standard Federal rate calculated in accordance with § 412.523(c)(3) would be adjusted to account for updating the standard Federal rate on July 1, 2003, instead of October 1, 2003.
  • The fixed-loss amount for determining high-cost outlier payments under § 412.525(a) would also be updated based on the proposed Federal rate effective for July 1, 2003 through June 30, 2004.

In section VI.B.1 of this proposed rule, we discuss the proposed computational adjustments resulting from our proposed establishment of a LTCH PPS rate year beginning July 1, 2003 through June 30, 2004.

Several provisions of the LTCH PPS would not be affected by the proposed change in the annual rate update year for the LTCH PPS from October 1 to July 1 because these policies are not based on any of the Federal rate calculations for the LTCH PPS. Specifically, the following provisions would not be affected:

  • The transition blends provided for under § 412.533(a) would not be affected because they are linked to the start of each LTCH's cost reporting period, rather than to the start of the Federal fiscal year. (LTCHs being paid under the transition blend methodology would receive those blends for the entire 5-year transition period, unless they elect payments based on 100 percent of the Federal rate.) For instance, for cost reporting periods that began on or after October 1, 2002, and before October 1, 2003, the total payment for a LTCH is 80 percent of the amount that would have been calculated under the TEFRA payment system for that specific LTCH and 20 percent of the Federal prospective payment amount. For cost reporting periods beginning on or after October 1, 2003 and before October 1, 2004, the total payment for a LTCH is 60 percent of the amount that would have been calculated under the Start Printed Page 11239TEFRA payment system for that specific LTCH and 40 percent of the Federal prospective payment amount.
  • The 5-year phase-in of the adjustment for differences in area wage levels under § 412.525(c) would not be affected because they are linked to the start of each LTCH's cost reporting period, rather than to the start of the Federal fiscal year. For cost reporting periods that began on or after October 1, 2002 and before September 30, 2003, the applicable LTCH PPS wage index is one-fifth of the full LTCH wage index value, and for cost reporting periods beginning on or after October 1, 2003 and before September 30, 2004, the applicable LTCH PPS wage index is two-fifths of the full LTCH wage index value.
  • The LTC-DRGs and their relative weights and the GROUPER would not be affected since they would continue to be updated effective October 1 through September 30 each year based on the changes to the DRGs published in the IPPS final rule.

Section XII. of this proposed rule contains an impact analysis that reflects the impact of these proposed changes.

In summary, we are proposing to amend § 412.535 to indicate that information on the unadjusted Federal payment rates and a description of the methodology and data used to calculate the payment rates under the LTCH PPS would be published in the Federal Register on or before June 1 prior to the beginning of each proposed LTCH PPS rate year beginning July 1. We are proposing that information on the DRG classification system and associated weighting factors, with the DRGs from which the LTC-DRGs are derived, would be published in the proposed IPPS rule and, ultimately, the final rule for the IPPS (the final IPPS rule is published on or before August 1 of each Federal fiscal year).

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

A. Background

Section 123 of Pub. L. 106-113 specifically requires that the PPS for LTCHs be a per discharge system with a DRG-based patient classification system reflecting the differences in patient resources and costs in LTCHs while maintaining budget neutrality. Section 307(b)(1) of Pub. L. 106-554 modified the requirements of section 123 of Pub. L. 106-113 by specifically requiring that the Secretary examine “the feasibility and the impact of basing payment under such a system [the LTCH PPS] on the use of existing (or refined) hospital diagnosis-related groups (DRGs) that have been modified to account for different resource use of long-term care hospital patients as well as the use of the most recently available hospital discharge data.”

In accordance with section 307(b)(1) of Pub. L. 106-554 and § 412.515 of our existing regulations, the LTCH PPS uses information from LTCH patient records to classify patient cases into distinct long-term care diagnosis-related groups (LTC-DRGs) based on clinical characteristics and expected resource needs. The LTC-DRGs used as the patient classification component of the LTCH PPS correspond to the DRGs in the IPPS. We apply weights to the existing hospital inpatient DRGs to account for the difference in resource use by patients exhibiting the case complexity and multiple medical problems characteristic of LTCHs.

In a departure from the IPPS, we use low volume LTC-DRGs (less than 25 LTCH cases) in determining the LTC-DRG weights, since LTCHs do not typically treat the full range of diagnoses as do acute care hospitals. In order to deal with the large number of low volume DRGs (all DRGs with fewer than 25 cases), we group low volume DRGs into 5 quintiles based on average charge per discharge. (A listing of the composition of low volume quintiles appears in the August 30, 2002 final rule at 67 FR 55986.) We also take into account adjustments to payments for cases in which the stay at the LTCH is five-sixths of the geometric average length of stay and classify these cases as short-stay outlier cases. (A detailed discussion of the application of the Lewin Group model that was used to develop the LTC-DRGs appears in the August 30, 2002 final rule at 67 FR 55978.)

B. Patient Classifications into DRGs

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

(1) Principal diagnosis.

(2) Up to eight additional diagnoses.

(3) Up to six procedures performed.

(4) Age.

(5) Sex.

(6) Discharge status of the patient.

Upon the discharge of the patient from a LTCH, the LTCH must assign appropriate diagnosis and procedure codes from the ICD-9-CM. As of October 16, 2002, a LTCH that was required to comply with the HIPAA Administrative Simplification Standards and that had not obtained an extension in compliance with the Administrative Compliance Act (Pub. L. 107-105) is obligated to comply with the standards at 45 CFR 162.1002 and 45 CFR 162.1102. Completed claim forms are to be submitted to the LTCH's Medicare fiscal intermediary.

Medicare fiscal intermediaries enter the clinical and demographic information into their claims processing systems and subject this information to a series of automated screening processes called the Medicare Code Editor (MCE). These screens are designed to identify cases that require further review before assignment into a DRG can be made. During this process, the following type of cases are selected for further development:

  • Cases that are improperly coded. (For example, diagnoses are shown that are inappropriate, given the sex of the patient. Code 68.6, Radical abdominal hysterectomy, would be an inappropriate code for a male.)
  • Cases including surgical procedures not covered under Medicare (for example, organ transplant in a nonapproved transplant center).
  • Cases requiring more information. (For example, ICD-9-CM codes are required to be entered at their highest level of specificity. There are valid 3-digit, 4-digit, and 5-digit codes. That is, code 136.3, Pneumocystosis, contains all appropriate digits, but if it is reported with either fewer or more than 4 digits, the claim will be rejected by the MCE as invalid.)
  • Cases with principal diagnoses that do not usually justify admission to the hospital. (For example, code 437.9, Unspecified cerebrovascular disease. While this code is valid according to the ICD-9-CM coding scheme, a more precise code should be used for the principal diagnosis.)

After screening through the MCE, each claim will be classified into the appropriate LTC-DRG by the Medicare LTCH GROUPER. The LTCH GROUPER is specialized computer software based on the same GROUPER used by the IPPS. The GROUPER software was developed as a means of classifying each case into a DRG on the basis of diagnosis and procedure codes and other demographic information (age, sex, and discharge status). Following the LTC-DRG assignment, the Medicare fiscal intermediary will determine the prospective payment by using the Medicare PRICER program, which accounts for hospital-specific adjustments. As provided for under the IPPS, we provide an opportunity for the Start Printed Page 11240LTCH to review the LTC-DRG assignments made by the fiscal intermediary and to submit additional information within a specified timeframe (§ 412.513(c)).

The GROUPER is used both to classify past cases in order to measure relative hospital resource consumption to establish the DRG weights and to classify current cases for purposes of determining payment. The records for all Medicare hospital inpatient discharges are maintained in the MedPAR file. The data in this file are used to evaluate possible DRG classification changes and to recalibrate the DRG weights during our annual update. DRG weights are based on data for the population of LTCH discharges, reflecting the fact that LTCH patients represent a different patient mix than patients in short-term acute care hospitals.

C. Organization of DRGs

The DRGs are organized into 25 Major Diagnostic Categories (MDCs), most of which are based on a particular organ system of the body; the remainder involve multiple organ systems (such as MDC 22, Burns). Accordingly, the principal diagnosis determines MDC assignment. Within most MDCs, cases are then divided into surgical DRGs and medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy that orders operating room (O.R.) procedures or groups of O.R. procedures by resource intensity. The GROUPER does not recognize all ICD-9-CM procedure codes as procedures that affect DRG assignment, that is, procedures which are not surgical (for example, EKG), or minor surgical procedures (for example, 86.11, Biopsy of skin and subcutaneous tissue).

The medical DRGs are generally differentiated on the basis of diagnosis. Both medical and surgical DRGs may be further differentiated based on age, sex, discharge status, and presence or absence of complications or comorbidities (CC). We note that CCs are defined by certain secondary diagnoses not related to, or not inherently a part of, the disease process identified by the principal diagnosis. (For example, the GROUPER would not recognize a code from the 800.0x series, Skull fracture, as a CC when combined with principal diagnosis 850.4, Concussion with prolonged loss of consciousness, without return to preexisting conscious level.) In addition, we note that the presence of additional diagnoses does not automatically generate a CC, as not all DRGs recognize a comorbid or complicating condition in their definition. (For example, DRG 466, Aftercare without History of Malignancy as Secondary Diagnosis, is based solely on the principal diagnosis, without consideration of additional diagnoses for DRG determination.)

In its June 2000 Report to Congress, MedPAC recommended that the Secretary “* * * improve the hospital inpatient prospective payment system by adopting, as soon as practicable, diagnosis-related group refinements that more fully capture differences in severity of illness among patients.” (Recommendation 3A, p. 63) We have determined it is not practical at this time to develop a refinement to inpatient hospital DRGs based on severity due to time and resource requirements. However, this does not preclude us from development of a severity-adjusted DRG refinement in the future. That is, a refinement to the list of comorbidities and complications could be incorporated into the existing DRG structure. It is also possible a more comprehensive severity adjusted structure may be created if a new code set is adopted. That is, if ICD-9-CM is replaced by ICD-10-CM (for diagnostic coding) and ICD-10-CS (for procedure coding) or by other code sets, a severity concept may be built into the resulting DRG assignments. Of course any change to the code set would be adopted through the process established in the HIPAA Administrative Simplification provisions.

D. Update of LTC-DRGs

For FY 2003, the LTC-DRG patient classification system was based on LTCH data from the FY 2001 MedPAR file, which contained hospital bills received through March 31, 2001, for hospital discharges occurring in FY 2001. The patient classification system consisted of 510 DRGs that formed the basis of the FY 2003 LTCH PPS GROUPER. The 510 LTC-DRGs included two “error DRGs”. As in the IPPS, we included two error DRGs in which cases that cannot be assigned to valid DRGs will be grouped. These two error DRGs are DRG 469 (Principal Diagnosis Invalid as a Discharge Diagnosis) and DRG 470 (Ungroupable). (See the August 1, 2001, Medicare Program final rule, Changes to the Hospital Inpatient Prospective Payment Systems and Rates and Costs of Graduate Medical Education; Fiscal Year 2002 Rates, 66 FR 40062.) The other 508 LTC-DRGs are the same DRGs used in the IPPS GROUPER for FY 2003 (Version 20.0).

In the health care industry, annual changes to the ICD-9-CM codes are effective for discharges occurring on or after October 1 each year. Thus, the manual and electronic versions of the GROUPER software, which are based on the ICD-9-CM codes, are also revised annually and effective for discharges occurring on or after October 1 each year. As discussed earlier, the patient classification system for the LTCH PPS (LTC-DRGs) is based on the IPPS patient classification system (CMS-DRGs), which is updated annually and effective for discharges occurring on or after October 1 through September 30 each year. The updated DRGs and GROUPER software are based on the latest revision to the ICD-9-CM codes, which are published annually in the IPPS proposed rule and final rule. The new or revised ICD-9-CM codes are not used by the industry for either the IPPS or the LTCH PPS until the beginning of the next Federal fiscal year (effective for discharges occurring on or after October 1 through September 30). (The use of the ICD-9-CM codes in this manner is consistent with current usage and the HIPAA regulations.) October 1 is also when the changes to the CMS-DRGs and the next version of the GROUPER software becomes effective.

As discussed in section III. of this proposed rule, we are proposing to make the annual update to the LTCH PPS effective from July 1 through June 30 each year. As a result of this change the LTCH PPS would use two GROUPERS during the course of a 12-month period: one GROUPER for 3 months (from July 1 through September 30); and an updated GROUPER for 9 months (from October 1 through June 30). The need to use two GROUPERs is based upon the October 1 effective date of the updated ICD-9-CM coding system. As previously discussed, new ICD-9-CM codes may result in changes to the structure of the DRGs. In order for the industry to be on the same schedule (for both the IPPS and the LTCH PPS) for the use of the most current ICD-9-CM codes, it is necessary for us to propose to apply two GROUPER programs to the LTCH PPS. Although we do not believe that this will have any adverse effect on LTCHs, we are interested in receiving comments on this issue. LTCHs would continue to code diagnosis and procedures using the most current version of the ICD-9-CM coding system.

Currently, for Federal FY 2003, we are using Version 20.0 of the GROUPER software for both the IPPS and the LTCH PPS. For discharges beginning on October 1, 2003 (Federal FY 2004), we are proposing our intent to use Version 21.0 of the GROUPER software for both the IPPS and the LTCH PPS. Thus, proposed changes to the CMS-DRGs Start Printed Page 11241(the DRGs on which the LTC-DRGs are based), and their relative weights, as well as the LTC-DRGs and their relative weights that would be effective for October 1, 2003 through September 30, 2004, would be presented in the IPPS FY 2004 proposed rule that will be published in the spring of 2003 in the Federal Register. Accordingly, we would then notify LTCHs of any revised LTC-DRG relative weights based on the final DRGs and Version 21.0 GROUPER for the IPPS that would be effective October 1, 2003.

E. ICD-9-CM Coding System

1. Uniform Hospital Discharge Data Set (UHDDS) Definitions

Because the assignment of a case to a particular LTC-DRG will help determine the amount that will be paid for the case, it is important that the coding is accurate. Classifications and terminology used in the LTCH PPS are consistent with the ICD-9-CM and the UHDDS, as recommended to the Secretary by the National Committee on Vital and Health Statistics (“Uniform Hospital Discharge Data: Minimum Data Set, National Center for Health Statistics, April 1980”) and as revised in 1984 by the Health Information Policy Council (HIPC) of the U.S. Department of Health and Human Services.

We wish to point out that the ICD-9-CM coding terminology and the definitions of principal and other diagnoses of the UHDDS are consistent with the requirements of the HIPPA Administrative Simplification Act of 1996 (45 CFR Part 162). Furthermore, the UHDDS has been used as a standard for the development of policies and programs related to hospital discharge statistics by both governmental and nongovernmental sectors for over 30 years. In addition, the following definitions (as described in the 1984 Revision of the UHDDS, approved by the Secretary of Health and Human Services for use starting January 1986) are requirements of the ICD-9-CM coding system, and have been used as a standard for the development of the CMS-DRGs:

  • Diagnoses include all diagnoses that affect the current hospital stay.
  • Principal diagnosis is defined as the condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.
  • Other diagnoses (also called secondary diagnoses or additional diagnoses) are defined as all conditions that coexist at the time of admission, that develop subsequently, or that affect the treatment received or the length of stay or both. Diagnoses that relate to an earlier episode of care that have no bearing on the current hospital stay are excluded.
  • All procedures performed will be reported. This includes those that are surgical in nature, carry a procedural risk, carry an anesthetic risk, or require specialized training.

We provide LTCHs with a 60-day window after the date of the notice of the initial LTC-DRG assignment to request review of that assignment. Additional information may be provided by the LTCH to the fiscal intermediary as part of that review.

2. Maintenance of the ICD-9-CM Coding System

The ICD-9-CM Coordination and Maintenance (C&M) Committee is a Federal interdepartmental committee, co-chaired by the National Center for Health Statistics (NCHS) and CMS, that is charged with maintaining and updating the ICD-9-CM system. The C&M Committee is jointly responsible for approving coding changes, and developing errata, addenda, and other modifications to the ICD-9-CM to reflect newly developed procedures and technologies and newly identified diseases. The C&M Committee is also responsible for promoting the use of Federal and non-Federal educational programs and other communication techniques with a view toward standardizing coding applications and upgrading the quality of the classification system.

The NCHS has lead responsibility for the ICD-9-CM diagnosis codes included in the Tabular List and Alphabetic Index for Diseases, while CMS has lead responsibility for the ICD-9-CM procedure codes included in the Tabular List and Alphabetic Index for Procedures.

The C&M Committee encourages participation by health-related organizations in the above process and holds public meetings for discussion of educational issues and proposed coding changes twice a year at the CMS Central Office located in Baltimore, Maryland. The agenda and dates of the meetings can be accessed on the CMS Web site at: http://www.cms.gov/​paymentsystems/​icd9.

All changes to the ICD-9-CM coding system affecting DRG assignment are addressed annually in the IPPS proposed and final rules. Because the DRG-based patient classification system for the LTCH PPS is based on the IPPS DRGs, these changes will also affect the LTCH PPS LTC-DRG patient classification system.

As discussed above, the ICD-9-CM coding changes that have been adopted by the C&M Committee become effective at the beginning of each Federal fiscal year, October 1. Regardless of the proposed change to the annual update of the LTCH PPS year to July 1, we are proposing that coders would use the most current updated ICD-9-CM coding book from October 1 through September 30 of each year. This would mean that coders and LTCHs that use the updated ICD-9-CM coding system would be on the same schedule (effective October 1) as the rest of the health care industry. The newest version of ICD-9-CM is not available for use until October 1, which would be 4 months after the date that we are proposing to publish the LTCH annual payment rate update final rule. The new codes on which the LTC-DRGs are based would go into effect and be available for use for discharges occurring on or after October 1 through September 30 of each year. This annual schedule of the revision to the ICD-9-CM coding system and the change of the ICD-9-CM coding books or electronic coding programs has been in effect since the adoption of Revision 9 of the ICD in 1979.

Of particular note to LTCHs will be the invalid diagnosis codes (Table 6C) and the invalid procedure codes (Table 6D) located in the annual proposed and final rules for the IPPS. Claims with invalid codes will not be processed by the Medicare claims processing system.

3. Coding Rules and Use of ICD-9-CM Codes in LTCHs

We emphasize the need for proper coding by LTCHs. Inappropriate coding of cases can adversely affect the uniformity of cases in each LTC-DRG and produce inappropriate weighting factors at recalibration. We continue to urge LTCHs to focus on improved coding practices. Because of concerns raised by LTCHs concerning correct coding, we have asked the American Hospital Association (AHA) to provide additional clarification or instruction on proper coding in the LTCH setting. The AHA will provide this instruction via their established process of addressing questions through their publication “Coding Clinic for ICD-9-CM”. Written questions or requests for clarification may be addressed to the Central Office on ICD-9-CM, American Hospital Association, One North Franklin, Chicago, IL 60606. A form for the question(s) is available to be downloaded and mailed on AHA's Web site at: http://www.ahacentraloffice.org. In addition, current coding guidelines are available at the National Center for Health Statistics (NCHS) Web site: Start Printed Page 11242

http://www.cdc.gov/​nchs.icd9.htm.

In conjunction with the cooperating parties of the C&M Committee (AHA, AHIMA, and NCHS), we have reviewed actual medical records and are concerned about the quality of the documentation under the LTCH PPS, as was the case at the beginning of the IPPS. We fully believe that, with experience, the quality of the documentation and coding will improve, just as it did for the IPPS. As noted above, the cooperating parties have plans to assist their members with improvement in documentation and coding issues for the LTCHs through specific questions and coding guidelines. The importance of good documentation is emphasized in the revised ICD-9-CM Official Guidelines for Coding and Reporting (October 1, 2002): “A joint effort between the attending physician and coder is essential to achieve complete and accurate documentation, code assignment, and reporting of diagnoses and procedures. The importance of consistent, complete documentation in the medical record cannot be overemphasized. Without such documentation, the application of all coding guidelines is a difficult, if not impossible, task. (Coding Clinic for ICD-9-CM, Fourth Quarter 2002, page 115)

To improve medical record documentation, LTCHs should be aware that if the patient is being admitted for continuation of treatment of an acute or chronic condition, guidelines at Section I.B.10 of the Coding Clinic for ICD-9-CM, Fourth Quarter 2002 (page 129) are applicable concerning selection of principal diagnosis. To clarify coding advice issued in the August 30, 2002 final rule (67 FR 55979-55981), we would like to point out that, at Guideline I.B.12, Late Effects, a late effect is considered to be the residual effect (condition produced) after the acute phase of an illness or injury has terminated (Coding Clinic for ICD-9-CM, Fourth Quarter 2002, page 129). We have received question regarding whether a LTCH should report the ICD-9-CM code(s) for an unresolved acute condition instead of the code(s) for late effect or rehabilitation. Depending on the documentation in the medical record, either code could be appropriate in a LTCH. Since implementation of the LTCH PPS, our Medicare fiscal intermediaries have been conducting training and providing assistance to LTCHs in correct coding. We have also issued manuals containing procedures as well as coding instructions to LTCHs and fiscal intermediaries. We will continue to conduct such training and provide guidance on an as-needed basis. We also refer readers to the detailed discussion on correct coding practices in the August 30, 2002 final rule (67 FR 55979-55981).

F. Proposed Changes to the Method for Updating the LTC-DRG Relative Weights

As previously discussed, under the LTCH PPS, each LTCH will receive a payment that represents an appropriate amount for the efficient delivery of care to Medicare patients. The system must be able to account adequately for each LTCH's case-mix in order to ensure both fair distribution of Medicare payments and access to adequate care for those Medicare patients whose care is more costly. Therefore, in accordance with § 412.523(c), we adjust the standard Federal PPS rate by the LTC-DRG relative weights in determining payment to LTCHs for each case.

Under this payment system, relative weights for each LTC-DRG are a primary element used to account for the variations in cost per discharge and resource utilization among the payment groups (§ 412.515). To ensure that Medicare patients who are classified to each LTC-DRG have access to an appropriate level of services and to encourage efficiency, we calculate a relative weight for each LTC-DRG that represents the resources needed by an average inpatient LTCH case in that LTC-DRG. For example, cases in a LTC-DRG with a relative weight of 2 will, on average, cost twice as much as cases in a LTC-DRG with a weight of 1.

As we discussed in the August 30, 2002 final rule (67 FR 55984-55995), the LTC-DRG relative weights effective under the LTCH PPS for Federal FY 2003 were calculated using the March 2002 update of FY 2001 MedPAR data and Version 20.0 of the CMS GROUPER software. We use total days and total charges in the calculation of the LTC-DRG relative weights.

By nature, LTCHs often specialize in certain areas, such as ventilator-dependent patients and rehabilitation and wound care. Some case types (DRGs) may be treated, to a large extent, in hospitals that have, from a perspective of charges, relatively high (or low) charges. Such distribution of cases with relatively high (or low) charges in specific LTC-DRGs has the potential to inappropriately distort the measure of average charges. To account for the fact that cases may not be randomly distributed across LTCHs, we use a hospital-specific relative value method to calculate relative weights. We believe this method removes this hospital-specific source of bias in measuring average charges. Specifically, we reduce the impact of the variation in charges across providers on any particular LTC-DRG relative weight by converting each LTCH's charge for a case to a relative value based on that LTCH's average charge. (See the August 30, 2002 final rule (67 FR 55985) for further information of the hospital-specific relative value methodology.)

In order to account for LTC-DRGs with low volume (that is, with fewer than 25 LTCH cases), we grouped those low volume LTC-DRGs into one of five categories (quintiles) based on average charges, for the purposes of determining relative weights. For FY 2003 based on the FY 2001 MedPAR data, we identified 161 LTC-DRGs that contained between 1 and 24 cases. This list of low volume LTC-DRGs was then divided into one of the five low volume quintiles, each containing a minimum of 32 LTC-DRGs (161/5 = 32 with 1 LTC-DRG as a remainder). Each of the low volume LTC-DRGs grouped to a specific quintile received the same relative weight and average length of stay using the formula applied to the regular LTC-DRGs (25 or more cases), as described below. (See the August 30, 2002 final rule (67 FR 55985-55988) for further explanation of the development and composition of each of the five low volume quintiles for FY 2003.)

After grouping the cases in the appropriate LTC-DRG, we calculate the relative weights by first removing statistical outliers and cases with a length of stay of 7 days or less. Next, we adjust the number of cases in each LTC-DRG for the effect of short-stay outlier cases under § 412.529. The short-stay adjusted discharges and corresponding charges were used to calculate “relative adjusted weights” in each LTC-DRG using the hospital-specific relative value method described above. (See the August 30, 2002 final rule (67 FR 55989-55995) for further details on the steps for calculating the LTC-DRG relative weights.)

We also adjust the LTC-DRG relative weights to account for nonmonotonically increasing relative weights. That is, we make an adjustment if cases classified to the LTC-DRG “with comorbidities (CCs)” of a “with CC”/“without CC” pair had a lower average charge than the corresponding LTC-DRG “without CCs” by assigning the same weight to both LTC-DRGs in the “with CC”/“without CC” pair. (See August 30, 2002, 67 FR 55990-55991). In addition, of the 510 LTC-DRGs in the LTCH PPS for FY 2003, based on the FY 2001 MedPAR data, we identified 159 LTC-DRGs for which there were no LTCH cases in the database. That is, no Start Printed Page 11243patients who would have been classified to those DRGs were treated in LTCHs during FY 2001 and, therefore, no charge data were reported for those DRGs. Thus, in the process of determining the relative weights of LTC-DRGs, we were unable to determine weights for these 159 LTC-DRGs using the method described above. However, since patients with a number of the diagnoses under these LTC-DRGs may be treated at LTCHs beginning in FY 2003, we assigned relative weights to each of the 159 “no volume” LTC-DRGs based on clinical similarity and relative costliness to one of the remaining 351 (510 − 159 = 351) LTC-DRGs for which we were able to determine relative weights, based on the FY 2001 claims data. (A list of the no volume LTC-DRGs and further explanation of their relative weight assignment can be found in the August 30, 2002 final rule (67 FR 55991-55994).)

Furthermore, we establish LTC-DRG relative weights of 0.0000 for heart, kidney, liver, lung, pancreas, and simultaneous pancreas/kidney transplants (LTC-DRGs 103, 302, 480, 495, 512 and 513, respectively) because Medicare will only cover these procedures if they are performed at a hospital that has been certified for the specific procedures by Medicare and presently no LTCH has been so certified. If in the future, however, a LTCH applies for certification as a Medicare-approved transplant center, we believe that the application and approval procedure would allow sufficient time for us to propose appropriate weights for the LTC-DRGs effected. At the present time, though, we only include these six transplant LTC-DRGs in the GROUPER program for administrative purposes because since the LTCH PPS uses the same GROUPER program for LTCHs as is used under the IPPS, removing these DRGs would be administratively burdensome.

As we stated previously, we are proposing that we would continue to use the same LTC-DRGs and relative weights until October 1, 2003. Accordingly, Table 3 in the Addendum to this proposed rule lists the LTC-DRGs and their respective relative weights and arithmetic mean length of stay that we are proposing would continue to be used for the period of July 1, 2003 through September 30, 2003. (This table is the same as Table 3 of the Addendum to the August 30, 2002 final rule (67 FR 56076-56084), except that it includes the proposed five-sixth of the average length of stay for short-stay outliers under § 412.529. As we noted in section IV.D. of this preamble, we are proposing that the final DRGs and GROUPER for FY 2004 that would be used for the IPPS and the LTCH PPS, effective October 1, 2003, would be presented in the IPPS FY 2004 final rule published no later than August 1, 2003 in the Federal Register.

Accordingly, we would notify LTCHs of the revised LTC-DRG relative weights for use in determining payments for discharges occurring between October 1, 2003 and September 30, 2004, based on the final DRGs and Version 21.0 GROUPER published in the IPPS rule on or before August 1, 2003.

V. Proposed Policy Change Related to Payments to LTCHs That Are Satellite Facilities

In the March 22, 2002 proposed rule related to the establishment of the LTCH PPS (67 FR 13416), we stated that we were considering proposing the elimination of the bed limit in § 412.22(h)(2)(i) for pre-1997 excluded hospitals once the applicable prospective payment system was fully phased in and all payments were based on 100 percent of the Federal prospective payment rates. This statement generated a number of comments and in the August 30, 2002 final rule (67 FR 56012), we stated our agreement with commenters who urged us to adopt a policy eliminating the bed-number restrictions for pre-1997 LTCHs with satellite facilities, as soon as a LTCH elected to be paid based on 100 percent of the Federal prospective rate. However, we also noted that we would address a change in the policy concerning bed limits in the next update of the LTCH PPS. Therefore, we are now proposing to eliminate the application of the bed-number restrictions set forth in § 412.22(h)(i) for LTCHs established prior to 1997 with satellite facilities, effective at the start of the first cost reporting year that the LTCH is paid under the 100 percent fully Federal prospective payment system. This would be either when the LTCH elects to be paid based on 100 percent of the Federal prospective rate or when the LTCH is transitioned to 100 percent of the Federal prospective rate, whichever comes first.

Presently, section 1886(b)(3) of the Act, as amended by section 4414 of Pub. L. 105-33, requires existing LTCHs to be subject to caps on their target amounts for cost reporting periods beginning on or after October 1, 1997 through September 30, 2002. For purposes of calculating these caps, the statute required the Secretary to “estimate the 75th percentile of the target amounts for such hospitals within [each] class for cost reporting periods ending during fiscal year 1996.” Section 1886(b)(3)(H) of the Act, as amended by section 121 of Pub. L. 106-113, directed the Secretary to provide for an appropriate wage adjustment to the caps on the target amounts for psychiatric and rehabilitation hospitals and units and LTCHs effective for cost reporting periods beginning on or after October 1, 1999 through September 30, 2002. In addition, payment limits were established for new excluded hospitals or units (excluding children's hospitals) effective October 1, 1997. For new excluded hospitals (that is, post-1997 LTCHs), section 1886(b)(7) of the Act, as added by section 4416 of Pub. L. 105-33, specified that the payment amount for the facility's first two 12-month cost reporting periods, for which the hospital has a settled cost report, must not exceed 110 percent of the national median of target amounts of similarly classified hospitals for cost reporting periods ending during FY 1996, updated by the hospital market basket increase percentage to the first cost reporting period in which the hospital receives payment, as adjusted by section 1886(b)(7)(C) of the Act. The result of section 4414 and 4416 of Pub. L. 105-33 was a distinction between the LTCHs established prior to and those established after 1997 with lower payment caps for the post-1997 LTCHs.

In the July 30, 1999 final rule for the IPPS (64 FR 41532-41533), we promulgated regulations at § 412.22(h)(2)(i) to discourage pre-1997 excluded hospitals, which had the higher caps on target amounts as discussed above (under § 413.40(c)(4)(iii), which implemented section 4414 of Pub. L. 105-33), from creating satellite arrangements rather than establishing new hospitals, in order to avoid the payment impact of the lower caps that apply to new hospitals (under § 413.40(f)(2)(ii) which implemented section 4416 of Pub. L. 105-33). Under the July 30, 1999 acute care hospital inpatient final rule (64 FR 41490), in order to address this possibility of gaming if a pre-1997 excluded hospital, such as a LTCH, established a satellite facility and, in doing so, its total beds, in both the parent hospital (or unit) and the satellite facility, exceeded the number of State-licensed and Medicare-certified beds in the parent hospital on the last day of its last cost reporting period beginning before October 1, 1997, the excluded hospital would be paid under the inpatient DRG system instead of receiving payment as an excluded hospital under the TEFRA payment system. Although the excluded hospital Start Printed Page 11244could “transfer” bed capacity from the parent facility to the satellite, it could not increase its total bed capacity beyond the level it had in the most recent cost reporting period beginning before October 1, 1997, and still be paid as a hospital excluded from the IPPS. However, no such limitation was imposed on a LTCH (or other excluded facility) established after October 1, 1997 because it would have already been subject to the lower payment limits under § 413.40(f)(2)(ii) of 110 percent of the national median of target amounts for similarly classified hospitals. Therefore, it would not benefit from the higher 75 percent cap on target amounts under § 413.40(c)(4) by establishing a satellite facility, as would a pre-1997 LTCH.

The rationale for the bed-limit provision based on the distinction between these groups of hospitals was the potential for gaming, by creating a satellite facility with a higher TEFRA target cap where, in reality, the satellite facility should have been a separately certified excluded facility, which would have been subject to the lower cap on payments to new (post-1997) facilities paid under the TEFRA system. Once the LTCH is paid based on 100 percent of the Federal prospective rate, however, the LTCH will no longer be subject to TEFRA caps and LTCH prospective payments will be the same regardless of when the LTCH was established. Therefore, we are proposing to eliminate the bed-limit provision once the LTCH is paid based on 100 percent of the LTCH Federal PPS rate. Finally, under this proposed policy, the bed limitation on “existing” LTCHs would, however, continue to apply to those LTCHs while they are paid based on the transition blend, and, therefore, continue to receive a percentage of their payments based on the TEFRA payment rules, until they transition to a rate based on 100 percent of the Federal prospective payment rate.

VI. Proposed Changes to the LTCH PPS Rates for the Proposed 2004 LTCH PPS Rate Year

A. Overview of the Development of the Proposed Payment Rates

The PPS for LTCHs was effective for cost reporting periods beginning on or after October 1, 2002. Effective with that cost reporting period, LTCHs are paid, during a 5-year transition period, on the basis of an increasing proportion of the LTCH PPS Federal rate and a decreasing proportion of a hospital's payment under TEFRA, unless the hospital makes a one-time election to receive payment based on 100 percent of the Federal rate (see § 412.533). New LTCHs (as defined at § 412.23(e)(4)) are paid based on 100 percent of the Federal rate, with no phase-in transition payments.

The basic methodology for determining LTCH PPS Federal prospective payment rates is set forth in our regulations at §§ 412.521 through 412.529. Below we discuss the factors that we are proposing to use to update the LTCH PPS standard Federal rate for the proposed 2004 LTCH PPS rate year, which would be effective for LTCHs paid under the PPS for discharges occurring on or after July 1, 2003 through June 30, 2004.

In the August 30, 2002 final rule (67 FR 56029-56031), for cost reporting periods beginning on or after October 1, 2002 (FY 2003), we computed the LTCH PPS standard Federal payment rate by updating the best available (FY 1998 or FY 1999) Medicare inpatient operating and capital costs per case data, using the excluded hospital market basket.

Section 123(a)(1) of Pub. L. 106-113 requires that the PPS developed for LTCHs be budget neutral. Therefore, in calculating the standard Federal rate for FY 2003 under § 412.523(d)(2), we set total estimated PPS payments equal to estimated payments that would have been made under the TEFRA methodology if the PPS for LTCHs were not implemented. Section 307(a) of Pub. L. 106-554 specified that the increases to the hospital-specific target amounts and cap on the target amounts for LTCHs for FY 2002 provided for by section 307(a)(1) of Pub. L. 106-554 shall not be taken into account in the development and implementation of the LTCH PPS. In addition, the statute provides for enhanced bonus payments for LTCHs for FY 2001 and FY 2002 provided for by section 122 of Pub. L. 106-113. Furthermore, as specified at § 412.523(d)(1), the standard Federal rate is reduced by an adjustment factor to account for the estimated proportion of outlier payments under the LTCH PPS to total LTCH PPS payments (8 percent). For further details on the development of the FY 2003 standard Federal rate, see the August 30, 2002 final rule (67 FR 56027-56037). Under the existing regulations at § 412.523(c)(3)(ii) for fiscal years after FY 2003, we update the standard Federal rate annually to adjust for the most recent estimate of the projected increases in prices for LTCH inpatient hospital services.

B. Proposed Update to the Standard Federal Rate for the Proposed 2004 LTCH PPS Rate Year

In the August 30, 2002 final rule (67 FR 56033), we established a LTCH PPS standard Federal rate of $34,956.15 for FY 2003. Based on the most recent estimate of the excluded hospital with capital market basket, adjusted to account for the proposed change in the rate year update cycle for the LTCH PPS rates discussed in section III. of this proposed rule, the proposed LTCH PPS standard Federal rate, effective from July 1, 2003 through June 30, 2004, would be $35,726.64 (as discussed below).

In the discussion that follows, we explain how we developed the proposed update to the standard Federal rate. The proposed Federal rate for the proposed 2004 LTCH PPS rate year is calculated based on the proposed update factor of 1.0250. Thus, the proposed standard Federal rate for the proposed 2004 LTCH PPS rate year would increase 2.2 percent compared to the FY 2003 standard Federal rate.

1. Proposed Standard Federal Rate Update

In the August 30, 2002 final rule, we established in § 412.523 that, for years after FY 2003, the annual update to the LTCH PPS standard Federal rate will be equal to the percentage change in the excluded hospital with capital market basket (described in further detail below). As we discussed in the August 30, 2002 final rule (67 FR 56087), in the future we may propose to develop a framework to update payments to LTCHs that would account for other appropriate factors that affect the efficient delivery of services and care provided to Medicare patients. Because the LTCH PPS has only been implemented for cost reporting periods beginning on or after October 1, 2002, we have not yet collected sufficient data to allow for the analysis and development of an update framework under the LTCH PPS. Therefore, at this time, we are not proposing an update framework for the LTCH PPS. However, a conceptual basis for the proposal of developing an update framework in the future can be found in Appendix B of the August 30, 2002 final rule (67 FR 56086-56090).

a. Description of the Proposed Market Basket for LTCHs for the Proposed 2004 LTCH PPS Rate Year

A market basket has historically been used in the Medicare program to account for price increases of the services furnished by providers. The market basket used for the LTCH PPS includes both operating and capital-related costs of LTCHs because the LTCH PPS uses a single payment rate for both operating and capital-related costs. The development of the LTCH Start Printed Page 11245PPS standard Federal rate is discussed in further detail in the August 30, 2002 final rule (67 FR 56027-56037).

Under the reasonable cost-based TEFRA reimbursement system, the excluded hospital market basket was used to update the hospital-specific limits on payment for operating costs of LTCHs. The excluded hospital market basket is based on operating costs from FY 1992 cost report data and includes Medicare-participating long-term care, rehabilitation, psychiatric, cancer, and children's hospitals. Since LTCHs' costs are included in the excluded hospital market basket, this market basket index, in part, also reflects the costs of LTCHs. However, in order to capture the total costs (operating and capital-related) of LTCHs, we added a capital component to the excluded hospital market basket for use under the LTCH PPS. We refer to this index as the excluded hospital with capital market basket.

Beginning with the implementation of the LTCH PPS in FY 2003, the excluded hospital with capital market basket based on FY 1992 Medicare cost report data has been used for updating payments to LTCHs. The FY 1992-based market basket reflected the distribution of costs in FY 1992 for Medicare-participating freestanding rehabilitation, long-term care, psychiatric, cancer, and children's hospitals. This information was derived from the FY 1992 Medicare cost reports. A full discussion of the methodology and data sources used to construct the FY 1992-based excluded hospital with capital market basket is included in Appendix A of the August 30, 2001 final rule (67 FR 56085-56086). In this proposed rule, we are proposing to revise and rebase the excluded hospital with capital market basket, based on more recent data, to an FY 1997 base year for application beginning with the proposed 2004 LTCH PPS rate year.

We believe it is appropriate to propose to rebase the LTCH PPS market basket based on the most recent complete data available (FY 1997) since these data would more accurately reflect LTCH current costs. This proposed rebasing of the LTCH PPS market basket from an FY 1992 base year to a FY 1997 base year is consistent with the rebasing of both the IPPS and the excluded hospital market basket used under the TEFRA payment system for FY 2003, as discussed in the August 1, 2002 IPPS final rule (67 FR 50032-50047).

The operating portion of the proposed FY 1997-based excluded hospital with capital market basket that we are proposing to use under the LTCH PPS is derived from the FY 1997-based excluded hospital market basket used under the TEFRA payment system. The methodology we proposed to use to develop the proposed operating portion of the market basket under the LTCH PPS is the same methodology used to describe the rebasing of the excluded hospital market basket used under the TEFRA payment system, which is described in greater detail in the August 1, 2002 IPPS final rule (67 FR 50042-50044). In brief, the operating cost category weights in the FY 1997-based excluded market basket added to 100.0. These weights were determined from FY 1997 Medicare cost report data, the 1997 Business Expenditure Survey, and the 1997 Annual Input-Output data from the Bureau of the Census. In this proposed rule, in applying the proposed FY 1997-based market basket we are proposing to make the same two methodological revisions that we established when we rebased the hospital inpatient market basket and the excluded hospital market basket in the August 1, 2002 IPPS final rule: (1) Changing the wage and benefit price proxies to use the Employment Cost Index (ECI) wage and benefit data for hospital workers; and (2) adding a cost category for blood and blood products.

When we add the weight for capital costs to the excluded hospital market basket, the sum of the operating and capital weights must still equal 100.0. Based on FY 1997 Medicare cost reports for excluded hospitals, the capital cost weight would be 8.968 percent. Because capital costs would account for 8.968 percent of total costs for excluded hospitals in FY 1997, operating costs must, therefore, account for 91.032 percent (100 percent−8.968 percent). Each operating cost category weight in the FY 1997-based excluded hospital market basket from the August 1, 2002 IPPS final rule (67 FR 50442-50444) was multiplied by 0.91032 to determine its weight in the FY 1997-based excluded hospital with capital market basket.

The aggregate capital component of the proposed FY 1997-based excluded hospital market basket (8.968 percent) was determined from the same set of Medicare cost reports used to derive the operating component. The detailed capital cost categories of depreciation, interest, and other capital expenses were also determined using the Medicare cost reports. We needed to determine two sets of weights for the capital portion of the proposed revised and rebased market basket. The first set of weights identifies the proportion of capital expenditures attributable to each capital cost category; the second set represents relative vintage weights for depreciation and interest. The vintage weights identify the proportion of capital expenditures that is attributable to each year over the useful life of capital assets within a cost category (See 67 FR 50046-50047, August 1, 2002, for a discussion of how vintage weights are determined).

The cost categories, price proxies, and base-year FY 1992 and proposed FY 1997 weights for the proposed excluded hospital with capital market basket are presented below in Table I. The vintage weights for the proposed FY 1997-based excluded hospital with capital market basket are presented in Table II.

Table I.—Proposed Excluded Hospital With Capital Input Price Index (FY 1992-Based and Proposed FY 1997-Based) Structure and Weights

Cost categoryPrice/wage variableWeights (%), base-year FY 1992 1 2Proposed weights (%) base-year FY 1997 1 2
Total100.000100.000
Compensation57.93557.579
Wages and SalariesECI—Wages and Salaries, Civilian Hospital Workers47.41747.335
Employee BenefitsECI—Benefits, Civilian Hospital Workers to Capture Total Costs10.51910.244
Professional fees: Non-MedicalECI—Compensation: Professional & Technical1.9084.423
Utilities1.5241.180
ElectricityPPI—Commercial Electric Power0.9160.726
Fuel Oil, Coal, etcPPI—Commercial Natural Gas   0.365   0.248
Water and SewerageCPI-U—Water & Sewerage Maintenance   0.243   0.206
Start Printed Page 11246
Professional Liability InsuranceCMS—Professional Liability Insurance Premiums Index   0.983   0.733
All Other Products and Services   28.571   27.117
All Other Products   22.027   17.914
PharmaceuticalsPPI—Ethical (Prescription) Drugs   2.791   6.318
Food: Direct PurchasePPI—Processed Foods and Feeds   2.155   1.122
Food: Contract ServiceCPI-U—Food Away from Home   0.998   1.043
ChemicalsPPI—Industrial Chemicals   3.413   2.133
Blood and Blood ProductsPPI—Blood and Blood Derivatives, Human Use   0.748
Medical InstrumentsPPI—Medical Instruments & Equipment   2.868   1.795
Photographic SuppliesPPI—Photographic Supplies   0.364   0.167
Rubber and PlasticsPPI—Rubber & Plastic Products   4.423   1.366
Paper ProductsPPI—Converted Paper and Paperboard Products   1.984   1.110
ApparelPPI—Apparel   0.809   0.478
Machinery and EquipmentPPI—Machinery & Equipment   0.193   0.852
Miscellaneous ProductsPPI—Finished Goods Less Food and Energy   2.029   0.783
All Other Services   6.544   9.203
TelephoneCPI-U—Telephone Services   0.574   0.348
PostageCPI-U—Postage   0.268   0.702
All Other: Labor IntensiveECI—Compensation for Private Service Occupations   4.945   4.453
All Other: Non-Labor IntensiveCPI-U—All Items   0.757   3.700
Capital-Related Costs   9.080   8.968
Depreciation   5.611   5.586
Building & Fixed EquipmentBoeckh-Institutional Construct. Index—Vintage Weighted (23 years)   3.570   3.503
Movable EquipmentPPI—Machinery & Equipment—Vintage Weighted (11 Years)   2.041   2.083
Interest Costs   3.212   2.682
Government/ NonprofitYield on Domestic Municipal Bonds (Bond Buyer 20 Bonds)—Vintage Weighted (23 years)   2.730   2.280
For-profitYield on Moody's Aaa Bonds—Vintage Weighted (23 Years)   0.482   0.402
Other Capital-Related CostsCPI-U—Residential Rent   0.257   0.699
1 The operating cost category weights in the excluded hospital market basket described in the August 1, 2002 final rule (67 FR 50042-50044) add to 100.0. When we add an additional set of cost category weights (total capital weight = 8.968 percent) to this original group, the sum of the weights in the new index must still add to 100.0. Capital costs account for 8.968 percent of the market basket; operating costs account for 91.032 percent. Each weight in the FY 1997-based excluded hospital market basket from the August 1, 2002 final rule (67 FR 50042-50044) was multiplied by 0.91032 to determine its weight in the proposed FY 1997-based excluded hospital with capital market basket.
2 Weights may not sum to 100.0 due to rounding.

Table II.—Proposed Excluded Hospital With Capital Input Price Index (FY 1997) Vintage Weights

Year (from farthest to most recent) *Building and fixed equipment (23-year weights) *Movable equipment (11-year weights) *Interest: capital-related (23-year weights) *
10.0180.0630.007
20.0210.0680.009
30.0230.0740.011
40.0250.0800.012
50.0260.0850.014
60.0280.0910.016
70.0300.0960.019
80.0320.1010.022
90.0350.1080.026
100.0390.1140.030
110.0420.1190.035
120.0440.039
130.0470.045
140.0490.049
150.0510.053
160.0530.059
170.0570.065
180.0600.072
190.0620.077
200.0630.081
210.0650.085
Start Printed Page 11247
220.0640.087
230.0650.090
Total1.00001.00001.0000
* Weights may not sum to 1.000 due to rounding.

Table III. compares the FY 1992-based excluded hospital with capital market basket to the proposed FY 1997-based excluded hospital with capital market basket. As shown in the table, the proposed rebased and revised market basket grows slightly faster over the FY 1999-2001 period than the FY 1992-based market basket. The major reason for this was the switching of the wage and benefit proxy to the ECI for hospital workers from the previous occupational blend. This revision had a similar impact on the IPPS and excluded market baskets, as described in the August 1, 2002 final rule (67 FR 50043-50047).

Table III.—Percent Changes in the FY 1992-Based and Proposed FY 1997-Based Excluded Hospital with Capital Market Baskets, FYs 1999-2004

Fiscal year (FY)Percentage change
FY 1992-based excluded hospital market basketProposed rebased FY 1997-based excluded market basket
19992.32.7
20003.43.1
20013.94.0
Average historical3.23.3
20022.83.7
20032.83.1
20043.03.3
Average forecast2.93.3

In the August 30, 2002 LTCH PPS final rule (67 FR 56016 and 56085-56086), we discussed why we believe the excluded hospital with capital market basket provides a reasonable measure of the price changes facing LTCHs. However, we have been researching the feasibility of developing a market basket specific to LTCH services. This research has included analyzing data sources for cost category weights, specifically the Medicare cost reports, and investigating other data sources on cost, expenditure, and price information specific to LTCHs. Based on this research (as discussed below), at this time we are not proposing to develop a market basket specific to LTCH services.

Our analysis of the Medicare cost reports indicates that the distribution of costs among major cost report categories (wages, pharmaceuticals, capital) for LTCHs is not substantially different from the proposed 1997-based excluded hospital with capital market basket presented in this proposed rule. Data on other major cost categories (benefits, blood, contract labor) that we would like to analyze were excluded by many LTCHs in their Medicare cost reports. An analysis based on only the data available to us for these cost categories presented a potential problem since no other major cost category weight would be based on LTCH data.

We conducted a sensitivity analysis of annual percent changes in the market basket when the weights for wages, pharmaceuticals, and capital in LTCHs were substituted into the excluded hospital with capital market basket. Other cost categories were recalibrated using ratios available from the IPPS market basket. On average between FY 1995 and FY 2002, the proposed excluded hospital with capital market basket shows increases at nearly the same average annual rate (2.9 percent) as the market basket with LTCH weights for wages, pharmaceuticals, and capital (2.8 percent). This difference is less than the 0.25 percentage point criterion that determines whether a forecast error adjustment is warranted under the IPPS update framework.

We believe that an excluded hospital with capital market basket adequately reflects the price changes facing LTCHs. We will continue to solicit comments about issues particular to LTCHs that should be considered in relation to the proposed FY 1997-based excluded hospital with capital market basket and to encourage suggestions for additional data sources that may be available.

b. Proposed LTCH Market Basket Increase for the Proposed 2004 LTCH PPS Rate Year

As stated earlier, for LTCHs paid under the LTCH PPS, we are proposing that the 2004 rate year update would apply to discharges occurring from July 1, 2003 through June 30, 2004. Because we are proposing to change the timeframe of the standard Federal rate annual update, we needed to calculate an update factor that would reflect this proposed change in the update cycle. Presently, the current rate cycle is October 1, 2002 through September 30, 2003. This means that the standard Federal rate ($34.956.15; see the August 30, 2002 final rule, 67 FR 56033) was determined based on the market basket increase through September 30, 2003. Since we are proposing to change the rate update cycle and, therefore, update the standard Federal rate 3 months earlier (that is, July 1, 2003 instead of October 1, 2003), we need to propose an adjustment to the projected full (12-month) market basket increase to eliminate the projected increase for the 3-month overlapping period (July 1, 2003 through September 30, 2003).

Thus, we needed to account for the fact that the FY 2003 standard Federal rate of $34,956.15 already includes an update for the 3-month period from July 1, 2003 through September 30, 2003. In the absence of this proposed change, the update for FY 2004 would have been calculated using the estimated increase between FY 2003 and FY 2004. For the proposed update for the proposed 2004 LTCH PPS rate year, we calculated the estimated increase between FY 2003 and the proposed 2004 LTCH PPS rate year. Based on the fourth quarter 2002 forecast of the proposed rebased FY 1997-based excluded hospital with capital market basket, this calculation results in an increase that is 0.8 percentage points less than it would have been if the proposed change in the LTCH PPS rate cycle would not be made. The projected market basket increase for this 3-month period (0.8 Start Printed Page 11248percent) was already included in the FY 2003 standard Federal rate and, therefore, needs to be deducted from the projected market basket increase for the 12-month period of July 1, 2003 through June 30, 2004 (3.3 percent) in order to account for the proposed change in the update cycle.

Consistent with our historical practice of estimating market basket increases, based on Global Insights' (formerly DRI-WEFA) fourth quarter 2002 forecast of the proposed rebased FY 1997-based excluded hospital with capital market basket, we are proposing an update of 2.5 percent, as shown in Table IV. below.

Table IV.—Calculation of Proposed Market Basket Increase for the Proposed 2004 LTCH Prospective Payment System Rate Year

Percent
Proposed 2004 rate year full market basket with capital increase*3.3
Adjustment for the proposed change in the update cycle**−0.8
Proposed 2004 market basket increase2.5
* Projected market basket increase for the 12-month period of July 1, 2003 through June 30, 2004.
** Projected market basket increase for the 3-month period of July 1, 2003 through September 30, 2003 already included in the FY 2003 standard Federal rate.

In addition, based on the best available data for 194 LTCHs, we estimate that LTCH prospective payment system payments would be $1.960 billion for the proposed 2004 LTCH prospective payment system rate year. As indicated previously, we are proposing to update the FY 2003 standard Federal rate and wage index data 3 months early (July 1, 2003 instead of October 1, 2003). We are proposing that this change be budget neutral because, as we discussed in the August 30, 2002 final rule (67 FR 56027), total estimated LTCH PPS payments in FY 2003 will equal estimated payments that would have been made under the reasonable cost-based principles if the LTCH PPS were not implemented. Based on the most recent data, for the 3-month period from July 1, 2003 through September 30, 2003, the proposed increase in the standard Federal rate would result in an additional cost of $5.66 million to the FY 2003 Federal budget. Accordingly, in order to maintain budget neutrality for the proposed change in the rate update cycle, under proposed § 412.523(c)(3)(ii), we are proposing to adjust the standard Federal rate by a factor of 0.997 (($1.960 billion—$5.66 million)/$1.960 billion) or −0.003. Also, we propose to revise this adjustment factor in the final rule based on the best available data.

Therefore, we are proposing to update the current standard Federal rate ($34,956.15) established in the August 30, 2002 final rule (67 FR 56033) by 2.2 percent (2.5 percent minus 0.3 percent) for discharges paid under the LTCH PPS that occur on or after July 1, 2003 through June 30, 2004. This proposed update represents the most recent estimate of the increase in the excluded hospital with capital market basket for the proposed 2004 LTCH PPS rate year, adjusted by the above described factor to transition to the proposed change in the rate update cycle to July 1, and is based on the best available data for 194 LTCHs.

2. Proposed Standard Federal Rate for the Proposed 2004 LTCH PPS Rate Year

In the August 30, 2002 LTCH PPS final rule (67 FR 56033), we established a standard Federal rate of $34,956.15. For the proposed 2004 LTCH PPS rate year, we are proposing a standard Federal rate of $35,726.64. Since the proposed standard Federal rate has already been adjusted for differences in case-mix, wages, cost-of-living, and high-cost outlier payments, we are not proposing any additional adjustments in the proposed standard Federal rate for these factors.

C. Calculation of Proposed LTCH Prospective Payments for the Proposed 2004 LTCH PPS Rate Year

The basic methodology for determining prospective payment rates for LTCH inpatient operating and capital-related costs is set forth in § 412.521. In accordance with § 412.515, we assign appropriate weighting factors to each LTC-DRG to reflect the estimated relative cost of hospital resources used for discharges within that group as compared to discharges classified within other groups. The amount of the prospective payment is based on the standard Federal rate, established under § 412.523, and adjusted for the LTC-DRG relative weights, differences in area wage levels, cost-of-living in Alaska and Hawaii, high-cost outliers, and other special payment provisions (short-stay outliers under § 412.529 and interrupted stays under § 412.531). In accordance with § 412.533, during the 5-year transition period, payment is based on the applicable transition blend percentage of the adjusted Federal rate and the TEFRA rate unless the LTCH makes a one-time election to receive payment based on 100 percent of the Federal rate. A LTCH defined as “new” under § 412.23(e)(4) is paid based on 100 percent of the Federal rate with no blended transition payments (§ 412.533(d)). As discussed in the August 30, 2002 final rule and in accordance with § 412.533(a), the applicable transition blends are as follows:

Cost reporting periods beginning on or afterFederal rate percentageTEFRA rate percentage
Oct. 1, 20022080
Oct. 1, 20034060
Oct. 1, 20046040
Oct. 1, 20058020
Oct. 1, 20061000

Accordingly, for cost reporting periods beginning during FY 2003 (that is, on or after October 1, 2002, and before September 30, 2003), blended payments under the transition methodology are based on 80 percent of the LTCH's TEFRA rate and 20 percent of the adjusted Federal rate. For cost reporting periods beginning during FY 2004 (that is, on or after October 1, 2003 and before September 30, 2004), blended payments under the transition methodology will be based on 60 percent of the LTCH's TEFRA rate and 40 percent of the adjusted Federal rate.

1. Proposed Adjustment for Area Wage Levels

Under the authority of section 307(b) of Pub. L. 106-554, we established an adjustment to account for differences in LTCH area wage levels under § 412.525(c) using the labor-related share estimated by the excluded hospital market basket with capital and wage indices that were computed using wage data from acute care inpatient hospitals without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act. Furthermore, as we discussed in the August 30, 2002 final rule (67 FR 56015-56019), we established a 5-year transition to the full wage adjustment. For cost reporting periods beginning on or after October 1, 2002 and before September 30, 2003 (FY 2003), the applicable LTCH wage index value is one-fifth of the full FY 2002 acute care hospital inpatient wage index data, without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act.

In that same final rule (67 FR 56018), we stated that we would continue to reevaluate LTCH data as they become available and would propose to adjust the phase-in if subsequent data support Start Printed Page 11249a change. Because the LTCH PPS was only recently implemented, sufficient new data have not been generated that would enable us to conduct a comprehensive reevaluation of the appropriateness of adjusting the phase-in. However, we have reviewed the most recent data available and did not find any evidence to support a change in the 5-year phase-in of the wage index. Therefore, we are not proposing to adjust the phase-in at this time. In addition, as stated earlier, the 5-year phase-in of the wage index would not be affected by the proposed establishment of a LTCH PPS rate year of July 1 to June 30. Instead, the 5-year phase-in of the wage index established in the August 30, 2002 final rule (67 FR 56018) will continue to follow the Federal fiscal year. That is, for cost reporting periods beginning on or after October 1, 2003 and before September 30, 2004 (FY 2004), the applicable proposed LTCH wage index will be two-fifths of the proposed applicable LTCH PPS index values discussed below. However, we will reevaluate LTCH data as they become available and would propose to adjust the phase-in if subsequent data support a change.

Section 412.525(c) provides that the adjustment to account for differences in area wage levels is made by multiplying the labor-related portion of the Federal rate by the appropriate wage index value for the area in which the LTCH is physically located. In the August 30, 2002 final rule (67 FR 56018), based on the best available data at that time, we stated that the wage index adjustment is based on the FY 2002 inpatient acute care hospital wage index data without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act. For the proposed 2004 LTCH PPS rate year, we are proposing that the wage index adjustment provided for under § 412.525(c) be based on the most recent available inpatient acute care hospital wage data, that is, the FY 2003 inpatient acute care hospital wage index data without taking into account geographic reclassification under section 1886(d)(8) and section 1886(d)(10) of the Act. As we noted above, the 5-year phase-in of the wage index adjustment would not be affected by the proposed change in the LTCH PPS rate update cycle and will continue to be based on the Federal fiscal year. However, we are proposing to update the data used to compute the annual wage index values on the proposed 2004 LTCH PPS rate year cycle (July through June). For example, for a LTCH with a cost reporting period from January 1, 2003 through December 31, 2003, the LTCH will be paid using the one-fifth wage index value for its entire cost reporting period. For the first 6 months of that period (January 1, 2003 through June 30, 2003), the one-fifth wage index value would be based on the FY 2000 inpatient acute care hospital wage index data without taking into account geographic reclassifications under sections 1886(d)(8) and (d)(10) of the Act as established in the August 30, 2002 final rule (67 FR 56018). Under our proposal to update the data used to compute the LTCH PPS wage index values for July 1, 2003 through June 30 2004, for the next 6 months (July 1, 2003 through December 31, 2003) the LTCH would still be paid using one-fifth of the wage index value, but the wage index value would now be computed using FY 2003 inpatient acute care hospital wage index data without taking into account geographic reclassifications under sections 1886(d)(8) and (d)(10) of the Act (as shown in Tables 1 and 2 of the Addendum of this proposed rule). For the LTCH's cost reporting period from January 1, 2004 through December 31, 2004, the LTCH would be paid using the two-fifth wage index value. For the first 6 months of that period (January 1, 2004 through June 30, 2004), the two-fifth wage index value would be based on the FY 2000 inpatient acute care hospital wage index data without taking into account geographic reclassifications under sections 1886(d)(8) and (d)(10) of the Act, as shown in Tables 1 and 2 of the Addendum of this proposed rule.

In the August 30, 2002 final rule (67 FR 56018), for FY 2003 we used the FY 2002 inpatient acute care hospital wage index data without taking into account geographic reclassifications under sections 1886(d)(8) and (d)(10) of the Act. The inpatient acute care hospital wage index data, without taking into account geographic reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act, is also used under other postacute care PPSs, such as the IRF PPS and the SNF PPS. As we discussed in the August 30, 2002 final rule (67 FR 56019), since hospitals that are excluded from the IPPS are not required to provide wage-related information on the Medicare cost report and we would need to establish instructions for the collection of such LTCH data in order to establish a geographic reclassification adjustment under the LTCH PPS, the wage adjustment established under the LTCH PPS is based on a LTCH's actual location without regard to the urban or rural designation of any related or affiliated provider. In this proposed rule, for the proposed 2004 LTCH PPS rate year, we are proposing to use the FY 2000 inpatient acute care hospital wage index data without taking into account geographic reclassifications under sections 1886(d)(8) and (d)(10) of the Act, because it is the most recent available complete data. This is the same wage data that were used to compute the FY 2003 wage indices currently used under the IPPS. The proposed LTCH wage index values for July 1, 2003 through June 30, 2004 is shown in Table 1 (for urban areas) and Table 2 (for rural areas) in the Addendum of this proposed rule. As noted above, for cost reporting periods beginning on or after October 1, 2002 and before September 30, 2003 (FY 2003), the applicable LTCH wage index is one-fifth of the full FY 2003 acute care hospital inpatient wage index data, without taking into account geographic reclassifications under sections 1886(d)(8) and (d)(10) of the Act. For cost reporting periods beginning on or after October 1, 2003 and before September 30, 2003 (FY 2004), the applicable proposed LTCH wage index would be two-fifths of the full FY 2003 acute care hospital inpatient wage index data, without taking into account geographic reclassification under sections 1886(d)(8) and (d)(10) of the Act.

In conjunction with our proposal to rebase the excluded hospital with capital market basket from an FY 1992 to an FY 1997 base year (as discussed in section VI.B.1.a. of this preamble), we also are proposing to use a labor-related share that is determined from our proposed FY 1997-based excluded hospital with capital market basket. In the August 30, 2002 final rule (67 FR 56016), we established a labor-related share of 72.885 percent based on the relative importance of the labor-related share of operating and capital costs of the excluded hospital with capital market basket with an FY 1992 base-year. In this proposed rule, as discussed in further detail below, we are proposing a labor-related share of 72.612 percent 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 in the proposed FY 1997 rebased excluded hospital with capital market basket.

To determine the proposed labor-related share, we use the cost categories contained in the proposed FY 1997-based excluded hospital with capital market basket that are influenced by local labor markets, which reflect the different rates of price change for these cost categories between the base year Start Printed Page 11250(FY 1997) and this period. First, we estimate the portion related to operating costs, which we estimate to be 69.075 percent for the proposed LTCH PPS rate year of July 1, 2003 through June 30, 2004, calculated based on the Medicare cost reports for excluded hospitals as the sum of the relative importance for wages and salaries (48.967), employee benefits (11.032), professional fees (4.518), and labor-intensive services (4.558), as shown in Table V. The labor-related share of capital costs in the market basket needed to be considered as well. After an analysis of FY 1997 Medicare cost report data, we found no evidence to revise our current estimate of the portion of capital costs that is influenced by local labor markets of 46 percent (see 67 FR 56016, August 30, 2002). Based on the proposed change in the LTCH PPS rate update cycle, the relative importance of capital is estimated to be 7.692 percent. Because the relative importance of capital is 7.692 percent of the proposed FY 1997-based excluded hospital with capital market basket for the proposed 2004 LTCH PPS rate year, we multiplied 46 percent by 7.692 percent to determine the labor-related share of capital costs to be 3.538 percent. We then added the 3.543 that was calculated for capital costs to the 69.075 percent that was calculated for operating costs to determine the total labor-related relative importance of 72.612. Therefore, we are proposing to use a labor-related share of 72.612 percent for the proposed 2004 LTCH PPS rate year.

Table V.—Proposed Labor-Related Share Relative Importance

Cost categoryRelative importance FY 1992-based market basket (proposed 2004 LTCH PPS rate year)Relative importance FY 1997-based market basket (proposed 2004 LTCH PPS rate year)
Wages and salaries50.57248.967
Employee benefits11.88211.032
Professional fees2.0524.518
Postage0.254
All other labor intensive services5.2424.558
Subtotal70.00169.075
Labor-related share of capital costs3.4123.538
Total73.41372.612*
* Although the weights of the cost categories appear to add to 76.213, this is due to rounding; the actual labor-related share is 72.61246.

2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii

Under § 412.525(b), we make a cost-of-living adjustment (COLA) for LTCHs located in Alaska and Hawaii to account for the higher costs incurred in those States.

For the proposed 2004 LTCH PPS rate year, under § 412.525(b), we are proposing to make a COLA to payments for LTCHs located in Alaska and Hawaii by multiplying the standard Federal payment rate by the appropriate factor listed in Table VI. below. These factors are obtained from the U.S. Office of Personnel Management (OPM). If OPM releases revised COLA factors before May 1, 2003, we propose to use them for the development of payments and will publish them in the final rule.

Table VI.—Proposed Cost-of-Living Adjustment Factors for Alaska and Hawaii Hospitals for the Proposed 2004 LTCH PPS Rate Year

Alaska:
All areas1.25
Hawaii:
Honolulu County1.25
Hawaii County1.165
Kauai County1.2325
Maui County1.2375
Kalawao County1.2375

3. Proposed Adjustment for High-Cost Outliers

Under § 412.525(a), we make an adjustment for additional payments for outlier cases that have extraordinarily high costs relative to the costs of most discharges. Providing additional payments for outliers strongly improves the accuracy of the LTCH PPS in determining resource costs at the patient and hospital level. These additional payments reduce the financial losses that would otherwise be caused by treating patients who require more costly care and, therefore, reduce the incentives to underserve these patients. We include a provision for outlier payments under the LTCH PPS and set the outlier threshold before the beginning of the applicable proposed rate update year so that total outlier payments are projected to equal 8 percent of total payments under the LTCH PPS.

Under § 412.525(a), we make outlier payments for any discharges if the estimated cost of a case exceeds the adjusted LTCH PPS payment for the LTC-DRG plus a fixed-loss amount. The fixed-loss amount is the amount used to limit the loss that a hospital will incur under an outlier policy. This results in Medicare and the LTCH sharing financial risk in the treatment of extraordinarily costly cases. The LTCH's loss is limited to the fixed-loss amount and the percentage of costs above the marginal cost factor. We calculate the estimated cost of a case by multiplying the overall hospital cost-to-charge ratio by the Medicare allowable covered charge. In accordance with § 412.525(a), we pay outlier cases 80 percent of the difference between the estimated cost of the patient case and the outlier threshold (the sum of the adjusted Federal prospective payment for the LTC-DRG and the fixed-loss amount).

We determine a fixed-loss amount, that is, the maximum loss that a LTCH can incur under the PPS for a case with unusually high costs before the hospital will receive any additional payments. We calculate the fixed-loss amount by simulating aggregate payments with and without an outlier policy. The fixed loss amount would result in estimated total outlier payments being equal to 8 Start Printed Page 11251percent of projected total LTCH PPS payments.

Outlier payments under the LTCH PPS are determined consistent with the IPPS outlier policy. Currently, under the IPPS, a floor and a ceiling are applied to an acute care hospital's cost-to-charge ratio and if the acute care hospital's cost-to-charge ratio is either below the floor or above the ceiling, the applicable statewide average cost-to-charge ratio is assigned to the acute care hospital. Similarly, if a LTCH's cost-to-charge ratio is below the floor or above the ceiling, currently the applicable statewide average cost-to-charge ratio is assigned to the hospital. In addition, for LTCHs for which we are unable to compute a cost-to-charge ratio, we also assign the applicable statewide average. Currently, MedPAR claims data and cost-to-charge ratios based on the latest available cost report data from HCRIS and corresponding MedPAR claims data are used to establish a fixed-loss threshold amount under the LTCH PPS.

For FY 2003, based on FY 2001 MedPAR claims data and cost-to-charge ratios based on the latest available data from HCRIS and corresponding MedPAR claims data from FYs 1998 and 1999, we established a fixed-loss amount of $24,450. For the proposed 2004 LTCH PPS rate year, we are proposing to continue to use the March 2002 update of the FY 2001 MedPAR claims data to determine a fixed-loss threshold that would result in outlier payments being equal to 8 percent of total payments, based on the policies described in this proposed rule, because these data are the best data available. We would calculate cost-to-charge ratios for determining the proposed fixed-loss amount based on the latest available cost report data in HCRIS and corresponding MedPAR claims data from FYs 1998, 1999, and 2000. Consistent with the proposed outlier policy changes for acute care hospitals under the IPPS discussed in the March 4, 2003 proposed rule, we are proposing to no longer assign the applicable statewide average cost-to-charge ratio when a LTCH's cost-to-charge ratio falls below the floor. We are proposing this policy change because, as is the case for acute care hospitals, we believe LTCHs could arbitrarily increase their charges in order to maximize outlier payments. Even though this arbitrary increase in charges should result in a lower cost-to-charge ratio in the future (due to the lag time in cost report settlement), currently when a LTCH's actual cost-to-charge ratio falls below the floor, the LTCH's cost-to-charge ratio would be raised to the applicable statewide average. This application of the statewide average would result in inappropriately higher outlier payments. Accordingly, we are proposing to apply the LTCH's actual cost-to-charge ratio to determine the cost of the case, even where the LTCH's actual cost-to-charge ratio falls below the floor. No longer applying the applicable statewide average cost-to-charge ratio when a LTCH's actual cost-to-charge ratio falls below the floor would result in a lower future cost-to-charge ratio. Applying this lower cost-to-charge ratio to charges in the future to determine the cost of the case would result in more appropriate outlier payments. Therefore, consistent with the proposed policy change for acute care hospitals under the IPPS, we are proposing that LTCHs would receive their actual cost-to-charge ratios no matter how low their ratios fall. Also, consistent with the proposed policy change for acute care hospitals under the IPPS, we are proposing under § 412.525(a)(4), by cross-referencing proposed § 412.84(i), to continue to apply the applicable statewide average cost-to-charge ratio when a LTCH's cost-to-charge ratio exceeds the ceiling by adopting the proposed policy at proposed § 412.84(i)(1)(ii). Cost-to-charge ratios above this range are probably due to faulty data reporting or entry, and, therefore, should not be used to identify and make payments for outlier cases because such data are clearly errors and should not be relied upon. In addition, we are proposing to make a similar change to § 412.529(c), by cross-referencing proposed § 412.84(i), for determining short-stay outlier payments to indicate that the applicable statewide average cost-to-charge ratio would be applied when a LTCH's cost-to-charge ratio exceeds the ceiling, but not when a LTCH's cost-to-charge ratio falls below the floor. Since cost-to-charge ratios are also used in determining short-stay outlier payments, the rationale for this proposed change mirrors that for high-cost outliers.

Therefore, consistent with IPPS outlier policy in determining the proposed fixed-loss amount for the proposed 2004 LTCH PPS rate year, we are proposing to use only the current combined operating and capital cost-to-charge ratio ceiling under the IPPS of 1.421 (as explained in the acute care hospital inpatient PPS final rule (67 FR 50125, August 1, 2002)). We believe that using the current combined IPPS operating and capital cost-to-charge ratio ceiling for LTCHs is appropriate since, as we explained in the August 30, 2002 final rule (67 FR 55960), LTCHs are certified as acute care hospitals that meet the criteria set forth in section 1861(e) of the Act in order to participate in the hospital in the Medicare program. As we also discussed in the August 30, 2002 final rule (67 FR 55956), in general hospitals are paid as a LTCH only because their average length of stay is greater than 25 days in accordance with § 412.23(e). Furthermore, prior to qualifying as a LTCH under § 412.23(e)(2)(i), the hospitals generally are paid as acute care hospitals under the IPPS during the period in which they demonstrate that they have an average length of stay of greater than 25 days. Accordingly, if a LTCH's cost-to-charge ratio is above this ceiling, we are proposing to assign the applicable IPPS statewide average cost-to-charge ratio. (Currently, the applicable IPPS statewide averages can be found in Tables 8A and 8B of the August 1, 2002 IPPS final rule (67 FR 50263).) We would also assign the applicable statewide average for LTCHs for which we are unable to compute a cost-to-charge ratio. Accordingly, for the proposed 2004 LTCH PPS rate year, we are proposing a fixed-loss amount of $19,978. Thus, we would pay an outlier case 80 percent of the difference between the estimated cost of the case and the outlier threshold (the sum of the adjusted Federal LTCH payment for the LTC-DRG and the proposed fixed-loss amount of $19,978).

As we discussed in section IV.D. of this preamble, the IPPS standard Federal rate and relative weights are updated simultaneously, effective October 1 of each year, when the new GROUPER with the final DRGs and the new relative weights are implemented for that fiscal year. The LTCH PPS utilizes the same DRGs and Medicare GROUPER program as the IPPS. The GROUPER in effect on July 1, 2003 will be version 20.0. Although we are proposing to update the LTCH PPS standard Federal rate on July 1, 2003, version 21.0 of the GROUPER will not be available at the time the final rule following this proposed rule is published. To the extent that the LTC-DRG weights in the version 21.0 GROUPER may change, total LTCH PPS payments may also change. Therefore, as explained in section IV.F. of this proposed rule, we are not proposing an update to the LTC-DRG weights for the period of July 1, 2003 through September 30, 2003, and the LTCH PPS would continue to use version 20.0 of the GROUPER and the LTC-DRG relative weights published in Table 3 of the Addendum to the August 30, 2002 final rule (reprinted in Table 3 of the Addendum to this proposed rule) for the Start Printed Page 11252period from July 1, 2003 through September 30, 2003.

The calculation of the fixed-loss amount is dependent in part on the LTC-DRG relative weights because the fixed-loss amount is set so that estimated total outlier payments are estimated to be equal to 8 percent of total LTCH PPS payments. We are proposing to calculate a fixed-loss amount that would result in total estimated outlier payments being equal to 8 percent of total LTCH PPS payments for the proposed 2004 LTCH PPS rate year, using the LTC-DRG relative weights based on the version 20.0 GROUPER. We are proposing to use the version 20.0 GROUPER in determining the fixed-loss amount for the period of July 1, 2003 through June 30, 2004 as it contains the best available data at the time the fixed-loss amount is determined.

As we discuss below, we are not proposing to change the fixed-loss amount to account for changes in the version 21.0 GROUPER because we believe implementing two fixed-loss amounts would be administratively burdensome. Implementing a single fixed-loss amount which would be in effect for a full 12 months (July through June) would be consistent with other components of the LTCH PPS, such as the standard Federal rate and the wage index, both of which would be in effect for a full 12-month period (July through June). Similarly, the relative weights and the GROUPER program are in effect for 12 months (October through September). However, because the update to the ICD-9-CM codes, as described in section IV.E.2. of this proposed rule, is effective at the beginning of the Federal fiscal year, we will continue to update the GROUPER and the relative weights on October 1. Furthermore, we do not anticipate that the fixed-loss amount calculated using the relative weights based on the version 20.0 GROUPER would be significantly different from a fixed-loss amount calculated using the relative weights based on the version 21.0 GROUPER. We believe this based on the fact that the LTCH PPS outlier policy, one component of which is a fixed-loss amount, was based on the IPPS outlier policy. The annual reclassification and recalibration of DRGs under the IPPS generally does not result in a significant impact on the IPPS fixed-loss amount (although this impact would vary from year to year depending on the actual DRG changes). Therefore, as explained above, we are proposing to calculate a single fixed-loss amount for each LTCH PPS rate year based on the version of the GROUPER that is in effect as of July 1 of that year.

Since the proposed effective date of the updated LTCH PPS standard Federal rate would be July 1, while the updated GROUPER would not be effective until October 1, we did consider an alternative proposal that would establish two separate fixed-loss amounts: one for July through September based on the current GROUPER and another for October through June based on the updated GROUPER. We decided not to propose this alternative because, as we discussed above, calculating and implementing two fixed-loss amounts in one proposed LTCH PPS rate year is administratively burdensome.

As we stated in the August 30, 2002 final rule (67 FR 56026), under some rare circumstances, a LTCH discharge could qualify as a short-stay outlier case (as defined under § 412.529 and discussed in section VI. of this preamble) and also as a high-cost outlier case. In such a scenario, a patient could be hospitalized for less than five-sixths of the geometric average length of stay for the specific LTC-DRG, and yet incur extraordinarily high treatment costs. If the costs exceeded the outlier threshold (that is, the short-stay outlier payment plus the fixed-loss amount), the discharge would be eligible for payment as a high-cost outlier. Thus, for short-stay outlier in the proposed 2004 LTCH PPS rate year, the high-cost outlier payment would be based on 80 percent of the difference between the estimated cost of the case plus the outlier threshold (the sum of the proposed fixed-loss amount of $19,978 and the amount paid under the short-stay outlier policy).

Under existing regulations at § 412.525(a) (as established in the August 30, 2002 LTCH PPS final rule (67 FR 56026)), we specify that no retroactive adjustment will be made to the outlier payments upon cost report settlement to account for differences between the estimated cost-to-charge ratios and the actual cost-to-charge ratios for outlier cases. This policy is consistent with the existing outlier payment policy for short-term acute care hospitals under the IPPS. However, we note that in the proposed rule on March 4, 2003, we proposed to revise the methodology for determining cost-to-charge ratios for acute care hospitals under the IPPS because, as we discussed in that notice, we became aware that payment vulnerabilities exist in the current IPPS outlier policy.

Because the LTCH PPS high-cost outlier and short-stay policies are modeled after the outlier policy in the IPPS, we believe they are susceptible to the same payment vulnerabilities and, therefore, merit revision. As proposed for acute care hospitals under the IPPS at proposed § 412.84(m) in the March 4, 2003 proposed rule, we are proposing under § 412.525(a)(4)(ii), by cross-referencing proposed § 412.84(m), that for LTCHs any reconciliation of outlier payments would be made upon cost report settlement to account for differences between the estimated cost-to-charge ratio for the period during which the discharge occurs. As is the case with the proposed changes to the outlier policy for acute care hospitals under the IPPS, we are still assessing the procedural changes that would be necessary to implement this change. In addition, we are proposing to make a similar change in § 412.529(c)(4)(ii), by cross-referencing proposed § 412.84(m), to indicate that any reconciliation of payments for short-stay outliers would be made upon cost report settlement to account for differences between the estimated cost-to-charge ratio and the actual cost-to-charge ratio for the period during which the discharge occurs.

In addition, because we currently use cost-to-charge ratios based on the latest settled cost report, again consistent with the policy for acute care hospitals under the IPPS, any dramatic increases in charges during the payment year are not reflected in the cost-to-charge ratios when making outlier payments. Consistent with the proposed policy change for acute care hospitals under the IPPS at proposed § 412.84(i) discussed in the March 4, 2003 proposed rule, because a LTCH has the ability to increase its outlier payments through a dramatic increase in charges and because of the lag time in the data used to calculate cost-to-charge ratios, we are proposing that fiscal intermediaries would use more recent data when determining a LTCH's cost-to-charge ratio. Therefore, under § 412.525(a)(4)(ii), by cross-referencing proposed § 412.84(i), we are proposing that fiscal intermediaries would use either the most recent settled cost report or the most recent tentative settled cost report, whichever is later. In addition, we are proposing to make a similar change in § 412.529(c)(4)(ii), by cross-referencing proposed § 412.84(i), to indicate that subject to the proposed provisions in the regulations at § 412.84(i), fiscal intermediaries would use either the most recent settled cost report or the most recent tentative settled cost report, whichever is later.Start Printed Page 11253

4. Proposed Adjustments for Special Cases

a. General

As discussed in the August 30, 2002 final rule (67 FR 55995), under section 123 of Pub. L. 106-113 the Secretary generally has broad authority in developing the PPS for LTCHs, including whether (and how) to provide for adjustments to reflect variations in the necessary costs of treatment among LTCHs.

Generally, LTCHs, as described in section 1886(d)(1)(B)(iv) of the Act, are distinguished from other inpatient hospital settings by maintaining an average length of stay of greater than 25 days. However, LTCHs may have cases that have stays of considerably less than the average length of stay and that receive significantly less than the full course of treatment for a specific LTC-DRG. As we explained in the August 30, 2002 final rule (67 FR 55995), such cases would be paid inappropriately if the hospital were to receive the full LTC-DRG payment. While we are not proposing any changes to the payment policy for special cases at this time, below we discuss the payment methodology for these special cases as implemented in the August 30, 2002 final rule (67 FR 55955-56010).

b. Short-Stay Outlier Cases

A short-stay outlier case may occur when a beneficiary receives less than the full course of treatment at the LTCH before being discharged. These patients may be discharged to another site of care or they may be discharged and not readmitted because they no longer require treatment. Furthermore, patients may expire early in their LTCH stay.

As noted above, generally LTCHs are defined by statute as having an average length of stay of greater than 25 days. We believe that a payment adjustment for short-stay outlier cases results in more appropriate payments, because these cases most likely would not receive a full course of treatment in such a short period of time and a full LTC-DRG payment may not always be appropriate. Payment-to-cost ratios simulated for LTCHs, for the cases described above, show that if LTCHs receive a full LTC-DRG payment for those cases, they would be significantly “overpaid” for the resources they have actually expended.

Under § 412.529, we adjust the per discharge payment to the least of 120 percent of the cost of the case, 120 percent of the LTC-DRG specific per diem amount multiplied by the length of stay of that discharge, or the full LTC-DRG payment, for all cases with a length of stay up to and including five-sixths of the geometric average length of stay of the LTC-DRG.

As we discussed above, in section VI.C.3. of this preamble, in the March 4, 2003 proposed rule we proposed to revise the methodology for determining cost-to-charge ratios for acute care hospitals under the IPPS because, as we discussed in that notice, we became aware that payment vulnerabilities exist in the current IPPS outlier policy. Because the LTCH PPS high-cost outlier and short-stay outlier policies are modeled after the outlier policy in the IPPS, we believe they are susceptible to the same payment vulnerabilities and, therefore, merit revision. As proposed for acute care hospitals under the IPPS at proposed § 412.84(i) and (m) in the March 4, 2003 proposed rule and as we are proposing above for high-cost outlier payments at § 412.525(a)(4)(ii), we are proposing under § 412.529 that short-stay outlier payments would be subject to the proposed provisions in the regulations at § 412.84(i) and (m). Therefore, consistent with the proposed changes to the high-cost outlier policy discussed above in section VI.C.3. of this preamble, we are proposing, by cross-referencing § 412.84(i), that fiscal intermediaries would use either the most recent settled cost report or the most recent tentative settled cost report, whichever is later, in determining a LTCH's cost-to-charge ratio. We also are proposing, by cross-referencing § 412.84(i), that the applicable statewide average cost-to-charge ratio would be applied when a LTCH's cost-to-charge ratio exceeds the ceiling. Finally, we are proposing, by cross-referencing § 412.84(m), that any reconciliation of payments for short-stay outliers would be made upon cost report settlement to account for differences between the estimated cost-to-charge ratio and the actual cost-to-charge ratio for the period during which the discharge occurs. As is the case with the proposed changes to the outlier policy for acute care hospitals under the IPPS, we are still assessing the procedural changes that would be necessary to implement this change.

c. Interrupted Stay

In § 412.531(a), we define an “interruption of a stay” as a stay at a LTCH during which a Medicare inpatient is transferred upon discharge to an acute care hospital, an IRF, or a SNF for treatment or services that are not available in the LTCH and returns to the same LTCH within applicable fixed day periods. For a discharge to an acute care hospital, the applicable fixed-day period is 9 days. For a discharge to an IRF, the applicable fixed-day period is 27 days. For a discharge to a SNF, the applicable fixed-day period is 45 days. The counting of the days begins on the day of discharge from the specified facility and ends on the 9th, 27th, or 45th day for an acute care hospital, an IRF, or a SNF, respectively. (We refer readers to section VI.C.4.e. of this preamble for a discussion of application of this interrupted stay policy to Medicare-participating providers with approved swing beds.)

If the patient's length of stay away from the LTCH does not exceed the fixed-day thresholds, the return to the LTCH is considered part of the first admission and only a single LTCH PPS payment will be made. (From the standpoint of implementing this policy, in the event that a Medicare inpatient is discharged from a LTCH and is readmitted and the stay qualifies as an interrupted stay, the provider should cancel the claim generated by the original stay in the LTCH and submit one claim for the entire stay. For further details, see Program Memorandum Transmittal A-02-093, September 2002.) On the other hand, if the patient stay exceeds the total fixed-day threshold outside of the LTCH at another facility before being readmitted, two separate LTC-DRG payments will be made, one based on the principal diagnosis for the first admittance and the other based on the principal diagnosis for the second admittance. Moreover, if the principal diagnoses are the same for both admissions, the hospital could receive two similar payments. (See section VI.C.4.e. of this proposed rule for application of the interrupted stay policy to transfers to swing bed hospitals.)

d. Onsite Discharges and Readmittances

Under § 412.532, generally, if a LTCH readmits more than 5 percent of its Medicare patients who are discharged to an onsite SNF, IRF, or psychiatric facility, or to an onsite acute care hospital, only one LTC-DRG payment will be made to the LTCH for discharges and readmittances during the LTCH's cost reporting period. Therefore, payment for the entire stay will be paid either as one full LTC-DRG payment or a short-stay outlier, depending on the duration of the entire LTCH stay.

In applying the 5-percent threshold, we apply one threshold for discharges and readmittances with a co-located acute care hospital. There is also a separate 5-percent threshold for all discharges and readmittances with co-located SNFs, IRFs, and psychiatric facilities. In the case of a LTCH that is co-located with an acute care hospital, Start Printed Page 11254an IRF, or a SNF, the interrupted stay policy at § 412.531 applies until the 5-percent threshold is reached. However, once the applicable threshold is reached, all such discharges and readmittances to the applicable site(s) for that cost reporting period are paid as one discharge. This means that even if a discharged LTCH Medicare patient was readmitted to the LTCH following a stay in an acute care hospital of greater than 9 days, if the facilities share a common location and the 5-percent threshold were exceeded, the subsequent discharge from the LTCH will not represent a separate hospitalization for payment purposes. Only one LTC-DRG payment will be made for all such discharges during a cost reporting period to the acute care hospital, regardless of the length of stay at the acute care hospital, that are followed by readmittances to the onsite LTCH.

Similarly, if the LTCH has exceeded its 5-percent threshold for all discharges to an onsite IRF, SNF, or psychiatric hospital or unit with readmittances to the LTCH, the subsequent LTCH discharge for patients from those sites for the entire cost reporting period will not be treated as a separate discharge for Medicare payment purposes. (As under the interrupted stay policy, payment to an acute care hospital under the IPPS, to an IRF under the IRF PPS, and to a SNF under the SNF PPS, will not be affected. Payments to the psychiatric facility also will not be affected.)

e. Treatment of Swing Beds Under the Interrupted Stay and Onsite Discharge and Readmittance Policies

A swing-bed hospital is defined at § 413.114(b) as a hospital or critical access hospital (CAH) participating in Medicare that has an approval from CMS to provide posthospital SNF care as defined in § 409.20 and meets the requirements specified in § 482.66 or § 485.645. Swing beds are otherwise licensed hospital beds that may, under certain circumstances, be used temporarily as SNF beds. Under § 413.114(a)(2), posthospital SNF care furnished in general routine inpatient beds in rural hospitals (other than CAHs) is paid in accordance with the provisions of the SNF PPS for services furnished for cost reporting periods beginning on or after July 1, 2002. Since it is possible for a Medicare beneficiary to be discharged from a LTCH for posthospital SNF care that is being provided by another hospital-level Medicare provider with swing beds, such a discharge would be considered the same as if it were to a individual SNF. We interpret the extension of the SNF PPS to swing beds to require that all payment policy determinations regarding patient movement between LTCHs and SNFs, including the onsite policy described above, also apply to swing beds.

We want to emphasize that our inclusion of swing beds in payment policy determinations for all patient movement between LTCHs and SNFs (see section VI.C.4.c. of this preamble) would mean that a readmission to a LTCH from posthospital SNF care being provided in a swing bed that is located either in the LTCH itself or in another onsite Medicare provider would have the same policy consequences as would a readmission to the LTCH from an onsite SNF.

5. Other Proposed Payment Adjustments

As indicated earlier, we had broad authority under section 123 of Pub. L. 106-113, including whether (and how) to provide for adjustments to reflect variations in the necessary costs of treatment among LTCHs. Thus, in the August 30, 2002 final rule (67 FR 56014-56027), we discussed our extensive data analysis and rationale for not implementing an adjustment for geographic reclassification, rural location, treating a disproportionate share of low-income patients (DSH), or indirect medical education (IME) costs. In that same final rule, we stated that we would collect data and reevaluate the appropriateness of these adjustments in the future once more LTCH data become available after the LTCH PPS is implemented. Because the LTCH PPS was only recently implemented, sufficient new data have not yet been generated that would enable us to conduct a comprehensive reevaluation of these payment adjustments. Therefore, we are not proposing an adjustment for geographic reclassification, rural location, DSH, or IME at this time. However, we will continue to collect and interpret new data as they become available in the future to determine if these data support proposing any additional payment adjustments.

6. Proposed Budget Neutrality Offset to Account for the Transition Methodology

Under § 412.533, we implemented a 5-year transition period from cost-based TEFRA reimbursement to prospective payment, during which a LTCH will be paid an increasing percentage of the LTCH PPS rate and a decreasing percentage of its payments under the TEFRA payment principles for each discharge. Furthermore, we allow a LTCH to elect to be paid based on 100 percent of the standard Federal rate in lieu of the blend methodology.

As we discussed in further detail in the August 30, 2002 final rule (67 FR 56032-56037), the standard Federal rate was determined as if all LTCHs will be paid based on 100 percent of the standard Federal rate. As stated earlier, we provide for a 5-year transition period methodology that allows LTCHs to receive payments based partially on reasonable cost principles. In order to maintain budget neutrality as required by section 123(a)(1) of the Pub. L. 106-113 and § 412.523(d)(2), during the 5-year transition period, we reduce all LTCH Medicare payments (whether a LTCH elects payment based on 100 percent of the Federal rate or whether a LTCH is being paid under the transition blend methodology) by a factor that is equal to 1 minus the ratio of the estimated TEFRA reasonable cost-based payments that would have been made if the LTCH PPS had not been implemented, to the projected total Medicare program PPS payments (that is, payments made under the transition methodology and the option to elect payment based on 100 percent of the Federal rate).

For FY 2003, based on a comparison of the estimated FY 2003 payments to each LTCH based on 100 percent of the standard Federal rate and the transition blend methodology, we projected that approximately 49 percent of LTCHs would elect to be paid based on 100 percent of the standard Federal rate rather than receive payment based on the transition blend methodology. This projection was based on our estimate that those 49 percent of LTCHs would receive higher payments based on 100 percent of the standard Federal rate compared to the payments they would receive under the transition blend methodology. Similarly, we projected that the remaining 51 percent of LTCHs would choose to be paid based on the transition blend methodology (80 percent of TEFRA and 20 percent of the PPS) in FY 2003, because those payments would be higher than if they were paid based on 100 percent of the standard Federal rate.

In the August 30, 2002 final rule (67 FR 56034), we projected that the full effect of the 5-year transition period and the election option would result in a cost to the Medicare program of $240 million as follows: For FY 2003, $50 million; for FY 2004, $80 million; for FY 2005, $60 million; for FY 2006, $40 million; for FY 2007, $10 million. Thus, in order to maintain budget neutrality, we applied a 6.6 percent reduction (0.934) to all LTCHs' payments in FY 2003 to account for the estimated cost Start Printed Page 11255of $50 million for FY 2003. Furthermore, in order to maintain budget neutrality, we indicated that, in the future, we would propose a budget neutrality offset for each of the remaining years of the transition period to account for the estimated payments for the respective fiscal year. Based on the data available at that time, in the August 30, 2002 final rule (67 FR 56037) we estimated the following budget neutrality offsets to LTCH payments during the remainder of transition period: 5.0 percent (0.950) in FY 2004; 3.4 percent (0.996) in FY 2005; and 1.7 percent (0.983) in FY 2006. We also stated that no budget neutrality offset is necessary in the 5th year of the transition period (FY 2007) because under the transition methodology at § 412.533, all LTCHs will be paid based on 100 percent of the standard Federal rate and zero percent of the TEFRA rate.

For the proposed 2004 LTCH PPS rate year, based on the best available data and the policies presented in this proposed rule, we project that approximately 49 percent of LTCHs would be paid based on 100 percent of the proposed standard Federal rate rather than receive payment under the transition blend methodology. Using the same methodology described in the August 30, 2002 final rule (67 FR 56034), this projection, which uses updated data and inflation factors, is based on our estimate that LTCHs would receive higher payments based on 100 percent of the proposed standard Federal rate compared to the payments they would receive under the transition blend methodology. Similarly, we project that the remaining 51 percent of LTCHs would choose to be paid based on the transition blend methodology (80 percent of TEFRA and 20 percent of the PPS for cost reporting periods beginning during FY 2003; and 60 percent of TEFRA and 40 percent of the PPS for cost reporting periods beginning during FY 2004 in accordance with § 412.533(a)) because they would receive higher payments than if they were paid based on 100 percent of the proposed standard Federal rate. We note that, as discussed in section VIII. of this preamble, we are not proposing to change the 5-year transition period set forth in § 412.533(a) in conjunction with the proposed change in the proposed 2004 LTCH PPS rate update discussed in detail in section III. of this preamble. Therefore, the applicable transition blend percentage will apply for a LTCH's entire cost reporting period beginning on or after October 1 (unless the LTCH elects payment based on 100 percent of the Federal rate).

In this proposed rule, based on the best available data and the proposed policy revisions described, we project that the full effect of the remaining 4 years of the transition period (including the election option) would result in a cost to the Medicare program of $300 million as follows:

Proposed LTCH PPS rate yearEstimated cost (in millions)
2004$120
200590
200660
200730

Therefore, we are proposing a 5.7 percent reduction (0.943) to all LTCHs' payments for discharges occurring on or after July 1, 2003 and through June 30, 2004, to account for the estimated cost of the $120 million for the proposed 2004 LTCH PPS rate year. We emphasize that the budget neutrality offset to account for the transition methodology is calculated based on and effective for payments made for discharges occurring during the proposed 2004 LTCH PPS rate year of July 1, 2003 through June 30, 2004, not the Federal FY 2004 of October 1, 2003 through September 30, 2004.

As we stated above, in order to maintain budget neutrality, we indicated that we would propose a budget neutrality offset for each of the remaining years of the transition period to account for the estimated costs for the respective fiscal year. Based on the best available data at this time, we are proposing the following budget neutrality offsets to LTCH payments during the transition period: 4.4 percent (0.956) in proposed 2005 LTCH PPS rate year; 2.9 percent (0.971) in proposed 2006 LTCH PPS rate year; and 1.2 percent (0.988) in proposed 2007 LTCH PPS rate year.

As we discussed in the August 30, 2002 final rule (67 FR 56036), consistent with the statutory requirement for budget neutrality in section 123(a)(1) of Pub. L. 106-113, we intend for estimated aggregate payments under the LTCH PPS to equal the estimated aggregate payments that would be made if the LTCH PPS was not implemented. Our methodology for estimating proposed payments for purposes of the proposed budget neutrality calculations used the best available data at this time and necessarily reflects assumptions. As the LTCH PPS progresses, we are monitoring payment data and will evaluate the ultimate accuracy of the assumptions used in the budget neutrality calculations (for example, inflation factors, intensity of services provided, or behavioral response to the implementation of the LTCH PPS) described in the August 30, 2002 final rule (67 FR 56027-56037). To the extent these assumptions significantly differ from actual experience, the aggregate amount of actual payments may turn out to be significantly higher or lower than the estimates on which the budget neutrality calculations were based.

Section 123 of Pub. L. 106-113 and section 307 of Pub. L. 106-554 provide the Secretary broad authority in developing the LTCH PPS, including the authority for appropriate adjustments. Under this broad authority, as implemented in the regulations at § 412.523(d)(3), we have provided for the possibility of making a one-time prospective adjustment to the LTCH PPS rates by October 1, 2006, so that the effect of any significant difference between actual payments and estimated payments for the first year of the LTCH PPS would not be perpetuated in the PPS rates for future years.

In the August 30, 2002 final rule (67 FR 56037), we estimated that total Medicare program payments for LTCH services over 5 years would be $1.59 billion for FY 2003; $1.69 billion for FY 2004; $1.79 billion for FY 2005; $1.90 billion for FY 2006; and $2.00 billion for FY 2007. In this proposed rule, based on the best available data, we estimate that total Medicare program payments for LTCH services from the proposed LTCH PPS rate years of 2004 through 2008 would be:

Proposed LTCH PPS rate yearEstimated payments ($ in billions)
2004$2.17
20052.29
20062.42
20072.56
20082.71

As in our August 30, 2002 final rule (67 FR 56037), these estimates are based on the projection that 49 percent of LTCHs would elect to be paid based on 100 percent of the proposed standard Federal rate rather than the transition blend, and an update of our estimate of proposed 2004 LTCH PPS rate year payments to LTCHs using our Office of the Actuary's most recent estimate of the excluded hospital with capital market basket of 2.5 percent for proposed 2004 LTCH PPS rate year (adjusted to account for the proposed change in the rate update cycle discussed in section VI.B.1.b. of this preamble), 3.1 percent for proposed 2005 LTCH PPS rate year, 3.0 percent for proposed 2006 LTCH PPS rate year, 2.9 percent for proposed 2007 LTCH Start Printed Page 11256PPS rate year, and 3.0 percent for proposed 2008 LTCH PPS rate year. We also have taken into account our Office of the Actuary's projection that there would be an increase in Medicare beneficiary enrollment of 1.3 percent in proposed 2004 LTCH PPS rate year, 1.6 percent in proposed 2005 LTCH PPS rate year, and 1.9 percent in proposed 2006 LTCH PPS rate year and 2.0 percent in proposed 2007 LTCH PPS rate year and 2.1 percent in proposed 2008 LTCH PPS rate year.

Because the LTCH PPS was only recently implemented, sufficient new data have not been generated that would enable us to conduct a comprehensive reevaluation of our budget neutrality calculations. Therefore, we are not proposing an adjustment for budget neutrality under § 412.523(d)(3) at this time. However, we will continue to collect and interpret new data as the data become available in the future to determine if such an adjustment should be proposed.

VII. Computing the Proposed Adjusted Federal Prospective Payments

In accordance with § 412.525 and as discussed in sections VI. of this proposed rule, the proposed standard Federal rate would be adjusted to account for differences in area wages by multiplying the labor-related share of the proposed standard Federal rate by the appropriate proposed LTCH wage index. The proposed standard Federal rate would also be adjusted to account for the higher costs of hospitals in Alaska and Hawaii by multiplying the nonlabor-related share of the proposed standard Federal rate by the appropriate adjustment factor shown in the table in section VI.C.2. of this preamble. To illustrate the methodology we are using to adjust the proposed Federal prospective payments, we are providing the following example:

During the proposed 2004 LTCH PPS rate year, a Medicare patient is in a LTCH located in Chicago, Illinois (MSA 1600) with a proposed two-fifths wage index value of 1.0418 (see Table 1 in the Addendum to this proposed rule). The Medicare patient is classified into LTC-DRG 4 (Spinal Procedures), which has a proposed relative weight of 1.2493 (see Table 3 of the Addendum to this proposed rule). To calculate the LTCH's total adjusted Federal prospective payment for this Medicare patient, we compute the wage-adjusted Federal prospective payment amount by multiplying the unadjusted proposed standard Federal rate ($35,830.05) by the labor-related share (72.612 percent) and the proposed wage index (1.0418). This wage-adjusted amount is then added to the nonlabor-related portion of the unadjusted proposed standard Federal rate (27.388 percent) to determine the adjusted proposed Federal rate, which is then multiplied by the proposed LTC-DRG relative weight (1.2493) to calculate the total adjusted proposed Federal prospective payment for the proposed 2004 LTCH PPS rate year ($46,121.11). In addition, as discussed in section VI.C.6. of this preamble, for the proposed 2004 LTCH PPS rate year, we are proposing to reduce the LTCH PPS payment by 5.6 percent for the proposed budget neutrality offset to account for the costs of the transition methodology. The following illustrates the components of the calculations in this example:

Proposed Unadjusted Standard Federal Prospective Payment Rate$35,830.05
Labor-Related Share0.72612
Labor-Related Portion of the Federal Rate= $26,016.92
Proposed 2/5th Wage Index (MSA 1600)1.0418
Wage-Adjusted Labor Share= $27,104.43
Nonlabor-Related Portion of the Federal Rate (adjusted for COLA if applicable)+ $ 9,813.36
Adjusted Proposed Federal Rate= $36,917.56
Proposed LTC-DRG 4 Relative Weight× 1.2493
Total Adjusted Proposed Federal Prospective Payment (Before the Proposed Budget Neutrality Offset)= $46,121.11
Proposed Budget Neutrality Offset× 0.944
Total Proposed Federal Prospective Payment (With the Proposed Budget Neutrality Offset)= $43,538.33

VIII. Transition Period

To provide a stable fiscal base for LTCHs, under § 412.533, we implemented a 5-year transition period from reasonable cost-based reimbursement under the TEFRA system to a prospective payment based on industry-wide average operating and capital-related costs. Under the average pricing system, payment is not based on the experience of an individual hospital. We believe that a 5-year phase-in will provide LTCHs time to adjust their operations and capital financing to the new LTCH PPS, which is based on prospectively determined Federal payment rates. Furthermore, we believe that the 5-year phase-in of the LTCH PPS allows LTCH personnel to develop proficiency with the LTC-DRG coding system, resulting in improvement in the quality of the data used for generating our annual determination of relative weights and payment rates.

In accordance with § 412.533, the transition period for all hospitals subject to the LTCH PPS begins with the hospital's first cost reporting period beginning on or after October 1, 2002 and extends through the hospital's last cost reporting period beginning before October 1, 2007. During the 5-year transition period, a LTCH's total payment under the LTCH PPS is based on two payment percentages—one based on reasonable cost-based (TEFRA) payments and the other based on the standard Federal prospective payment rate. The percentage of payment based on the LTCH PPS Federal rate increases by 20 percentage points each year, while the TEFRA rate percentage decreases by 20 percentage points each year, for the next 4 fiscal years. For cost reporting periods beginning on or after October 1, 2006, Medicare payment to LTCHs will be determined entirely under the Federal PPS methodology. The blend percentages are as follows:

Cost reporting periods beginning on or afterFederal rate percentageReasonable cost principles rate percentage
October 1, 20022080
October 1, 20034060
October 1, 20046040
Start Printed Page 11257
October 1, 20058020
October 1, 20061000

For a cost reporting period that began on or after October 1, 2002, and before October 1, 2003 (FY 2003), the total payment for a LTCH is 80 percent of the amount calculated under reasonable cost principles for that specific LTCH and 20 percent of the Federal prospective payment amount. For cost reporting periods beginning on or after October 1, 2003 and before October 1, 2004 (Federal FY 2004), the total payment for a LTCH will be 60 percent of the amount calculated under reasonable cost principles for that specific LTCH and 40 percent of the Federal prospective payment amount. We note that the proposed change in the effective date of the proposed 2004 LTCH PPS rate year update discussed in section III. of this preamble has no effect on the LTCH PPS transition period as set forth in § 412.533(a). That is, LTCHs paid under the transition blend under § 412.533(a), will receive those blended for the entire 5-year transition period (unless they elect payments based on 100 percent of the Federal rate). Furthermore, LTCHs paid under the transition blend will receive the appropriate blend percentages of the Federal and reasonable cost-based rate for their entire cost reporting period as prescribed in § 412.533(a)(1) through (a)(5). For example, a LTCH with a cost reporting period beginning on July 1, 2003 (which is the LTCH's first cost reporting period since the implementation of the LTCH PPS) would receive payments based on 80 percent of the reasonable cost-based rate and 20 percent of the Federal rate for its discharges occurring on or after July 1, 2003 through June 30, 2004 (if the LTCH does not elect payment based on 100 percent of the Federal rate).

The reasonable cost-based rate percentage is a LTCH specific amount that is based on the amount that the LTCH would have been paid (under TEFRA) if the PPS were not implemented. Medicare fiscal intermediaries will continue to compute the LTCH reasonable cost-based payment amount according to § 412.22(b) of the regulations and sections 1886(d) and (g) of the Act. We note that several reasonable cost-based payment provisions that were previously in effect are no longer effective, starting with cost reporting periods beginning in FY 2003. For instance, the caps on the target amounts for “existing” LTCHs provided for under section 4414 of the BBA (see § 413.40(c)(4)(iii)) for FYs 1998 through 2002 will no longer be applicable for cost reporting periods beginning in FY 2003. Thus, a LTCH's target amount for FYs 2003 and beyond will be determined by updating its prior year's target amount (which for FY 2003 was subject to the FY 2002 cap). In addition, the 15-percent reduction to payments to LTCHs for capital-related costs provided for under section 4412 of Pub. L. 105-33 (§ 413.40(j)) is only applicable for portions of cost reporting periods occurring in FYs 1998 through FY 2002. This reduction is no longer applicable for cost reporting periods beginning in FY 2003. Therefore, the TEFRA portion of a LTCH's payment for capital-related costs during the LTCH PPS transition period is based on 100 percent of its Medicare allowable capital costs.

As we discussed in the August 30, 2002 final rule (67 FR 56038), in implementing the PPS for LTCHs, one of our goals is to transition hospitals to full prospective payments as soon as appropriate. Therefore, under § 412.533(c), we allow a LTCH, which is subject to a blended rate, to elect payment based on 100 percent of the Federal rate at the start of any of its cost reporting periods during the 5-year transition period rather than incrementally shifting from reasonable cost-based payments to prospective payments. Once a LTCH elects to be paid based on 100 percent of the Federal rate, it will not be able to revert to the transition blend. For cost reporting periods beginning on or after December 1, 2002, and for the remainder of the 5-year transition period, a LTCH must notify its fiscal intermediary in writing of its election on or before the 30th day prior to the start of the LTCH's next cost reporting period. For example, a LTCH with a cost report period that begins on October 15, 2003, must notify its fiscal intermediary in writing of an election before September 15, 2003.

Under § 412.533(c)(2)(i), the notification by the LTCH to make the election must be made in writing to the Medicare fiscal intermediary. Under § 412.533(c)(2)(ii) and (iii), the intermediary must receive the request on or before the specified date (that is, before November 1, 2002 for cost reporting periods that begin on or after October 1, 2002 through November 30, 2002 and on or before the 30th day before the applicable cost reporting period begins for cost reporting periods beginning on or after December 1, 2002 through September 30, 2006), regardless of any postmarks or anticipated delivery dates.

Notifications received, postmarked, or delivered by other means after the specified date will not be accepted. If the specified date falls on a day that the postal service or other delivery sources are not open for business, the LTCH will be responsible for allowing sufficient time for the delivery of the request before the deadline. If a LTCH's notification is not received timely, payment will be based on the transition period rates.

IX. Proposed Payments to New LTCHs

Under § 412.23(e)(4), for purposes of Medicare payment under the LTCH PPS, we define a new LTCH as a provider of inpatient hospital services that otherwise meets the qualifying criteria for LTCHs, set forth in §§ 412.23(e)(1) and (e)(2) and, under present or previous ownership (or both), and its first cost reporting period as a LTCH begins on or after October 1, 2002. We also specify in § 412.500 that the LTCH PPS applies to hospitals with a cost reporting period beginning on or after October 1, 2002.

This definition of new LTCHs should not be confused with those LTCHs first paid under the TEFRA payment system for discharges occurring on or after October 1, 1997, described in section 1886(b)(7)(A) of the Act, added by section 4416 of Pub. L. 105-33. As stated in § 413.40(f)(2)(ii), for cost reporting periods beginning on or after October 1, 1997, the payment amount for a “new” (post-FY 1998) LTCH is the lower of the hospital's net inpatient operating cost per case or 110 percent of the national median target amount payment limit for hospitals in the same class for cost reporting periods ending during FY 1996, updated to the applicable cost reporting period (see 62 FR 46019, August 29, 1997). Under the PPS for LTCHs, those “new” LTCHs that meet the definition of “new” under Start Printed Page 11258§ 413.40(f)(2)(ii) and that have first cost reporting periods prior to October 1, 2002, will be paid under the transition methodology described in § 412.533.

As noted above and in accordance with § 412.533(d), new LTCHs will not participate in the 5-year transition from reasonable cost-based reimbursement to prospective payment. The transition period is intended to provide existing LTCHs time to adjust to payment under the new system. Since these new LTCHs with cost reporting periods beginning on or after October 1, 2002, would not have received payment under reasonable cost-based reimbursement for the delivery of LTCH services prior to the effective date of the LTCH PPS, we do not believe that those new LTCHs require a transition period in order to make adjustments to their operations and capital financing, as will LTCHs that have been paid under reasonable cost-based.

For example, a “new” LTCH (post-FY 1998) that first began receiving payment as a LTCH on October 1, 2001, will be subject to the 110 percent of the median target amount payment limit for LTCHs (in accordance with § 413.40(f)(2)(ii)) for both its FY 2002 (October 1, 2001 through September 30, 2002) and FY 2003 (October 1, 2002 through September 30, 2003) cost reporting periods. Assuming the hospital has not elected to be paid 100 percent of the Federal rate for its cost reporting period beginning on October 1, 2002 (the first cost reporting period when the LTCH will be subject to the PPS), the hospital would be paid under the transition methodology whereby the LTCH's reasonable cost-based portion of its payment for operating costs (80 percent) is limited by the 110 percent of the median target amount payment limit for LTCHs under § 413.40(f)(2)(ii). For its cost reporting period beginning on October 1, 2003 (which is the hospital's third cost reporting period), under the transition methodology, that LTCH's reasonable cost-based portion of its payment for operating costs (60 percent) will be limited to its target amount as determined under § 413.40(c)(4)(v). Furthermore, if a hospital is designated as a LTCH on September 1, 2002, it would not be considered a new LTCH under § 412.23(e)(4), even if it had not discharged any patients or received any payments as of the implementation date of the LTCH PPS on October 1, 2002, because its first cost reporting period did not begin on or after October 1, 2002. Thus, it would be paid according to § 413.40(f)(2)(ii) from September 1, 2002 through August 30, 2003. This LTCH will not be subject to payments under the LTCH PPS until the start of its next cost reporting period on September 1, 2003. At the beginning of its second cost reporting period as a LTCH (that is, September 1, 2003), this LTCH would be subject to the transition period in § 412.533(a)(1), because this provision applies to cost reporting periods beginning on or after October 1, 2002, and before October 1, 2003. Under the blended payments of the transition period in § 412.533(a)(1), 80 percent of payments for operating costs would be paid under the reasonable cost principles, as described in § 413.40(f)(2)(ii). (This hospital could also elect to be paid 100 percent of the Federal rate for its cost reporting period beginning September 1, 2003.)

X. Method of Payment

Under § 412.513, a Medicare LTCH patient is classified into a LTC-DRG based on the principal diagnosis, up to eight additional (secondary) diagnoses, and up to six procedures performed during the stay, as well as age, sex, and discharge status of the patient. The LTC-DRG is used to determine the Federal prospective payment that the LTCH will receive for the Medicare-covered Part A services the LTCH furnished during the Medicare patient's stay. Under § 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 LTC-DRG rate to payment for a case as a short-stay outlier (under § 412.529) or as an interrupted stay (under § 412.531), or to determine if the case will qualify for a high-cost outlier payment (under § 412.525(a)).

Accordingly, the ICD-9-CM codes and other information used to determine if an adjustment to the full LTC-DRG payment is necessary (for example, length of stay or interrupted stay status) are recorded by the LTCH on the Medicare patient's discharge bill and submitted to the Medicare fiscal intermediary for processing. The payment made represents payment in full, under § 412.521(b), for inpatient operating and capital-related costs, but not for the costs of an approved medical education program, bad debts, blood clotting factors, anesthesia services by hospital-employed nonphysician anesthetists or obtained under arrangement, or the costs of photocopying and mailing medical records requested by a QIO, which are costs paid outside the LTCH PPS.

As under the previous (reasonable cost-based) payment system, under § 412.541(b) a LTCH may elect to be paid using the periodic interim payment (PIP) method described in § 413.64(h) and may be eligible to receive accelerated payments as described in § 413.64(g).

For those LTCHs that are paid during the 5-year transition based on the blended transition methodology in § 412.533 for cost reporting periods beginning on or after October 1, 2002, and before October 1, 2006, the PIP amount is based on the transition blend. For those LTCHs that are paid based on 100 percent of the standard Federal rate, the PIP amount is based on the estimated prospective payment for the year rather than on the estimated reasonable cost-based reimbursement. We exclude outlier payments that are paid upon submission of a discharge bill from the PIP amounts. In addition, Part A costs that are not paid for under the LTCH PPS, including Medicare costs of an approved medical education program, bad debts, blood clotting factors, anesthesia services by hospital-employed nonphysician anesthetists or obtained under arrangement, and the costs of photocopying and mailing medical records requested by a QIO, are subject to the interim payment provisions (§ 412.541(c)).

Under § 412.541(d), LTCHs with unusually long lengths of stay and 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 should include any outlier payment determined as of the last day for which the services have been billed.

XI. Monitoring

In the August 30, 2002 final rule (67 FR 56014), we discussed our intent to develop a monitoring system that will assist us in evaluating the LTCH PPS. Specifically we discussed the monitoring of the various policies that we believed would provide equitable payment for stays that reflect less than the full course of treatment and reduce the incentives for inappropriate admissions, transfers, or premature discharges of patients that are present in a discharge-based prospective payment system. We also stated our intent to collect and interpret data on changes in average lengths of stay under the PPS for specific LTC-DRGs and the impact of these changes on the Medicare program. We stated that if our data indicate that changes might be warranted, we may revisit these issues and consider proposing revisions to these policies in the future. To this end, we have designed systems features that will enable CMS and the fiscal intermediary to track a beneficiary to Start Printed Page 11259and from a LTCH and to and from another Medicare provider.

In that same final rule, we also explained that, given that the only unique requirement that distinguishes a LTCH from other hospitals is an average length of stay of greater than 25 days, we continue to be concerned about the extent to which LTCH services and patients differ from those services and patients treated in other Medicare covered settings (for example, SNFs and IRFs) and how the LTCH PPS will affect the access, quality, and costs across the health care continuum. Thus, we will monitor trends in the supply and utilization of LTCHs and Medicare's costs in LTCHs relative to other Medicare providers. For example, we may conduct medical record reviews of Medicare patients to monitor changes in service use (for example, ventilator use) over a LTCH episode of care and to assess patterns in the average length of stay at the facility level. We will consider future changes to LTCH coverage and payment policy based upon the results of such analyses.

XII. 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.

XIII. Regulatory Impact Analysis

A. Introduction

We have examined the impact of this proposed rule as required by Executive Order 12866. We also have examined the impacts of this proposed rule under the criteria of the Regulatory Flexibility Act (RFA) (Pub. L. 96-354), section 1102(b) of the Social Security Act (the Act), the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4), and Executive Order 13132 (Federalism).

1. Executive Order 12866

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for proposed and final rules that constitute significant regulatory action, including rules that have an economic effect of $100 million or more in any one year (major rules). We have determined that this proposed rule would not be a major rule within the meaning of Executive Order 12866 because the redistributive effects do not constitute a shift of $100 million in any one year. As we discuss in further detail below, and in section VI.B.1.b. of the preamble of this proposed rule, we are proposing that the proposed change to the LTCH PPS rate update cycle be budget neutral. Therefore, we estimate that there would be no budgetary impact for the Medicare program as a result of the proposed change to the LTCH PPS rate update cycle. Based on the best available data for 194 LTCHs, we estimate that the proposed 2.2 percent increase in the standard Federal rate for the proposed 2004 LTCH PPS rate year would result in $21.4 million and there are no significant redistributive effects among any groups of hospitals. (Section VI.C.6. of this preamble includes an estimate of Medicare program payments for LTCH services.)

2. Regulatory Flexibility Act (RFA)

The RFA requires agencies to analyze options for regulatory relief of small businesses in issuing a proposed and final rule. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $25 million or less annually. For purposes of the RFA, all hospitals are considered small entities. Medicare fiscal intermediaries are not considered to be small entities. Individuals and States are not included in the definition of a small entity. We certify that this proposed rule would not have a significant impact on a substantial number of small entities, in accordance with RFA.

3. Impact on Rural Hospitals

Section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a proposed or final rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of an MSA and has fewer than 100 beds. As discussed in detail in section XIII.B. of this preamble, this proposed rule would not have a substantial impact on the seven rural hospitals for which data were available that have fewer than 100 beds and that are located in rural areas.

4. Unfunded Mandates

Section 202 of the UMRA requires that agencies assess anticipated costs and benefits before issuing any proposed rule or any final rule preceded by a rule that may result in expenditures in any one year by State, local, or tribal governments, in the aggregate, or by the private sector, of $110 million or more. 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 $110 million or more in any one year.

5. Federalism

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications.

We have examined this proposed rule under the criteria set forth in Executive Order 13132 and have determined that this proposed rule will not have any significant impact on the rights, roles, and responsibilities of State, local, or tribal governments or preempt State law.

B. Anticipated Effects

We discuss the impact of this proposed rule below in terms of its fiscal impact on the Federal Medicare budget and on LTCHs.

1. Budgetary Impact

Section 123(a)(1) of Pub. L. 106-113 requires us to set the payment rates contained in this proposed rule such that total payments under the LTCH PPS are projected to equal the amount that would have been paid if this PPS had not been implemented. However, as discussed in greater detail in the August 30, 2002 final rule (67 FR 56033-56036), the FY 2003 standard Federal rate ($34,956.15) was calculated as if all LTCHs will be paid based on 100 percent of the standard Federal rate in FY 2003. As discussed in section VI.C.6. of this proposed rule, we are applying a budget neutrality offset to payments to account for the monetary effect of the 5-year transition period and the policy to permit LTCHs to elect to be paid based on 100 percent of the standard Federal rate rather than a blend of Federal prospective payments and reasonable cost-based payments during the transition. The amount of the offset is equal to 1 minus the ratio of the estimated reasonable cost-based payments that would have been made if the LTCH PPS had not been implemented, to the projected total Start Printed Page 11260Medicare program payments that would be made under the transition methodology and the option to elect payment based on 100 percent of the Federal prospective payment rate.

Our Office of the Actuary computed an update factor to update LTCH PPS payments from the current rate period (Federal FY 2003) to the proposed new LTCH PPS rate year (July 1, 2003 through June 30, 2004). The proposed LTCH PPS rate year overlaps the current rate period by 3 months (July 1, 2003 through September 30, 2003). The update for Federal FY 2003 is currently estimated at 3.5 percent and the proposed update factor for the proposed 2004 LTCH PPS rate year is estimated at 2.5 percent (as discussed in section VI.B. of the preamble of this proposed rule). Therefore, over the period from FY 2002 through the proposed 2004 LTCH PPS rate year (June 30, 2004), the cumulative increase would be 6.0 percent [1.035 * 1.025 = 1.060]. This cumulative increase matches (within rounding) the cumulative increase calculated by using the index level in the new proposed effective period and the index level in FY 2002, such that having two separate updates result in the same cumulative update as if we had used a single update for the entire 21-month period (October 1, 2002 through June 30, 2004). Thus, the proposed change to the proposed 2004 LTCH PPS rate update cycle would not result in a higher or lower update than would have been the case (except due to rounding) if no change had been made to the LTCH PPS update cycle. In addition, as discussed in section VI.B.1.b. of the preamble of this proposed rule, we proposed to apply a budget neutrality adjustment of 0.997 in determining the proposed standard Federal rate to account for the estimated $5.66 million budgetary impact for the Medicare program in FY 2003 as a result of the proposed change to LTCH PPS rate update cycle.

2. Impact on Providers

The basic methodology for determining a LTCH PPS payment is set forth in the regulations at § 412.521 through § 412.525. In addition to the basic LTC-DRG payment (standard Federal rate x LTC-DRG relative weight), we make adjustments for differences in area wage levels, cost-of-living adjustment for Alaska and Hawaii, and short-stay outliers. In addition, LTCHs may also receive high-cost outlier payments for those cases that qualify under the threshold established each rate year. Section 412.533 provides for a 5-year transition to fully prospective payments from payment based on reasonable cost-based principles. During the 5-year transition period, payments to LTCHs are based on an increasing percentage of the LTCH PPS Federal rate and a decreasing percentage of payment based on reasonable cost-based principles. Section 412.533(c) provides for a one-time opportunity for LTCHs to elect payments based on 100 percent of the LTCH PPS Federal rate.

In order to understand the impact of the proposed changes to the LTCH PPS discussed in this proposed rule on different categories of LTCHs for the proposed 2004 LTCH PPS rate year, it is necessary to estimate payments per discharge under the current (Federal FY 2003) LTCH PPS rates and factors (see the August 30, 2002 final rule) and payments per discharge that would be made under the proposed LTCH PPS rates and factors for the proposed 2004 LTCH PPS rate year (July 1, 2003 through June 30, 2004). We also evaluated the percent change in payments per discharge of estimated FY 2003 prospective payments to estimated proposed 2004 LTCH PPS rate year payments for each category of LTCHs.

Hospital groups were based on characteristics provided in OSCAR data and FYs 1999 through 2000 cost report data from HCRIS. Hospitals with incomplete characteristics were grouped into the “unknown” category. Hospital groups include:

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

To estimate the impacts among the various categories of providers during the transition period, it is imperative that reasonable cost-based principle payments and prospective payments contain similar inputs. More specifically, in the impact analysis showing the impact reflecting the applicable transition blend percentages of prospective payments and reasonable cost-based principle payments and the option to elect payment based on 100 percent of the Federal rate (Table I below), we estimated payments only for those providers that we are able to calculate payments based on reasonable cost-based principles. For example, if we did not have FYs 1996 through 1999 cost data for a LTCH, we were unable to determine an update to the LTCH's target amount to estimate payment under the current reasonable cost-based principles.

Using LTCH cases from the FY 2001 MedPAR file and cost data from FYs 1996 through 2000 in HCRIS to estimate payments under the current reasonable cost-based principles, we have both case-mix and cost data for 194 LTCHs. Thus, for the impact analyses reflecting the applicable transition blend percentages of prospective payments and reasonable cost-based principle payments and the option to elect payment based on 100 percent of the Federal rate (see Table VII. below), we used data from 194 LTCHs. However, using cases from the FY 2001 MedPAR file, we had case-mix data for 250 LTCHs. Cost data to determine current payments under reasonable cost-based principle payments are not needed to simulate payments based on 100 percent of the Federal rate. Therefore, for the impact analyses reflecting fully phased-in prospective payments (see Table VIII. below), we used data from 250 LTCHs.

These impacts reflect the estimated “losses” or “gains” among the various classifications of providers for the 12-month period from October 1, 2002 through September 30, 2003 (Federal FY 2003) compared to the 12-month period from July 1, 2003 through June 30, 2004 (proposed 2004 LTCH PPS rate year). Proposed 2004 LTCH rate year prospective payments were based on the proposed standard Federal rate of $35,726.64 and the hospital's estimated case-mix based on FY 2001 claims data. Prospective payments for Federal FY 2003 were based on the standard Federal rate of $34,956.15 and the same FY 2001 claims data.

3. Calculation of Prospective Payments

To estimate payments under the LTCH PPS, we simulated payments on a case-by-case basis by applying the payment policy for short-stay outliers (as described in section VI.C.4.b. of this proposed rule) and the adjustments for area wage differences (as described in section VI.C.1. of this proposed rule) and for the cost-of-living for Alaska and Hawaii (as described in section VI.C.2. of this proposed rule). Additional payments would also be made for high-cost outlier cases (as described in section VI.C.3. of this proposed rule). As noted in section VI.C.5. of this proposed rule, we are not proposing to make adjustments for geographic reclassification, indirect medical education costs, or a disproportionate share of low-income patients.

The adjustment for area wage differences for estimated FY 2003 payments was done by using the applicable LTCH PPS wage index (one-fifth of the full FY 2002 acute care hospital inpatient wage index data, without taking into account geographic reclassification under sections 1886(d)(8) and (d)(10) of the Act (see Start Printed Page 11261August 30, 2002, 67 FR 56057-56075). For the estimated proposed 2004 LTCH PPS rate year payments, we used a weighted average of a LTCH's applicable wage index during the period from July 1, 2003, through June 30, 2004, since some providers may experience a change in the wage index phase-in percentage during the period from July 1, 2003 through June 30, 2004. For cost reporting periods beginning on or after October 1, 2002 and before September 30, 2003, the applicable proposed LTCH wage index is one-fifth of the full FY 2002 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 cost reporting periods beginning on or after October 1, 2003 and before September 30, 2004, the applicable LTCH wage index would be two-fifths of the full FY 2003 acute care hospital inpatient wage index data, without taking into account geographic reclassification under sections 1886(d)(8) and (d)(10) of the Act. Therefore, a provider with a cost reporting period beginning October 1, 2003, would have 3 months of payments under the one-fifth wage index value and 9 months of payment under the two-fifths wage index value. For this provider, we computed a blended wage index of 25 percent (3 months/12 months) of the one-fifth wage index value and 75 percent (9 months/12 months) of the two-fifths wage index value.

We also calculated payments using the applicable transition blend percentages. For FY 2003, the applicable transition blend percentage is 80 percent of payment based on reasonable cost-based principles and 20 percent of payment under the LTCH PPS. For the proposed 2004 LTCH PPS rate year based on the transition blend percentages set forth in § 412.533(a), some providers may experience a change in the transition blend percentage during the period from July 1, 2003 through June 30, 2004. For example during the 12-month period from July 1, 2003 through June 30, 2004, a provider with a cost reporting period beginning on October 1, 2002 (which is paid under the 80/20 transition blend (80 percent of payments based on reasonable cost-based principles and 20 percent of payments under the LTCH PPS) beginning October 1, 2002) would have 3 months (July 1, 2003 through September 30, 2003) under the 80/20 blend and 9 months (October 1, 2003 through June 30, 2004) of payment under the 60/40-transition blend (60 percent of payments based on reasonable cost-based principles and 40 percent of payments under the LTCH PPS). (The 60 percent/40 percent blend would continue until the provider is cost report period beginning on October 1, 2004.) In estimating blended transition payments, we estimated payments based on reasonable cost-based principles in accordance with the methodology in section 1886(b) of the Act. We compared the estimated blended transition payment to the LTCH's estimated payment if it would elect payment based on 100 percent of the Federal rate. If we estimated that a LTCH would be paid more based on 100 percent of the Federal rate, we assumed that it would elect to bypass the transition methodology and to receive immediate prospective payments.

Then we applied the 6.6 percent reduction to payment to account for the effect of the 5-year transition methodology and election of payment based on 100 percent of the Federal rate on Medicare program payments established in the August 30, 2002 final rule (67 FR 56034) to each LTCH's estimated payments under the PPS for FY 2003. Similarly, we applied the proposed 5.7 percent reduction to payment to account for the effect of the 5-year transition methodology and election of payment based on 100 percent of the Federal rate on Medicare program payments (see section VI.C.6. of this proposed rule) to each LTCH's estimated payments under the PPS for the proposed 2004 LTCH PPS rate year. The impact based on our projection of whether a LTCH would be paid based on the transition blend methodology or would elect payment based on 100 percent of the Federal rate is shown below in Table VII.

In Table VIII. below, we also show the impact if the LTCH PPS were fully implemented; that is, as if there were an immediate transition to fully Federal prospective payments under the LTCH PPS for Federal FY 2003 and the proposed 2004 LTCH PPS rate year. Accordingly, the proposed 5.7 percent reduction to account for the 5-year transition methodology on LTCHs' Medicare program payments for the proposed 2004 LTCH PPS rate year and the 6.6 percent reduction to account for the 5-year transition methodology on LTCHs' Medicare program payments established for FY 2003 were not applied to LTCHs' estimated payments under the PPS.

Tables VII. and VIII. below illustrate the aggregate impact of the payment system among various classifications of LTCHs. The first column, LTCH Classification, identifies the type of LTCH. The second column lists the number of LTCHs of each classification type; the third column identifies the number of long-term care cases; and the fourth column shows the estimated payment per discharge for FY 2003; the fifth column shows the estimated payment per discharge for proposed 2004 LTCH PPS rate year; and the sixth column shows the percent change of FY 2003 compared to proposed 2004 LTCH PPS rate year.

Table VII.—Projected Impact Reflecting Applicable Transition Blend Percentages of Proposed Prospective Payments and Reasonable Cost-Based (TEFRA) Payments and Option To Elect Payment Based on 100 Percent of the Federal Rate 1

[FY 2003 Payments Compared to Proposed 2004 LTCH Prospective Payment System Rate Year]

LTCH classificationNumber of LTCHsNumber of LTCH casesAverage Federal FY 2003 payment per case 2Average proposed 2004 LTCH prospective payment system rate year payment per case 3Percent change
All Providers19471,811$26,919$27,2271.1
By Location:
Rural72,15320,66820,8641.0
Urban18769,65827,11327,4241.1
Large11347,70527,44527,7421.1
Start Printed Page 11262
Other7421,95326,39126,7331.3
By Participation Date:
After October 199312441,87628,13728,5061.3
Before October 1983167,83620,06020,2701.0
October 1983—September 19934519,99027,19427,4270.9
Unknown92,10925,63625,7910.6
By Ownership Control:
Voluntary4817,73024,75625,0961.4
Proprietary13651,62627,68827,9901.1
Government102,45526,37126,5870.8
By Census Region:
New England149,48720,14620,3200.9
Middle Atlantic93,27628,51928,7140.7
South Atlantic206,57131,31031,6601.1
East North Central339,05728,96429,2380.9
East South Central102,86325,76125,9050.6
West North Central112,89826,61126,9471.3
West South Central7130,24826,14726,4791.3
Mountain152,49128,39928,9331.9
Pacific114,92034,14534,6081.4
By Bed Size:
Beds: 0-24172,45329,29929,5700.9
Beds: 25-498821,72528,09128,3731.0
Beds: 50-74248,20928,49228,6590.6
Beds: 75-1243416,30627,24127,6301.4
Beds: 125-1992113,82024,57924,8561.1
Beds: 200+99,21825,23125,6361.6
Unknown1807,7878,0433.3
1 These calculations take into account that some providers may experience a change in the blend percentage changes during the July 1, 2003 through June 30, 2004 rate cycle. For example, during the 12-month period of July 1, 2003 through June 30, 2004, a provider with a cost reporting period beginning October 1 would have 3 months (July 1, 2003 through September 30, 2003) of payments under the 80/20 blend and 9 months (October 1, 2003 through June 30, 2004) of payment under the 60/40 blend.
2 Average payment per case for the 12-month period of October 1, 2002 through September 30, 2003.
3 Average payment per case for the 12-month period of July 1, 2003 through June 30, 2004.

Table VIII.—Projected Impact Reflecting the Fully Phased-In Proposed Prospective Payments

[FY 2003 Payments Compared to Proposed 2004 LTCH Prospective Payment System Rate Year Payments]

LTCH classificationNumber of LTCHsNumber of LTCH casesAverage Federal FY 2003 payment per case 1Average proposed 2004 LTCH prospective payment system rate year payment per case 2Percent change
All Providers25082,625$26,367$26,9592.2
By Location:
Rural164,67420,85121,1911.6
Urban23477,95126,68727,3052.3
Large13552,25627,02727,6612.3
Other9925,69525,99626,5812.2
By Participation Date:
After October 199317751,65627,30827,8221.9
Before October 1983177,89720,82620,780−0.2
October 1983—September 19934520,00426,72427,7193.7
Unknown113,06822,17823,4005.5
By Ownership Control:
Voluntary5519,85324,31425,0202.9
Proprietary14854,26927,49028,0272.0
Government478,50323,89324,6723.3
Start Printed Page 11263
By Census Region:
New England169,60921,09420,937−0.7
Middle Atlantic154,16228,98229,6222.2
South Atlantic237,05130,44131,3292.9
East North Central4812,14528,35628,8601.8
East South Central143,72228,56128,523−0.1
West North Central163,76926,34727,0942.8
West South Central8733,97124,56025,3633.3
Mountain192,99326,52927,7054.4
Pacific125,20333,83634,3691.6
By Bed Size:
Beds: 0-24213,07327,13028,0273.3
Beds: 25-499824,38627,95428,1530.7
Beds: 50-74279,31027,55627,6650.4
Beds: 75-1243516,43226,22227,3214.2
Beds: 125-1992113,83824,94525,5642.5
Beds: 200+119,51825,04126,0994.2
Unknown376,06823,35424,0953.2
1 Average payment per case for the 12-month period of October 1, 2002 through September 30, 2003.
2 Average payment per case for the 12-month period of July 1, 2003 through June 30, 2004.

4. Results

We have prepared the following summary of the impact (as shown in Table VII.) of the LTCH PPS set forth in this proposed rule.

a. Location

The majority of LTCHs are in urban areas. Approximately 3 percent of the LTCHs are identified as being located in a rural area, and approximately 3 percent of all LTCH cases are treated in these rural hospitals. Impact analysis in Table VII. shows that the percent change in estimated payments per discharge for FY 2003 compared to the proposed 2004 LTCH PPS rate year for rural LTCHs would be 1.0 percent, and would be 1.1 percent for urban LTCHs. Large urban LTCHs are projected to experience a 1.1 percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year, while other urban LTCHs projected to experience a 1.3 percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year. (See Table VII.)

b. Participation Date

LTCHs are grouped by participation date into three categories: (1) Before October 1983; (2) between October 1983 and September 1993; and (3) after October 1993. We did not have sufficient OSCAR data on 9 LTCHs, which we labeled as an “Unknown” category. The majority, approximately 58 percent, of the LTCH cases are in hospitals that began participating after October 1993 and are projected to experience a 1.3 percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year. Approximately 11 percent of the cases are in LTCHs that began participating in Medicare before October 1983 and are projected to experience a 1.0 percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year. (See Table VII.)

c. Ownership Control

LTCHs are grouped into three categories based on ownership control type—(1) voluntary; (2) proprietary; and (3) government.

Approximately 25 percent of LTCHs are government run and we expect that voluntary LTCHs would “gain” the most from the proposed changes based on our projection that they would experience a 1.4 percent increase in payments per discharge from FY 2003 compared to the proposed 2004 LTCH PPS rate year. Government and proprietary LTCHs are projected to experience a 0.8 percent and 1.1 percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year, respectively. (See Table VII.)

d. Census Region

LTCHs located in most regions are expected to experience an increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year. Specifically, of the nine census regions, we expect that LTCHs in the Mountain region would experience the largest percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year (1.9 percent). We expect LTCHs in the East South Central region would experience the smallest percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year (0.6 percent). (See Table VII.)

e. Bed Size

LTCHs were grouped into six categories based on bed size—0-24 beds, 25-49 beds, 50-74 beds, 75-124 beds, 125-199 beds, and 200+ beds. We did not have sufficient OSCAR data on 1 LTCH, which we labeled as an “Unknown” category.

The percent increase in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year are projected to increase for all bed size categories. Most LTCHs were in bed size categories where the percent increase in payments per discharge from FY 2003 compared to the proposed 2004 LTCH PPS rate year is Start Printed Page 11264estimated to be greater than 1.0 percent. Other than the LTCH whose bed size is unknown, LTCHs with 200 or more beds have the highest estimated percent change in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year (1.6 percent), while LTCHs with between 50-74 beds have the lowest projected increase in the percent change in payments per discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS rate year (0.6 percent). (See Table VII.)

5. Effect on the Medicare Program

Based on actuarial projections resulting from our experience with other prospective payment systems, we estimate that Medicare spending (total Medicare program payments) for LTCH services over the next 5 years would be as follows:

Proposed LTCH PPS rate yearEstimated payments ($ in billions)
2004$2.17
20052.29
20062.42
20072.56
20082.71

These estimates are based on the current estimate of increase in the excluded hospital market with capital basket of 2.5 percent for proposed 2004 LTCH PPS rate year (adjusted to account for the proposed change in the rate update cycle discussed in section VI.B.1.b. of the preamble of this proposed rule), 3.1 percent for proposed 2005 LTCH PPS rate year, 3.0 percent for proposed 2006 LTCH PPS rate year, 2.9 percent for proposed 2007 LTCH PPS rate year, and 3.0 percent for proposed 2008 LTCH PPS rate year. We currently estimate that there would be an increase in Medicare beneficiary enrollment of 1.3 percent in proposed 2004 LTCH PPS rate year, 1.6 percent in proposed 2005 LTCH PPS rate year, 1.9 percent in proposed 2006 LTCH PPS rate year, 2.0 percent in proposed 2007 LTCH PPS rate year, 2.1 percent in proposed 2008 LTCH PPS rate year, and an estimated increase in the total number of LTCHs. Consistent with the statutory requirement for budget neutrality, we intend for estimated aggregate payments under the LTCH PPS in FY 2003 to equal the estimated aggregate payments that would be made if the LTCH PPS were not implemented. Our methodology for estimating payments for purposes of the budget neutrality calculations uses the best available data and necessarily reflects assumptions. As we collect data from LTCHs, we will monitor payments and evaluate the ultimate accuracy of the assumptions used to calculate the budget neutrality calculations (for example, inflation factors, intensity of services provided, or behavioral response to the implementation of the LTCH PPS). To the extent the assumptions significantly differ from actual experience, the aggregate amount of actual payments may turn out to be significantly higher or lower than the estimates on which the budget neutrality calculations are based.

Section 123 of Pub. L. 106-113 and section 307 of Pub. L. 106-554 provide the Secretary with extremely broad authority in developing the LTCH PPS, including the authority for appropriate adjustments. In accordance with this broad authority, we may discuss in a future proposed rule a possible one-time prospective adjustment to the LTCH PPS rates to maintain budget neutrality so that the effect of the difference between actual payments and estimated payments for the first year of LTCH PPS is not perpetuated in the PPS rates for future years. As the LTCH PPS was only implemented for cost reporting periods beginning on or after October 1, 2002, we do not yet have sufficient data to determine whether such an adjustment is warranted.

6. Effect on Medicare Beneficiaries

Under the LTCH PPS, hospitals will receive payment based on the average resources consumed by patients for each diagnosis. We do not expect any changes in the quality of care or access to services for Medicare beneficiaries under the LTCH PPS, but we expect that paying prospectively for LTCH services will enhance the efficiency of the Medicare program.

C. Executive Order 12866

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

XIV. Response to Public Comments

Because of the large number of items of correspondence we normally receive on a proposed rule, we are not able to acknowledge or respond to them individually. However, in preparing the final rule, we will consider all comments concerning the provisions of this proposed rule that we receive by the date and time specified in the DATES section of this preamble and respond to those comments in the preamble to that rule.

Start List of Subjects

List of Subjects in 42 CFR Part 412

End List of Subjects

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

Start Part

PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES

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

Start Authority

Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).

End Authority

2. Section 412.22 is amended by revising paragraph (h)(2) and adding a new paragraph (h)(6) to read as follows:

Excluded hospitals and hospital units: General rules.
* * * * *

(h) Satellite facilities. * * *

(2) Except as provided in paragraphs (h)(3) and (h)(6) of this section, effective for cost reporting periods beginning on or after October 1, 1999, a hospital that has a satellite facility must meet the following criteria in order to be excluded from the prospective payment systems for any period:

* * * * *

(6) The provisions of paragraph (h)(2)(i) of this section do not apply to any long-term care hospital that is subject to the long-term care hospital prospective payment system under Subpart O of this part, effective for cost reporting periods occurring on or after October 1, 2002, and that elects to be paid based on 100 percent of the Federal prospective payment rate as specified in § 412.533(c), beginning with the first cost reporting period following that election, or to a new long-term care hospital, as defined in § 412.23(e)(4).

3. Section 412.503 is amended by adding a definition of “long-term care hospital prospective payment system rate year” in alphabetical order to read as follows:

Definitions.
* * * * *

Long-term care hospital prospective payment system rate year means the 12-month period of July 1 through June 30.

* * * * *

4. Section 412.523 is amended by revising paragraphs (c)(3) and (d)(3) to read as follows:

Start Printed Page 11265
Methodology for calculating the Federal prospective payment rates.
* * * * *

(c) * * *

(3) Computation of the standard Federal rate. The standard Federal rate is computed as follows:

(i) For FY 2003. Based on the updated costs per discharge and estimated payments for FY 2003 determined in paragraph (c)(2) of this section, CMS computes a standard Federal rate for FY 2003 that reflects, as appropriate, the adjustments described in paragraph (d) of this section. The FY 2003 standard Federal rate is effective for discharges occurring in cost reporting periods beginning on or after October 1, 2002 through June 30, 2003.

(ii) For long-term care hospital prospective payment system rate years beginning July 1, 2003 and after. The standard Federal rate for long-term care hospital prospective payment system rate years beginning July 1, 2003 and after will be the standard Federal rate for the previous long-term care hospital prospective payment system rate year, updated by the increase factor described in paragraph (a)(2) of this section, and adjusted as appropriate as described in paragraph (d) of this section. For the rate year from July 1, 2003 through June 30, 2004, the updated and adjusted standard Federal rate will be offset by a budget neutrality factor to account for updating the FY 2003 standard Federal rate on July 1 rather than October 1.

* * * * *

(d) * * *

(3) One-time prospective adjustment. The Secretary will review payments under this prospective payment system and may make a one-time prospective adjustment to the long-term care hospital prospective payment system rates by October 1, 2006, so that the effect of any significant difference between actual payments and estimated payments for the first year of the long-term care hospital prospective payment system is not perpetuated in the prospective payment rates for future years.

* * * * *

5. Section 412.525 is amended by revising paragraph (a) to read as follows:

Adjustments to the Federal prospective payment.

(a) Adjustments for high-cost outliers.

(1) CMS provides for an additional payment to a long-term care hospital if its estimated costs for a patient exceed the adjusted LTC-DRG payment plus a fixed-loss amount. For each long-term care hospital rate year, CMS determines a fixed-loss amount that is the maximum loss that a hospital can incur under the prospective payment system for a case with unusually high costs.

(2) The fixed-loss amount is determined for the long-term care hospital rate year using the LTC-DRG relative weights that are in effect on July 1 of the rate year.

(3) The additional payment equals 80 percent of the difference between the estimated cost of the patient care (determined by multiplying the hospital-specific cost-to-charge ratios by the Medicare allowable covered charge) and the sum of the adjusted Federal prospective payment for the LTC-DRG prospective payment system payment and the fixed-loss amount.

(4)(i) For discharges occurring on or after October 1, 2002 through June 30, 2003, no retroactive adjustments will be made to outlier payments upon cost report settlement to account for differences between the estimated cost-to-charge ratio and the actual cost-to-charge ratio of the case.

(ii) For discharges occurring on or after July 1, 2003, high-cost outlier payments are subject to the provisions of § 412.84(i) and (m) for adjustments of cost-to-charge ratios.

* * * * *

6. Section 412.529 is amended by:

A. Revising paragraph (c)(4).

B. In paragraph (d), the term “LTCH's” is removed and the term “long-term care hospital's” is added in its place.

Special payment provision for short-stay outliers.
* * * * *

(c) * * *

(4)(i) For discharges occurring on or after October 1, 2002 through June 30, 2003, no retroactive adjustments will be made to short-stay outlier payments upon cost report settlement to account for differences between cost-to-charge ratio and the actual cost-to-charge ratio of the case.

(ii) For discharges occurring on or after July 1, 2003, short-stay outlier payments are subject to the provisions of § 412.84(i) and (m) for adjustments of cost-to-charge ratios.

* * * * *

7. Section 412.535 is revised to read as follows:

Publication of the Federal prospective payment rates.

CMS publishes information pertaining to the long-term care hospital prospective payment system effective for each annual update in the Federal Register.

(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 June 1 prior to the start of each long-term care hospital prospective payment system rate year which begins July 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.

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

Start Signature

Dated: December 20, 2003.

Thomas A. Scully,

Administrator, Centers for Medicare & Medicaid Services.

Dated: February 14, 2003.

Tommy G. Thompson,

Secretary.

End Signature

Addendum

This addendum 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, 2003 through June 30, 2004

Table 2.—Proposed Long-Term Care Hospital Wage Index for Rural Areas for Discharges Occurring from July 1, 2003 through June 30, 2004

Table 3.—Proposed LTC-DRG Relative Weights, Geometric Mean Length of Stay, and Short-Stay Five-Sixths Average Length of Stay for the Period of July 1, 2003 through September 30, 2003

Table 1.—Proposed Long-Term Care Hospital Wage Index for Urban Areas for Discharges Occurring From July 1, 2003 Through June 30, 2004

MSAUrban area (Constituent counties)Full wage index 11/5 wage index 22/5 wage index 3
0040Abilene, TX
Start Printed Page 11266
 Taylor, TX0.77920.95580.9117
0060Aguadilla, PR
 Aguada, PR
 Aguadilla, PR
 Moca, PR0.45870.89170.7835
0080Akron, OH
 Portage, OH
 Summit, OH0.96000.99200.9840
0120Albany, GA
 Dougherty, GA
 Lee, GA1.05941.01191.0238
0160Albany-Schenectady-Troy, NY
 Albany, NY
 Montgomery, NY
 Rensselaer, NY
 Saratoga, NY
 Schenectady, NY
 Schoharie, NY0.83840.96770.9354
0200Albuquerque, NM
 Bernalillo, NM
 Sandoval, NM
 Valencia, NM0.93150.98630.9726
0220Alexandria, LA
 Rapides, LA0.78590.95720.9144
0240Allentown-Bethlehem-Easton, PA
 Carbon, PA
 Lehigh, PA
 Northampton, PA0.97350.99470.9894
0280Altoona, PA
 Blair, PA0.92250.98450.9690
0320Amarillo, TX
 Potter, TX
 Randall, TX0.90340.98070.9614
0380Anchorage, AK
 Anchorage, AK1.23581.04721.0943
0440Ann Arbor, MI
 Lenawee, MI
 Livingston, MI
 Washtenaw, MI1.11031.02211.0441
0450Anniston, AL
 Calhoun, AL0.80440.96090.9218
0460Appleton-Oshkosh-Neenah, WI
 Calumet, WI
 Outagamie, WI
 Winnebago, WI0.89970.97990.9599
0470Arecibo, PR
 Arecibo, PR
 Camuy, PR
 Hatillo, PR0.43370.88670.7735
0480Asheville, NC
 Buncombe, NC
 Madison, NC0.98760.99750.9950
0500Athens, GA
 Clarke, GA
 Madison, GA
 Oconee, GA1.02111.00421.0084
0520Atlanta, GA
 Barrow, GA
 Bartow, GA
 Carroll, GA
 Cherokee, GA
 Clayton, GA
 Cobb, GA
 Coweta, GA
 DeKalb, GA
 Douglas, GA
 Fayette, GA
 Forsyth, GA
 Fulton, GA
Start Printed Page 11267
 Gwinnett, GA
 Henry, GA
 Newton, GA
 Paulding, GA
 Pickens, GA
 Rockdale, GA
 Spalding, GA
 Walton, GA0.99910.99980.9996
0560Atlantic-Cape May, NJ
 Atlantic, NJ
 Cape May, NJ1.10171.02031.0407
0580Auburn-Opelika, AL
Lee, AL0.83250.96650.9330
0600Augusta-Aiken, GA-SC
 Columbia, GA
 McDuffie, GA
 Richmond, GA
 Aiken, SC
Edgefield, SC1.02641.00531.0106
0640Austin-San Marcos, TX
 Bastrop, TX
 Caldwell, TX
 Hays, TX
 Travis, TX
 Williamson, TX0.96370.99270.9855
0680Bakersfield, CA
 Kern, CA0.98770.99750.9951
0720Baltimore, MD
 Anne Arundel, MD
 Baltimore, MD
 Baltimore City, MD
 Carroll, MD
 Harford, MD
 Howard, MD
 Queen Anne's, MD0.99290.99860.9972
0733Bangor, ME
 Penobscot, ME0.96640.99330.9866
0743Barnstable-Yarmouth, MA
 Barnstable, MA1.32021.06401.1281
0760Baton Rouge, LA
 Ascension, LA
 East Baton Rouge, LA
 Livingston, LA
 West Baton Rouge, LA0.82940.96590.9318
0840Beaumont-Port Arthur, TX
 Hardin, TX
 Jefferson, TX
 Orange, TX0.83240.96650.9330
0860Bellingham, WA
 Whatcom, WA1.22821.04561.0913
0870Benton Harbor, MI
 Berrien, MI0.89650.97930.9586
0875Bergen-Passaic, NJ
 Bergen, NJ
 Passaic, NJ1.21501.04301.0860
0880Billings, MT
 Yellowstone, MT0.90220.98040.9609
0920Biloxi-Gulfport-Pascagoula, MS
 Hancock, MS
 Harrison, MS
 Jackson, MS0.87570.97510.9503
0960Binghamton, NY
 Broome, NY
 Tioga, NY0.83410.96680.9336
1000Birmingham, AL
 Blount, AL
 Jefferson, AL
 St. Clair, AL
 Shelby, AL0.92220.98440.9689
Start Printed Page 11268
1010Bismarck, ND
 Burleigh, ND
 Morton, ND0.79720.95940.9189
1020Bloomington, IN
 Monroe, IN0.89070.97810.9563
1040Bloomington-Normal, IL
 McLean, IL0.91090.98220.9644
1080Boise City, ID
 Ada, ID
 Canyon, ID0.93100.98620.9724
1123Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH (NH Hospitals)
 Bristol, MA
 Essex, MA
 Middlesex, MA
 Norfolk, MA
 Plymouth, MA
 Suffolk, MA
 Worcester, MA
 Hillsborough, NH
 Merrimack, NH
 Rockingham, NH
 Strafford, NH1.12291.02461.0492
1125Boulder-Longmont, CO
 Boulder, CO0.96890.99380.9876
1145Brazoria, TX
 Brazoria, TX0.85350.97070.9414
1150Bremerton, WA
 Kitsap, WA1.09441.01891.0378
1240Brownsville-Harlingen-San Benito, TX
 Cameron, TX0.88800.97760.9552
1260Bryan-College Station, TX
 Brazos, TX0.88210.97640.9528
1280Buffalo-Niagara Falls, NY
 Erie, NY
 Niagara, NY0.93650.98730.9746
1303Burlington, VT
 Chittenden, VT
 Franklin, VT
 Grand Isle, VT1.00521.00101.0021
1310Caguas, PR
 Caguas, PR
 Cayey, PR
 Cidra, PR
 Gurabo, PR
 San Lorenzo, PR0.43710.88740.7748
1320Canton-Massillon, OH
 Carroll, OH
 Stark, OH0.89320.97860.9573
1350Casper, WY
 Natrona, WY0.96900.99380.9876
1360Cedar Rapids, IA
 Linn, IA0.90560.98110.9622
1400Champaign-Urbana, IL
 Champaign, IL1.06351.01271.0254
1440Charleston-North Charleston, SC
 Berkeley, SC
 Charleston, SC
 Dorchester, SC0.92350.98470.9694
1480Charleston, WV
 Kanawha, WV
 Putnam, WV0.88980.97800.9559
1520Charlotte-Gastonia-Rock Hill, NC-SC
 Cabarrus, NC
 Gaston, NC
 Lincoln, NC
 Mecklenburg, NC
 Rowan, NC
 Stanly, NC
 Union, NC
Start Printed Page 11269
 York, SC0.98750.99750.9950
1540Charlottesville, VA
 Albemarle, VA
 Charlottesville City, VA
 Fluvanna, VA
 Greene, VA1.04381.00881.0175
1560Chattanooga, TN-GA
 Catoosa, GA
 Dade, GA
 Walker, GA
 Hamilton, TN
 Marion, TN0.89760.97950.9590
1580Cheyenne, WY
 Laramie, WY0.86280.97260.9451
1600Chicago, IL
 Cook, IL
 DeKalb, IL
 DuPage, IL
 Grundy, IL
 Kane, IL
 Kendall, IL
 Lake, IL
 McHenry, IL
 Will, IL1.10441.02091.0418
1620Chico-Paradise, CA
 Butte, CA0.97450.99490.9898
1640Cincinnati, OH-KY-IN
 Dearborn, IN
 Ohio, IN
 Boone, KY
 Campbell, KY
 Gallatin, KY
 Grant, KY
 Kenton, KY
 Pendleton, KY
 Brown, OH
 Clermont, OH
 Hamilton, OH
 Warren, OH0.93810.98760.9752
1660Clarksville-Hopkinsville, TN-KY
 Christian, KY
 Montgomery, TN0.84060.96810.9362
1680Cleveland-Lorain-Elyria, OH
 Ashtabula, OH
 Cuyahoga, OH
 Geauga, OH
 Lake, OH
 Lorain, OH
 Medina, OH0.96700.99340.9868
1720Colorado Springs, CO
 El Paso, CO0.99160.99830.9966
1740Columbia, MO
 Boone, MO0.84960.96990.9398
1760Columbia, SC
 Lexington, SC
 Richland, SC0.93070.98610.9723
1800Columbus, GA-AL
 Russell, AL
 Chattahoochee, GA
 Harris, GA
 Muscogee, GA0.83740.96750.9350
1840Columbus, OH
 Delaware, OH
 Fairfield, OH
 Franklin, OH
 Licking, OH
 Madison, OH
 Pickaway, OH0.97510.99500.9900
1880Corpus Christi, TX
Start Printed Page 11270
 Nueces, TX
 San Patricio, TX0.87290.97460.9492
1890Corvallis, OR
 Benton, OR1.14531.02911.0581
1900Cumberland, MD-WV (WV Hospital)
 Allegany, MD
 Mineral, WV0.78470.95690.9139
1920Dallas, TX
 Collin, TX
 Dallas, TX
 Denton, TX
 Ellis, TX
 Henderson, TX
 Hunt, TX
 Kaufman, TX
 Rockwall, TX0.99981.00000.9999
1950Danville, VA
 Danville City, VA
 Pittsylvania, VA0.88590.97720.9544
1960Davenport-Moline-Rock Island, IA-IL
 Scott, IA
 Henry, IL
 Rock Island, IL0.88350.97670.9534
2000Dayton-Springfield, OH
 Clark, OH
 Greene, OH
 Miami, OH
 Montgomery, OH0.92820.98560.9713
2020Daytona Beach, FL
 Flagler, FL
 Volusia, FL0.90710.98140.9628
2030Decatur, AL
 Lawrence, AL
 Morgan, AL0.89730.97950.9589
2040Decatur, IL
 Macon, IL0.80550.96110.9222
2080Denver, CO
 Adams, CO
 Arapahoe, CO
 Denver, CO
 Douglas, CO
 Jefferson, CO1.06011.01201.0240
2120Des Moines, IA
 Dallas, IA
 Polk, IA
 Warren, IA0.87910.97580.9516
2160Detroit, MI
 Lapeer, MI
 Macomb, MI
 Monroe, MI
 Oakland, MI
 St. Clair, MI
 Wayne, MI1.04481.00901.0179
2180Dothan, AL
 Dale, AL
 Houston, AL0.81370.96270.9255
2190Dover, DE
 Kent, DE0.93560.98710.9742
2200Dubuque, IA
 Dubuque, IA0.87950.97590.9518
2240Duluth-Superior, MN-WI
 St. Louis, MN
 Douglas, WI1.03681.00741.0147
2281Dutchess County, NY
 Dutchess, NY1.06841.01371.0274
2290Eau Claire, WI
 Chippewa, WI
 Eau Claire, WI0.89520.97900.9581
2320El Paso, TX
Start Printed Page 11271
 El Paso, TX0.92650.98530.9706
2330Elkhart-Goshen, IN
 Elkhart, IN0.97220.99440.9889
2335Elmira, NY
 Chemung, NY0.84160.96830.9366
2340Enid, OK
 Garfield, OK0.83760.96750.9350
2360Erie, PA
 Erie, PA0.89250.97850.9570
2400Eugene-Springfield, OR
 Lane, OR1.09441.01891.0378
2440Evansville-Henderson, IN-KY (IN Hospitals)
 Posey, IN
 Vanderburgh, IN
 Warrick, IN
 Henderson, KY0.81770.96350.9271
2520Fargo-Moorhead, ND-MN
 Clay, MN
 Cass, ND0.96840.99370.9874
2560Fayetteville, NC
 Cumberland, NC0.88890.97780.9556
2580Fayetteville-Springdale-Rogers, AR
 Benton, AR
 Washington, AR0.81000.96200.9240
2620Flagstaff, AZ-UT
 Coconino, AZ
 Kane, UT1.06821.01361.0273
2640Flint, MI
 Genesee, MI1.11351.02271.0454
2650Florence, AL
 Colbert, AL
 Lauderdale, AL0.77920.95580.9117
2655Florence, SC
 Florence, SC0.87800.97560.9512
2670Fort Collins-Loveland, CO
 Larimer, CO1.00661.00131.0026
2680Ft. Lauderdale, FL
 Broward, FL1.02971.00591.0119
2700Fort Myers-Cape Coral, FL
 Lee, FL0.96800.99360.9872
2710Fort Pierce-Port St. Lucie, FL
 Martin, FL
 St. Lucie, FL0.98230.99650.9929
2720Fort Smith, AR-OK
 Crawford, AR
 Sebastian, AR
 Sequoyah, OK0.78950.95790.9158
2750Fort Walton Beach, FL
 Okaloosa, FL0.96930.99390.9877
2760Fort Wayne, IN
 Adams, IN
 Allen, IN
 De Kalb, IN
 Huntington, IN
 Wells, IN
 Whitley, IN0.94570.98910.9783
2800Forth Worth-Arlington, TX
 Hood, TX
 Johnson, TX
 Parker, TX
 Tarrant, TX0.94460.98890.9778
2840Fresno, CA
 Fresno, CA
 Madera, CA1.01691.00341.0068
2880Gadsden, AL
 Etowah, AL0.85050.97010.9402
2900Gainesville, FL
 Alachua, FL0.98710.99740.9948
2920Galveston-Texas City, TX
Start Printed Page 11272
 Galveston, TX0.94650.98930.9786
2960Gary, IN
 Lake, IN
 Porter, IN0.95840.99170.9834
2975Glens Falls, NY
 Warren, NY
 Washington, NY0.82810.96560.9312
2980Goldsboro, NC
Wayne, NC0.88920.97780.9557
2985Grand Forks, ND-MN
 Polk, MN
 Grand Forks, ND0.88970.97790.9559
2995Grand Junction, CO
 Mesa, CO0.94560.98910.9782
3000Grand Rapids-Muskegon-Holland, MI
 Allegan, MI
 Kent, MI
 Muskegon, MI
 Ottawa, MI0.95250.99050.9810
3040Great Falls, MT
 Cascade, MT0.89500.97900.9580
3060Greeley, CO
 Weld, CO0.92370.98470.9695
3080Green Bay, WI
 Brown, WI0.95020.99000.9801
3120Greensboro-Winston-Salem-High Point, NC
 Alamance, NC
 Davidson, NC
 Davie, NC
 Forsyth, NC
Guilford, NC
 Randolph, NC
 Stokes, NC
 Yadkin, NC0.92820.98560.9713
3150Greenville, NC
 Pitt, NC0.91000.98200.9640
3160Greenville-Spartanburg-Anderson, SC
 Anderson, SC
 Cherokee, SC
 Greenville, SC
 Pickens, SC
 Spartanburg, SC0.91220.98240.9649
3180Hagerstown, MD
 Washington, MD0.92680.98540.9707
3200Hamilton-Middletown, OH
 Butler, OH0.94180.98840.9767
3240Harrisburg-Lebanon-Carlisle, PA
 Cumberland, PA
 Dauphin, PA
 Lebanon, PA
 Perry, PA0.92230.98450.9689
3283Hartford, CT
 Hartford, CT
 Litchfield, CT
 Middlesex, CT
 Tolland, CT1.15491.03101.0620
32852 Hattiesburg, MS
 Forrest, MS
 Lamar, MS0.76590.95320.9064
3290Hickory-Morganton-Lenoir, NC
 Alexander, NC
 Burke, NC
 Caldwell, NC
 Catawba, NC0.90280.98060.9611
3320Honolulu, HI
 Honolulu, HI1.14571.02911.0583
3350Houma, LA
 Lafourche, LA
 Terrebonne, LA0.83170.96630.9327
Start Printed Page 11273
3360Houston, TX
 Chambers, TX
 Fort Bend, TX
 Harris, TX
 Liberty, TX
 Montgomery, TX
 Waller, TX0.98920.99780.9957
3400Huntington-Ashland, WV-KY-OH
 Boyd, KY
 Carter, KY
 Greenup, KY
 Lawrence, OH
 Cabell, WV
 Wayne, WV0.96360.99270.9854
3440Huntsville, AL
 Limestone, AL
 Madison, AL0.89030.97810.9561
3480Indianapolis, IN
 Boone, IN
 Hamilton, IN
 Hancock, IN
 Hendricks, IN
 Johnson, IN
 Madison, IN
 Marion, IN
 Morgan, IN
 Shelby, IN0.97170.99430.9887
3500Iowa City, IA
 Johnson, IA0.95870.99170.9835
3520Jackson, MI
 Jackson, MI0.95320.99060.9813
3560Jackson, MS
 Hinds, MS
 Madison, MS
 Rankin, MS0.86070.97210.9443
3580Jackson, TN
 Madison, TN
 Chester, TN0.92750.98550.9710
3600Jacksonville, FL
 Clay, FL
 Duval, FL
 Nassau, FL
 St. Johns, FL0.93810.98760.9752
3605Jacksonville, NC
 Onslow, NC0.82390.96480.9296
3610Jamestown, NY
 Chautauqua, NY0.79760.95950.9190
3620Janesville-Beloit, WI
 Rock, WI0.98490.99700.9940
3640Jersey City, NJ
 Hudson, NJ1.11901.02381.0476
3660Johnson City-Kingsport-Bristol, TN-VA
 Carter, TN
 Hawkins, TN
 Sullivan, TN
 Unicoi, TN
 Washington, TN
 Bristol City, VA
 Scott, VA
 Washington, VA0.82680.96540.9307
3680Johnstown, PA
 Cambria, PA
 Somerset, PA0.83290.96660.9332
3700Jonesboro, AR
 Craighead, AR0.77490.95500.9100
3710Joplin, MO
 Jasper, MO
 Newton, MO0.86130.97230.9445
3720Kalamazoo-Battlecreek, MI
Start Printed Page 11274
 Calhoun, MI
 Kalamazoo, MI
 Van Buren, MI1.05951.01191.0238
3740Kankakee, IL
 Kankakee, IL1.07901.01581.0316
3760Kansas City, KS-MO
 Johnson, KS
 Leavenworth, KS
 Miami, KS
 Wyandotte, KS
 Cass, MO
 Clay, MO
 Clinton, MO
 Jackson, MO
 Lafayette, MO
 Platte, MO
 Ray, MO0.97360.99470.9894
3800Kenosha, WI
 Kenosha, WI0.96860.99370.9874
3810Killeen-Temple, TX
 Bell, TX
 Coryell, TX1.03991.00801.0160
3840Knoxville, TN
 Anderson, TN
 Blount, TN
 Knox, TN
 Loudon, TN
 Sevier, TN
 Union, TN0.89700.97940.9588
3850Kokomo, IN
 Howard, IN
 Tipton, IN0.89710.97940.9588
3870La Crosse, WI-MN
 Houston, MN
 La Crosse, WI0.94000.98800.9760
3880Lafayette, LA
 Acadia, LA
 Lafayette, LA
 St. Landry, LA
 St. Martin, LA0.84520.96900.9381
3920Lafayette, IN
 Clinton, IN
 Tippecanoe, IN0.92780.98560.9711
3960Lake Charles, LA
 Calcasieu, LA0.79650.95930.9186
3980Lakeland-Winter Haven, FL
 Polk, FL0.93570.98710.9743
4000Lancaster, PA
 Lancaster, PA0.90780.98160.9631
4040Lansing-East Lansing, MI
 Clinton, MI
 Eaton, MI
 Ingham, MI0.97260.99450.9890
4080Laredo, TX
 Webb, TX0.84720.96940.9389
4100Las Cruces, NM
 Dona Ana, NM0.87450.97490.9498
4120Las Vegas, NV-AZ
 Mohave, AZ
 Clark, NV
 Nye, NV1.15211.03041.0608
4150Lawrence, KS
 Douglas, KS0.83230.96650.9329
4200Lawton, OK
 Comanche, OK0.83150.96630.9326
4243Lewiston-Auburn, ME
 Androscoggin, ME0.91790.98360.9672
4280Lexington, KY
 Bourbon, KY
Start Printed Page 11275
 Clark, KY
 Fayette, KY
 Jessamine, KY
 Madison, KY
 Scott, KY
 Woodford, KY0.85810.97160.9432
4320Lima, OH
 Allen, OH
 Auglaize, OH0.94830.98970.9793
4360Lincoln, NE
 Lancaster, NE0.98920.99780.9957
4400Little Rock-North Little Rock, AR
 Faulkner, AR
 Lonoke, AR
 Pulaski, AR
 Saline, AR0.90970.98190.9639
4420Longview-Marshall, TX
 Gregg, TX
 Harrison, TX
 Upshur, TX0.86290.97260.9452
4480Los Angeles-Long Beach, CA
 Los Angeles, CA1.20011.04001.0800
45201 Louisville, KY-IN
 Clark, IN
 Floyd, IN
 Harrison, IN
 Scott, IN
 Bullitt, KY
 Jefferson, KY
 Oldham, KY0.92760.98550.9710
4600Lubbock, TX
 Lubbock, TX0.96460.99290.9858
4640Lynchburg, VA
 Amherst, VA
 Bedford, VA
 Bedford City, VA
 Campbell, VA
 Lynchburg City, VA0.92190.98440.9688
4680Macon, GA
 Bibb, GA
 Houston, GA
 Jones, GA
 Peach, GA
 Twiggs, GA0.92040.98410.9682
4720Madison, WI
 Dane, WI1.04671.00931.0187
4800Mansfield, OH
 Crawford, OH
 Richland, OH0.89000.97800.9560
4840Mayaguez, PR
 Anasco, PR
 Cabo Rojo, PR
 Hormigueros, PR
 Mayaguez, PR
 Sabana Grande, PR
 San German, PR0.49140.89830.7966
4880McAllen-Edinburg-Mission, TX
 Hidalgo, TX0.84280.96860.9371
4890Medford-Ashland, OR
 Jackson, OR1.04981.01001.0199
4900Melbourne-Titusville-Palm Bay, FL
 Brevard, FL1.02531.00511.0101
4920Memphis, TN-AR-MS
 Crittenden, AR
 DeSoto, MS
 Fayette, TN
 Shelby, TN
 Tipton, TN0.89200.97840.9568
4940Merced, CA
Start Printed Page 11276
 Merced, CA0.97420.99480.9897
5000Miami, FL
 Dade, FL0.98020.99600.9921
5015Middlesex-Somerset-Hunterdon, NJ
 Hunterdon, NJ
 Middlesex, NJ
 Somerset, NJ1.12131.02431.0485
5080Milwaukee-Waukesha, WI
 Milwaukee, WI
 Ozaukee, WI
 Washington, WI
 Waukesha, WI0.98930.99790.9957
5120Minneapolis-St. Paul, MN-WI
 Anoka, MN
 Carver, MN
 Chisago, MN
 Dakota, MN
 Hennepin, MN
 Isanti, MN
 Ramsey, MN
 Scott, MN
 Sherburne, MN
 Washington, MN
 Wright, MN
 Pierce, WI
 St. Croix, WI1.09031.01811.0361
5140Missoula, MT
Missoula, MT0.91570.98310.9663
5160Mobile, AL
 Baldwin, AL
 Mobile, AL0.81080.96220.9243
5170Modesto, CA
 Stanislaus, CA1.04981.01001.0199
5190Monmouth-Ocean, NJ
 Monmouth, NJ
 Ocean, NJ1.06741.01351.0270
5200Monroe, LA
 Ouachita, LA0.81370.96270.9255
5240Montgomery, AL
 Autauga, AL
 Elmore, AL
 Montgomery, AL0.77340.95470.9094
5280Muncie, IN
 Delaware, IN0.92840.98570.9714
5330Myrtle Beach, SC
 Horry, SC0.89760.97950.9590
5345Naples, FL
 Collier, FL0.97540.99510.9902
5360Nashville, TN
 Cheatham, TN
 Davidson, TN
 Dickson, TN
 Robertson, TN
 Rutherford TN
 Sumner, TN
 Williamson, TN
 Wilson, TN0.95780.99160.9831
5380Nassau-Suffolk, NY
 Nassau, NY
 Suffolk, NY1.33571.06711.1343
5483New Haven-Bridgeport-Stamford-Waterbury-
 Danbury, CT
 Fairfield, CT
 New Haven, CT1.24081.04821.0963
5523New London-Norwich, CT
 New London, CT1.17671.03531.0707
5560New Orleans, LA
 Jefferson, LA
 Orleans, LA
Start Printed Page 11277
 Plaquemines, LA
 St. Bernard, LA
 St. Charles, LA
 St. James, LA
 St. John The Baptist, LA
 St. Tammany, LA0.90460.98090.9618
5600New York, NY
 Bronx, NY
 Kings, NY
 New York, NY
 Putnam, NY
 Queens, NY
 Richmond, NY
 Rockland, NY
 Westchester, NY1.44141.08831.1766
5640Newark, NJ
 Essex, NJ
 Morris, NJ
 Sussex, NJ
 Union, NJ
 Warren, NJ1.13811.02761.0552
5660Newburgh, NY-PA
 Orange, NY
 Pike, PA1.13871.02771.0555
5720Norfolk-Virginia Beach-Newport News, VA-NC
 Currituck, NC
 Chesapeake City, VA
 Gloucester, VA
 Hampton City, VA
 Isle of Wight, VA
 James City, VA
 Mathews, VA
 Newport News City, VA
 Norfolk City, VA
 Poquoson City, VA
 Portsmouth City, VA
 Suffolk City, VA
 Virginia Beach City VA
 Williamsburg City, VA
 York, VA0.85740.97150.9430
5775Oakland, CA
 Alameda, CA
 Contra Costa, CA1.50721.10141.2029
5790Ocala, FL
 Marion, FL0.94020.98800.9761
5800Odessa-Midland, TX
 Ector, TX
 Midland, TX0.93970.98790.9759
5880Oklahoma City, OK
 Canadian, OK
 Cleveland, OK
 Logan, OK
 McClain, OK
 Oklahoma, OK
 Pottawatomie, OK0.89000.97800.9560
5910Olympia, WA
 Thurston, WA1.09601.01921.0384
5920Omaha, NE-IA
 Pottawattamie, IA
 Cass, NE
 Douglas, NE
 Sarpy, NE
 Washington, NE0.99780.99960.9991
5945Orange County, CA
 Orange, CA1.14741.02951.0590
5960Orlando, FL
 Lake, FL
 Orange, FL
 Osceola, FL
Start Printed Page 11278
 Seminole, FL0.96400.99280.9856
5990Owensboro, KY
 Daviess, KY0.83440.96690.9338
6015Panama City, FL
 Bay, FL0.88650.97730.9546
6020Parkersburg-Marietta, WV-OH
 Washington, OH
 Wood, WV0.81270.96250.9251
6080Pensacola, FL
 Escambia, FL
 Santa Rosa, FL0.86100.97220.9444
6120Peoria-Pekin, IL
 Peoria, IL
 Tazewell, IL
 Woodford, IL0.87390.97480.9496
6160Philadelphia, PA-NJ
 Burlington, NJ
 Camden, NJ
 Gloucester, NJ
 Salem, NJ
 Bucks, PA
 Chester, PA
 Delaware, PA
 Montgomery, PA
 Philadelphia, PA1.07131.01431.0285
6200Phoenix-Mesa, AZ
 Maricopa, AZ
 Pinal, AZ0.98200.99640.9928
6240Pine Bluff, AR
 Jefferson, AR0.79620.95920.9185
6280Pittsburgh, PA
 Allegheny, PA
 Beaver, PA
 Butler, PA
 Fayette, PA
 Washington, PA
 Westmoreland, PA0.93650.98730.9746
6323Pittsfield, MA
 Berkshire, MA1.02351.00471.0094
6340Pocatello, ID
 Bannock, ID0.93720.98740.9749
6360Ponce, PR
 Guayanilla, PR
 Juana Diaz, PR
 Penuelas, PR
 Ponce, PR
 Villalba, PR
 Yauco, PR0.51690.90340.8068
6403Portland, ME
 Cumberland, ME
 Sagadahoc, ME
 York, ME0.97940.99590.9918
6440Portland-Vancouver, OR-WA
 Clackamas, OR
 Columbia, OR
 Multnomah, OR
 Washington, OR
 Yamhill, OR
 Clark, WA1.06671.01331.0267
6483Providence-Warwick-Pawtucket, RI
 Bristol, RI
 Kent, RI
 Newport, RI
 Providence, RI
 Washington, RI1.08541.01711.0342
6520Provo-Orem, UT
 Utah, UT0.99840.99970.9994
6560Pueblo, CO
 Pueblo, CO0.88200.97640.9528
Start Printed Page 11279
6580Punta Gorda, FL
 Charlotte, FL0.92180.98440.9687
6600Racine, WI
 Racine, WI0.93340.98670.9734
6640Raleigh-Durham-Chapel Hill, NC
 Chatham, NC
 Durham, NC
 Franklin, NC
 Johnston, NC
 Orange, NC
 Wake, NC0.99900.99980.9996
6660Rapid City, SD
 Pennington, SD0.88460.97690.9538
6680Reading, PA
 Berks, PA0.92950.98590.9718
6690Redding, CA
 Shasta, CA1.11351.02271.0454
6720Reno, NV
 Washoe, NV1.06481.01301.0259
6740Richland-Kennewick-Pasco, WA
 Benton, WA
 Franklin, WA1.14911.02981.0596
6760Richmond-Petersburg, VA
 Charles City County, VA
 Chesterfield, VA
 Colonial Heights City, VA
 Dinwiddie, VA
 Goochland, VA
 Hanover, VA
 Henrico, VA
 Hopewell City, VA
 New Kent, VA
 Petersburg City, VA
 Powhatan, VA
 Prince George, VA
 Richmond City, VA0.94770.98950.9791
6780Riverside-San Bernardino, CA
 Riverside, CA
 San Bernardino, CA1.13651.02731.0546
6800Roanoke, VA
 Botetourt, VA
 Roanoke, VA
 Roanoke City, VA
 Salem City, VA0.86140.97230.9446
6820Rochester, MN
 Olmsted, MN1.21391.04281.0856
6840Rochester, NY
 Genesee, NY
 Livingston, NY
 Monroe, NY
 Ontario, NY
 Orleans, NY
 Wayne, NY0.91940.98390.9678
6880Rockford, IL
 Boone, IL
 Ogle, IL
 Winnebago, IL0.96250.99250.9850
6895Rocky Mount, NC
 Edgecombe, NC
 Nash, NC0.92280.98460.9691
6920Sacramento, CA
 El Dorado, CA
 Placer, CA
 Sacramento, CA1.15001.03001.0600
6960Saginaw-Bay City-Midland, MI
 Bay, MI
 Midland, MI
 Saginaw, MI0.96500.99300.9860
6980St. Cloud, MN
Start Printed Page 11280
 Benton, MN
 Stearns, MN0.97000.99400.9880
7000St. Joseph, MO
 Andrew, MO
 Buchanan, MO0.95440.99090.9818
7040St. Louis, MO-IL
 Clinton, IL
 Jersey, IL
 Madison, IL
 Monroe, IL
 St. Clair, IL
 Franklin, MO
 Jefferson, MO
 Lincoln, MO
 St. Charles, MO
 St. Louis, MO
 St. Louis City, MO
 Warren, MO0.88550.97710.9542
7080Salem, OR
 Marion, OR
 Polk, OR1.05001.01001.0200
7120Salinas, CA
 Monterey, CA1.46231.09251.1849
7160Salt Lake City-Ogden, UT
 Davis, UT
 Salt Lake, UT
 Weber, UT0.99450.99890.9978
7200San Angelo, TX
 Tom Green, TX0.83740.96750.9350
7240San Antonio, TX
 Bexar, TX
 Comal, TX
 Guadalupe, TX
 Wilson, TX0.87530.97510.9501
7320San Diego, CA
 San Diego, CA1.11311.02261.0452
7360San Francisco, CA
 Marin, CA
 San Francisco, CA
 San Mateo, CA1.41421.08281.1657
7400San Jose, CA
 Santa Clara, CA1.41451.08291.1658
7440San Juan-Bayamon, PR
 Aguas Buenas, PR
 Barceloneta, PR
 Bayamon, PR
 Canovanas, PR
 Carolina, PR
 Catano, PR
 Ceiba, PR
 Comerio, PR
 Corozal, PR
 Dorado, PR
 Fajardo, PR
 Florida, PR
 Guaynabo, PR
 Humacao, PR
 Juncos, PR
 Los Piedras, PR
 Loiza, PR
 Luguillo, PR
 Manati, PR
 Morovis, PR
 Naguabo, PR
 Naranjito, PR
 Rio Grande, PR
 San Juan, PR
 Toa Alta, PR
 Toa Baja, PR
Start Printed Page 11281
 Trujillo Alto, PR
 Vega Alta, PR
 Vega Baja, PR
 Yabucoa, PR0.47410.89480.7896
7460San Luis Obispo-Atascadero-Paso Robles, CA
 San Luis Obispo, CA1.12711.02541.0508
7480Santa Barbara-Santa Maria-Lompoc, CA
 Santa Barbara, CA1.04811.00961.0192
7485Santa Cruz-Watsonville, CA
Santa Cruz, CA1.36461.07291.1458
7490Santa Fe, NM
 Los Alamos, NM
 Santa Fe, NM1.07121.01421.0285
7500Santa Rosa, CA
 Sonoma, CA1.30461.06091.1218
7510Sarasota-Bradenton, FL
 Manatee, FL
 Sarasota, FL0.94250.98850.9770
7520Savannah, GA
 Bryan, GA
 Chatham, GA
 Effingham, GA0.93760.98750.9750
7560Scranton—Wilkes-Barre-Hazleton, PA
 Columbia, PA
 Lackawanna, PA
 Luzerne, PA
 Wyoming, PA0.85990.97200.9440
7600Seattle-Bellevue-Everett, WA
 Island, WA
 King, WA
 Snohomish, WA1.14741.02951.0590
7610Sharon, PA
 Mercer, PA0.78690.95740.9148
7620Sheboygan, WI
 Sheboygan, WI0.86970.97390.9479
7640Sherman-Denison, TX
 Grayson, TX0.92550.98510.9702
7680Shreveport-Bossier City, LA
 Bossier, LA
 Caddo, LA
 Webster, LA0.89870.97970.9595
7720Sioux City, IA-NE
 Woodbury, IA
 Dakota, NE0.90460.98090.9618
7760Sioux Falls, SD
 Lincoln, SD
 Minnehaha, SD0.92570.98510.9703
7800South Bend, IN
 St. Joseph, IN0.98020.99600.9921
7840Spokane, WA
 Spokane, WA1.08521.01701.0341
7880Springfield, IL
 Menard, IL
 Sangamon, IL0.86590.97320.9464
7920Springfield, MO
 Christian, MO
 Greene, MO
 Webster, MO0.84240.96850.9370
8003Springfield, MA
 Hampden, MA
 Hampshire, MA1.09271.01851.0371
8050State College, PA
 Centre, PA0.89410.97880.9576
8080Steubenville-Weirton, OH-WV (WV Hospitals)
 Jefferson, OH
 Brooke, WV
 Hancock, WV0.88040.97610.9522
8120Stockton-Lodi, CA
 San Joaquin, CA1.05061.01011.0202
Start Printed Page 11282
8140Sumter, SC
 Sumter, SC0.82730.96550.9309
8160Syracuse, NY
 Cayuga, NY
 Madison, NY
 Onondaga, NY
 Oswego, NY0.97140.99430.9886
8200Tacoma, WA
 Pierce, WA1.09401.01881.0376
8240Tallahassee, FL
 Gadsden, FL
 Leon, FL0.85040.97010.9402
8280Tampa-St. Petersburg-Clearwater, FL
 Hernando, FL
 Hillsborough, FL
 Pasco, FL
 Pinellas, FL0.90650.98130.9626
8320Terre Haute, IN
 Clay, IN
 Vermillion, IN
 Vigo, IN0.85990.97200.9440
8360Texarkana, AR-Texarkana, TX
 Miller, AR
 Bowie, TX0.80880.96180.9235
8400Toledo, OH
 Fulton, OH
 Lucas, OH
 Wood, OH0.98100.99620.9924
8440Topeka, KS
 Shawnee, KS0.91990.98400.9680
8480Trenton, NJ
 Mercer, NJ1.04321.00861.0173
8520Tucson, AZ
 Pima, AZ0.89110.97820.9564
8560Tulsa, OK
 Creek, OK
 Osage, OK
 Rogers, OK
 Tulsa, OK
 Wagoner, OK0.83320.96660.9333
8600Tuscaloosa, AL
 Tuscaloosa, AL0.81300.96260.9252
8640Tyler, TX
 Smith, TX0.95210.99040.9808
8680Utica-Rome, NY
 Herkimer, NY
 Oneida, NY0.84650.96930.9386
8720Vallejo-Fairfield-Napa, CA
 Napa, CA
 Solano, CA1.33541.06711.1342
8735Ventura, CA
 Ventura, CA1.10961.02191.0438
8750Victoria, TX
 Victoria, TX0.87560.97510.9502
8760Vineland-Millville-Bridgeton, NJ
 Cumberland, NJ1.00311.00061.0012
8780Visalia-Tulare-Porterville, CA
 Tulare, CA0.94180.98840.9767
8800Waco, TX
 McLennan, TX0.80730.96150.9229
8840Washington, DC-MD-VA-WV
 District of Columbia, DC
 Calvert, MD
 Charles, MD
 Frederick, MD
 Montgomery, MD
 Prince Georges, MD
 Alexandria City, VA
 Arlington, VA
Start Printed Page 11283
 Clarke, VA
 Culpeper, VA
 Fairfax, VA
 Fairfax City, VA
 Falls Church City, VA
 Fauquier, VA
 Fredericksburg City, VA
 King George, VA
 Loudoun, VA
 Manassas City, VA
 Manassas Park City, VA
 Prince William, VA
 Spotsylvania, VA
 Stafford, VA
 Warren, VA
Berkeley, WV
 Jefferson, WV1.08511.01701.0340
8920Waterloo-Cedar Falls, IA
 Black Hawk, IA0.80690.96140.9228
8940Wausau, WI
 Marathon, WI0.97820.99560.9913
8960West Palm Beach-Boca Raton, FL
 Palm Beach, FL0.99390.99880.9976
9000Wheeling, WV-OH
 Belmont, OH
 Marshall, WV
 Ohio, WV0.76700.95340.9068
9040Wichita, KS
 Butler, KS
 Harvey, KS
 Sedgwick, KS0.95200.99040.9808
9080Wichita Falls, TX
 Archer, TX
 Wichita, TX0.84980.97000.9399
9140Williamsport, PA
 Lycoming, PA0.85440.97090.9418
9160Wilmington-Newark, DE-MD
 New Castle, DE
 Cecil, MD1.11731.02351.0469
9200Wilmington, NC
 New Hanover, NC
 Brunswick, NC0.96400.99280.9856
9260Yakima, WA
 Yakima, WA1.05691.01141.0228
9270Yolo, CA
 Yolo, CA0.94340.98870.9774
9280York, PA
 York, PA0.90260.98050.9610
9320Youngstown-Warren, OH
 Columbiana, OH
 Mahoning, OH
Trumbull, OH0.93580.98720.9743
9340Yuba City, CA
 Sutter, CA
 Yuba, CA1.02761.00551.0110
9360Yuma, AZ
 Yuma, AZ0.85890.97180.9436
1 Prereclassification wage index from Federal FY 2003 based on fiscal year 1999 audited acute care hospital inpatient wage data that excludes wages for services provided by teaching physicians, interns and residents, and nonphysician anesthetists under Part B of the Medicare program.
2 One-fifth of the full wage index value, applicable for LTCH's cost reporting period beginning on or after October 1, 2002 through September 30, 2003 (Federal FY 2203). For example, for a LTCH's cost reporting period begins during Federal in FY 2003 and located in Chicago, Illinois (MSA 1600), the 1/5 of the wage index value is computed as (1.1044 + 4)/5 = 1.0209. For further details on the 5-year phase-in of the wage index, see section VI.C.1. of this proposed rule.
3 Two-fifths of the full wage index value, applicable for LTCH's cost reporting period beginning on or after October 1, 2003 through September 30, 2003 (Federal FY 2004). For example, for a LTCH's cost reporting period begins during Federal in FY 2004 and located in Chicago, Illinois (MSA 1600), the 2/5 of the wage index value is computed as ((2*1.1044) + 3))/5 = 1.0418. For further details on the 5-year phase-in of the wage index, see section VI.C.1. of this proposed rule.
Start Printed Page 11284

Table 2.—Proposed Long-Term Care Hospital Wage Index for Rural Areas for Discharges Occurring From July 1, 2003 Through June 30, 2004

Nonurban areaFull wage index 11/5 wage index 22/5 wage index 3
Alabama0.76600.95320.9064
Alaska1.22931.04591.0917
Arizona0.84930.96990.9397
Arkansas0.76660.95330.9066
California0.98990.99800.9960
Colorado0.90150.98030.9606
Connecticut1.23941.04791.0958
Delaware0.91280.98260.9651
Florida0.88270.97650.9531
Georgia0.82300.96460.9292
Hawaii1.02551.00511.0102
Idaho0.87470.97490.9499
Illinois0.82040.96410.9282
Indiana0.87550.97510.9502
Iowa0.83150.96630.9326
Kansas0.79000.95800.9160
Kentucky0.80790.96160.9232
Louisiana0.75800.95160.9032
Maine0.88740.97750.9550
Maryland0.89460.97890.9578
Massachusetts1.12881.02581.0515
Michigan0.90090.98020.9604
Minnesota0.91510.98300.9660
Mississippi0.76800.95360.9072
Missouri0.78810.95760.9152
Montana0.84810.96960.9392
Nebraska0.82040.96410.9282
Nevada0.95770.99150.9831
New Hampshire0.98390.99680.9936
New Jersey 4
New Mexico0.88720.97740.9549
New York0.85420.97080.9417
North Carolina0.86690.97340.9468
North Dakota0.77880.95580.9115
Ohio0.86130.97230.9445
Oklahoma0.75900.95180.9036
Oregon1.02591.00521.0104
Pennsylvania0.84620.96920.9385
Puerto Rico0.43560.88710.7742
Rhode Island 4
South Carolina0.86070.97210.9443
South Dakota0.78150.95630.9126
Tennessee0.78770.95750.9151
Texas0.78210.95640.9128
Utah0.93120.98620.9725
Vermont0.93450.98690.9738
Virginia0.85040.97010.9402
Washington1.01791.00361.0072
West Virginia0.79750.95950.9190
Wisconsin0.91620.98320.9665
Wyoming0.90070.98010.9603 -
1 Pre-reclassification wage index from Federal FY 2003 based on fiscal year 1999 audited acute care hospital inpatient wage data that exclude wages for services provided by teaching physicians, residents, and nonphysician anesthetists under Part B of the Medicare program.
2 One-fifth of the full wage index value, applicable for LTCH's cost reporting period beginning on or after October 1, 2002 through September 30, 2003 (Federal FY 2203). For example, for a LTCH's cost reporting period begins during Federal in FY 2003 and located in rural Illinois, the 1/5 of the wage index value is computed as (0.8204 + 4)/5 = 0.9641. For further details on the 5-year phase-in of the wage index, see section VI.C.1. of this proposed rule.
3 Two-fifths of the full wage index value, applicable for LTCH's cost reporting period beginning on or after October 1, 2003 through September 30, 2003 (Federal FY 2004). For example, for a LTCH's cost reporting period begins during Federal in FY 2004 and located in rural Illinois, the 2/5 of the wage index value is computed as ((2*0.8204) + 3))/5 = 0.9282. For further details on the 5-year phase-in of the wage index, see section VI.C.1. of this proposed rule.
4 All counties within the State are classified as urban.
Start Printed Page 11285

Table 3.—Proposed LTC-DRG Relative Weights, Geometric Mean Length of Stay, and Short-Stays of Five-Sixths Average Length of Stay for the Period of July 1, 2003 Through September 30, 2003

LTC-DRGDescriptionRelative weightGeometric mean length of stayShort-stays of 5/6 average length of stay
1CRANIOTOMY AGE >17 W CC 51.878346.338.5
2CRANIOTOMY AGE > 17 W/O CC 51.878346.338.5
3CRANIOTOMY AGE 0-17*1.878346.338.5
4SPINAL PROCEDURES 41.249331.326.0
5EXTRACRANIAL VASCULAR PROCEDURES 41.249331.326.0
6CARPAL TUNNEL RELEASE*0.405516.814.0
7PERIPH & CRANIAL NERVE & OTHER NERV SYST PROC W CC1.782943.836.5
8PERIPH & CRANIAL NERVE & OTHER NERV SYST PROC W/O CC41.249331.326.0
9SPINAL DISORDERS & INJURIES1.411834.628.8
10NERVOUS SYSTEM NEOPLASMS W CC 70.853724.520.4
11NERVOUS SYSTEM NEOPLASMS W/O CC 70.853724.520.4
12DEGENERATIVE NERVOUS SYSTEM DISORDERS0.777327.122.5
13MULTIPLE SCLEROSIS & CEREBELLAR ATAXIA0.720725.621.3
14INTERCRANIAL HEMORRHAGE & STROKE W INFARCT0.881626.622.1
15NONSPECIFIC CVA & PRECEREBRAL OCCULUSION W/O INFARCT0.905329.424.5
16NONSPECIFIC CEREBROVASCULAR DISORDERS W CC0.886427.022.5
17NONSPECIFIC CEREBROVASCULAR DISORDERS W/O CC 20.665521.918.2
18CRANIAL & PERIPHERAL NERVE DISORDERS W CC0.777024.920.7
19CRANIAL & PERIPHERAL NERVE DISORDERS W/O CC0.548622.018.3
20NERVOUS SYSTEM INFECTION EXCEPT VIRAL MENINGITIS1.233129.324.4
21VIRAL MENINGITIS 10.405516.814.0
22HYPERTENSIVE ENCEPHALOPATHY 20.665521.918.2
23NONTRAUMATIC STUPOR & COMA0.962327.222.6
24SEIZURE & HEADACHE AGE >17 W CC0.883124.820.6
25SEIZURE & HEADACHE AGE >17 W/O CC0.483020.417.0
26SEIZURE & HEADACHE AGE 0-17*0.405516.814.0
27TRAUMATIC STUPOR & COMA, COMA >1 HR1.112631.626.3
28TRAUMATIC STUPOR & COMA, COMA <1 HR AGE>17 W CC1.150729.024.1
29TRAUMATIC STUPOR & COMA, COMA <1 HR AGE>17 W/O CC0.926827.222.6
30TRAUMATIC STUPOR & COMA, COMA <1 HR AGE 0-17*0.828423.319.4
31CONCUSSION AGE >17 W CC 20.665521.918.2
32CONCUSSION AGE >17 W/O CC*0.405516.814.0
33CONCUSSION AGE 0-17*0.405516.814.0
34OTHER DISORDERS OF NERVOUS SYSTEM W CC0.838525.120.9
35OTHER DISORDERS OF NERVOUS SYSTEM W/O CC0.656125.321.0
36RETINAL PROCEDURES*0.405516.814.0
37ORBITAL PROCEDURES*0.405516.814.0
38PRIMARY IRIS PROCEDURES*0.405516.814.0
39LENS PROCEDURES WITH OR WITHOUT VITRECTOMY*0.405516.814.0
40EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE >17*0.405516.814.0
41EXTRAOCULAR PROCEDURES EXCEPT ORBIT AGE 0-17*0.405516.814.0
42INTRAOCULAR PROCEDURES EXCEPT RETINA, IRIS & LENS*0.405516.814.0
43HYPHEMA 30.828423.319.4
44ACUTE MAJOR EYE INFECTIONS 20.665521.918.2
45NEUROLOGICAL EYE DISORDERS 10.405516.814.0
46OTHER DISORDERS OF THE EYE AGE >17 W CC 20.665521.918.2
47OTHER DISORDERS OF THE EYE AGE >17 W/O CC 10.405516.814.0
48OTHER DISORDERS OF THE EYE AGE 0-17*0.405516.814.0
49MAJOR HEAD & NECK PROCEDURES*1.878346.338.5
50SIALOADENECTOMY*0.665521.918.2
51SALIVARY GLAND PROCEDURES EXCEPT SIALOADENECTOMY*0.665521.918.2
52CLEFT LIP & PALATE REPAIR*0.665521.918.2
53SINUS & MASTOID PROCEDURES AGE >17*0.665521.918.2
54SINUS & MASTOID PROCEDURES AGE 0-17*0.665521.918.2
55MISCELLANEOUS EAR, NOSE, MOUTH & THROAT PROCEDURES 20.665521.918.2
56RHINOPLASTY*0.665521.918.2
57T&A PROC, EXCEPT TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE >17*0.665521.918.2
58T&A PROC, EXCEPT TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17*0.665521.918.2
59TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE >17*0.665521.918.2
60TONSILLECTOMY &/OR ADENOIDECTOMY ONLY, AGE 0-17*0.665521.918.2
61MYRINGOTOMY W TUBE INSERTION AGE >17 51.878346.338.5
62MYRINGOTOMY W TUBE INSERTION AGE 0-17*0.665521.918.2
63OTHER EAR, NOSE, MOUTH & THROAT O.R. PROCEDURES 51.878346.338.5
64EAR, NOSE, MOUTH & THROAT MALIGNANCY1.044725.521.2
65DYSEQUILIBRIUM0.505619.816.5
66EPISTAXIS 10.405516.814.0
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67EPIGLOTTITIS 10.405516.814.0
68OTITIS MEDIA & URI AGE >17 W CC 30.828423.319.4
69OTITIS MEDIA & URI AGE >17 W/O CC 30.828423.319.4
70OTITIS MEDIA & URI AGE 0-17*0.405516.814.0
71LARYNGOTRACHEITIS*0.405516.814.0
72NASAL TRAUMA & DEFORMITY 10.405516.814.0
73OTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE >170.809723.719.7
74OTHER EAR, NOSE, MOUTH & THROAT DIAGNOSES AGE 0-17*0.405516.814.0
75MAJOR CHEST PROCEDURES 51.878346.338.5
76OTHER RESP SYSTEM O.R. PROCEDURES W CC2.767450.642.1
77OTHER RESP SYSTEM O.R. PROCEDURES W/O CC 51.878346.338.5
78PULMONARY EMBOLISM0.634820.517.0
79RESPIRATORY INFECTIONS & INFLAMMATIONS AGE >17 W CC0.891622.218.5
80RESPIRATORY INFECTIONS & INFLAMMATIONS AGE >17 W/O CC0.794722.819.0
81RESPIRATORY INFECTIONS & INFLAMMATIONS AGE 0-17*0.405516.814.0
82RESPIRATORY NEOPLASMS0.797620.917.4
83MAJOR CHEST TRAUMA W CC0.738424.820.6
84MAJOR CHEST TRAUMA W/O CC 10.405516.814.0
85PLEURAL EFFUSION W CC0.820723.619.6
86PLEURAL EFFUSION W/O CC0.619421.117.5
87PULMONARY EDEMA & RESPIRATORY FAILURE1.659732.326.9
88CHRONIC OBSTRUCTIVE PULMONARY DISEASE0.753220.917.4
89SIMPLE PNEUMONIA & PLEURISY AGE >17 W CC0.853323.619.6
90SIMPLE PNEUMONIA & PLEURISY AGE >17 W/O CC0.792123.019.1
91SIMPLE PNEUMONIA & PLEURISY AGE 0-17*0.828423.319.4
92INTERSTITIAL LUNG DISEASE W CC0.725119.115.9
93INTERSTITIAL LUNG DISEASE W/O CC0.557318.515.4
94PNEUMOTHORAX W CC0.788522.718.9
95PNEUMOTHORAX W/O CC 10.405516.814.0
96BRONCHITIS & ASTHMA AGE >17 W CC0.817324.220.1
97BRONCHITIS & ASTHMA AGE >17 W/O CC0.594017.914.9
98BRONCHITIS & ASTHMA AGE 0-17*0.405516.814.0
99RESPIRATORY SIGNS & SYMPTOMS W CC1.116427.322.7
100RESPIRATORY SIGNS & SYMPTOMS W/O CC1.001525.421.1
101OTHER RESPIRATORY SYSTEM DIAGNOSES W CC0.976323.419.5
102OTHER RESPIRATORY SYSTEM DIAGNOSES W/O CC0.931324.520.4
103HEART TRANSPLANT 60.00000.00.0
104CARDIAC VALVE & OTHER MAJOR CARDIOTHORACIC PROC W CARDIAC CATH*1.878346.338.5
105CARDIAC VALVE & OTHER MAJOR CARDIOTHORACIC PROC W/O CARDIAC CATH*1.878346.338.5
106CORONARY BYPASS W PTCA*1.878346.338.5
107CORONARY BYPASS W CARDIAC CATH*1.878346.338.5
108OTHER CARDIOTHORACIC PROCEDURES 20.665521.918.2
109CORONARY BYPASS W/O PTCA OR CARDIAC CATH*1.878346.338.5
110MAJOR CARDIOVASCULAR PROCEDURES W CC 51.878346.338.5
111MAJOR CARDIOVASCULAR PROCEDURES W/O CC 51.878346.338.5
113AMPUTATION FOR CIRC SYSTEM DISORDERS EXCEPT UPPER LIMB & TOE1.410336.930.7
114UPPER LIMB & TOE AMPUTATION FOR CIRC SYSTEM DISORDERS1.337740.233.5
115PRM CARD PACEM IMPL W AMI,HRT FAIL OR SHK,OR AICD LEAD OR GNRTR P 51.878346.338.5
116OTH PERM CARD PACEMAK IMPL OR PTCA W CORONARY ARTERY STENT IMPLNT 30.828423.319.4
117CARDIAC PACEMAKER REVISION EXCEPT DEVICE REPLACEMENT*0.405516.814.0
118CARDIAC PACEMAKER DEVICE REPLACEMENT 10.405516.814.0
119VEIN LIGATION & STRIPPING*0.665521.918.2
120OTHER CIRCULATORY SYSTEM O.R. PROCEDURES1.409136.430.3
121CIRCULATORY DISORDERS W AMI & MAJOR COMP, DISCHARGED ALIVE0.716721.618.0
122CIRCULATORY DISORDERS W AMI W/O MAJOR COMP, DISCHARGED ALIVE0.514419.015.8
123CIRCULATORY DISORDERS W AMI, EXPIRED0.941220.917.4
124CIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH & COMPLEX DIAG 30.828423.319.4
125CIRCULATORY DISORDERS EXCEPT AMI, W CARD CATH W/O COMPLEX DIAG 51.878346.338.5
126ACUTE & SUBACUTE ENDOCARDITIS0.768924.820.6
127HEART FAILURE & SHOCK0.761622.418.6
128DEEP VEIN THROMBOPHLEBITIS0.604220.817.3
129CARDIAC ARREST, UNEXPLAINED1.053420.917.4
130PERIPHERAL VASCULAR DISORDERS W CC0.791424.820.6
131PERIPHERAL VASCULAR DISORDERS W/O CC0.708123.719.7
132ATHEROSCLEROSIS W CC0.818321.818.1
133ATHEROSCLEROSIS W/O CC0.548418.515.4
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134HYPERTENSION0.698524.020.0
135CARDIAC CONGENITAL & VALVULAR DISORDERS AGE >17 W CC0.733120.316.9
136CARDIAC CONGENITAL & VALVULAR DISORDERS AGE >17 W/O CC0.707521.017.5
137CARDIAC CONGENITAL & VALVULAR DISORDERS AGE 0-17*0.665521.918.2
138CARDIAC ARRHYTHMIA & CONDUCTION DISORDERS W CC0.718723.419.5
139CARDIAC ARRHYTHMIA & CONDUCTION DISORDERS W/O CC0.648220.417.0
140ANGINA PECTORIS0.769020.116.7
141SYNCOPE & COLLAPSE W CC0.625223.219.3
142SYNCOPE & COLLAPSE W/O CC0.545221.517.9
143CHEST PAIN0.731622.718.9
144OTHER CIRCULATORY SYSTEM DIAGNOSES W CC0.787021.918.2
145OTHER CIRCULATORY SYSTEM DIAGNOSES W/O CC0.763725.020.8
146RECTAL RESECTION W CC 41.249331.326.0
147RECTAL RESECTION W/O CC*1.249331.326.0
148MAJOR SMALL & LARGE BOWEL PROCEDURES W CC2.848847.639.6
149MAJOR SMALL & LARGE BOWEL PROCEDURES W/O CC 20.665521.918.2
150PERITONEAL ADHESIOLYSIS W CC 10.405516.814.0
151PERITONEAL ADHESIOLYSIS W/O CC*0.405516.814.0
152MINOR SMALL & LARGE BOWEL PROCEDURES W CC 41.249331.326.0
153MINOR SMALL & LARGE BOWEL PROCEDURES W/O CC*0.828423.319.4
154STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE >17 W CC 41.249331.326.0
155STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE >17 W/O CC*0.828423.319.4
156STOMACH, ESOPHAGEAL & DUODENAL PROCEDURES AGE 0-17*0.828423.319.4
157ANAL & STOMAL PROCEDURES W CC 10.405516.814.0
158ANAL & STOMAL PROCEDURES W/O CC*0.405516.814.0
159HERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE >17 W CC 41.249331.326.0
160HERNIA PROCEDURES EXCEPT INGUINAL & FEMORAL AGE >17 W/O CC*0.665521.918.2
161INGUINAL & FEMORAL HERNIA PROCEDURES AGE >17 W CC*0.665521.918.2
162INGUINAL & FEMORAL HERNIA PROCEDURES AGE >17 W/O CC*0.665521.918.2
163HERNIA PROCEDURES AGE 0-17*0.665521.918.2
164APPENDECTOMY W COMPLICATED PRINCIPAL DIAG W CC*0.828423.319.4
165APPENDECTOMY W COMPLICATED PRINCIPAL DIAG W/O CC*0.828423.319.4
166APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W CC*0.665521.918.2
167APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W/O CC*0.665521.918.2
168MOUTH PROCEDURES W CC 30.828423.319.4
169MOUTH PROCEDURES W/O CC*0.665521.918.2
170OTHER DIGESTIVE SYSTEM O.R. PROCEDURES W CC1.554335.029.1
171OTHER DIGESTIVE SYSTEM O.R. PROCEDURES W/O CC 30.828423.319.4
172DIGESTIVE MALIGNANCY W CC0.855324.220.1
173DIGESTIVE MALIGNANCY W/O CC0.551318.915.7
174G.I. HEMORRHAGE W CC0.874123.619.6
175G.I. HEMORRHAGE W/O CC0.835925.621.3
176COMPLICATED PEPTIC ULCER0.766124.420.3
177UNCOMPLICATED PEPTIC ULCER W CC 30.828423.319.4
178UNCOMPLICATED PEPTIC ULCER W/O CC 20.665521.918.2
179INFLAMMATORY BOWEL DISEASE1.097523.419.5
180G.I. OBSTRUCTION W CC0.845722.819.0
181G.I. OBSTRUCTION W/O CC0.563819.516.2
182ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE >17 W CC0.882925.921.5
183ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE >17 W/O CC0.691321.517.9
184ESOPHAGITIS, GASTROENT & MISC DIGEST DISORDERS AGE 0-17*0.665521.918.2
185DENTAL & ORAL DIS EXCEPT EXTRACTIONS & RESTORATIONS, AGE >17 30.828423.319.4
186DENTAL & ORAL DIS EXCEPT EXTRACTIONS & RESTORATIONS, AGE 0-17*0.828423.319.4
187DENTAL EXTRACTIONS & RESTORATIONS*0.828423.319.4
188OTHER DIGESTIVE SYSTEM DIAGNOSES AGE >17 W CC1.049024.220.1
189OTHER DIGESTIVE SYSTEM DIAGNOSES AGE >17 W/O CC0.585217.414.5
190OTHER DIGESTIVE SYSTEM DIAGNOSES AGE 0-17*0.665521.918.2
191PANCREAS, LIVER & SHUNT PROCEDURES W CC 51.878346.338.5
192PANCREAS, LIVER & SHUNT PROCEDURES W/O CC*1.249331.326.0
193BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/O C.D.E. W CC 41.249331.326.0
194BILIARY TRACT PROC EXCEPT ONLY CHOLECYST W OR W/O C.D.E. W/O CC*0.828423.319.4
195CHOLECYSTECTOMY W C.D.E. W CC*0.828423.319.4
196CHOLECYSTECTOMY W C.D.E. W/O CC*0.828423.319.4
197CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O C.D.E. W CC 51.878346.338.5
198CHOLECYSTECTOMY EXCEPT BY LAPAROSCOPE W/O C.D.E. W/O CC 51.878346.338.5
199HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR MALIGNANCY 30.828423.319.4
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200HEPATOBILIARY DIAGNOSTIC PROCEDURE FOR NON-MALIGNANCY 41.249331.326.0
201OTHER HEPATOBILIARY OR PANCREAS O.R. PROCEDURES 51.878346.338.5
202CIRRHOSIS & ALCOHOLIC HEPATITIS0.573618.415.3
203MALIGNANCY OF HEPATOBILIARY SYSTEM OR PANCREAS0.589718.215.1
204DISORDERS OF PANCREAS EXCEPT MALIGNANCY0.944422.118.4
205DISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA W CC0.682521.517.9
206DISORDERS OF LIVER EXCEPT MALIG,CIRR,ALC HEPA W/O CC 20.665521.918.2
207DISORDERS OF THE BILIARY TRACT W CC0.697921.517.9
208DISORDERS OF THE BILIARY TRACT W/O CC 10.405516.814.0
209MAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF LOWER EXTREMITY 51.878346.338.5
210HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE >17 W CC 41.249331.326.0
211HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE >17 W/O CC*0.828423.319.4
212HIP & FEMUR PROCEDURES EXCEPT MAJOR JOINT AGE 0-17*0.828423.319.4
213AMPUTATION FOR MUSCULOSKELETAL SYSTEM & CONN TISSUE DISORDERS1.259133.027.5
216BIOPSIES OF MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE 41.249331.326.0
217WND DEBRID & SKN GRFT EXCEPT HAND,FOR MUSCSKELET & CONN TISS DIS1.360238.832.3
218LOWER EXTREM & HUMER PROC EXCEPT HIP,FOOT,FEMUR AGE >17 W CC 30.828423.319.4
219LOWER EXTREM & HUMER PROC EXCEPT HIP,FOOT,FEMUR AGE >17 W/O CC*0.828423.319.4
220LOWER EXTREM & HUMER PROC EXCEPT HIP,FOOT,FEMUR AGE 0-17*0.828423.319.4
223MAJOR SHOULDER/ELBOW PROC, OR OTHER UPPER EXTREMITY PROC W CC 41.249331.326.0
224SHOULDER,ELBOW OR FOREARM PROC,EXC MAJOR JOINT PROC, W/O CC 10.405516.814.0
225FOOT PROCEDURES 41.249331.326.0
226SOFT TISSUE PROCEDURES W CC 41.249331.326.0
227SOFT TISSUE PROCEDURES W/O CC 30.828423.319.4
228MAJOR THUMB OR JOINT PROC,OR OTH HAND OR WRIST PROC W CC*0.665521.918.2
229HAND OR WRIST PROC, EXCEPT MAJOR JOINT PROC, W/O CC 20.665521.918.2
230LOCAL EXCISION & REMOVAL OF INT FIX DEVICES OF HIP & FEMUR 10.405516.814.0
231LOCAL EXCISION & REMOVAL OF INT FIX DEVICES EXCEPT HIP & FEMUR 51.878346.338.5
232ARTHROSCOPY*0.405516.814.0
233OTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC W CC 41.249331.326.0
234OTHER MUSCULOSKELET SYS & CONN TISS O.R. PROC W/O CC 10.405516.814.0
235FRACTURES OF FEMUR0.754028.523.7
236FRACTURES OF HIP & PELVIS0.738127.222.6
237SPRAINS, STRAINS, & DISLOCATIONS OF HIP, PELVIS & THIGH 20.665521.918.2
238OSTEOMYELITIS0.827527.522.9
239PATHOLOGICAL FRACTURES & MUSCULOSKELETAL & CONN TISS MALIGNANCY0.668921.918.2
240CONNECTIVE TISSUE DISORDERS W CC0.926026.021.6
241CONNECTIVE TISSUE DISORDERS W/O CC0.580522.718.9
242SEPTIC ARTHRITIS0.772526.321.9
243MEDICAL BACK PROBLEMS0.659623.419.5
244BONE DISEASES & SPECIFIC ARTHROPATHIES W CC0.575620.617.1
245BONE DISEASES & SPECIFIC ARTHROPATHIES W/O CC0.442617.514.5
246NON-SPECIFIC ARTHROPATHIES0.605321.417.8
247SIGNS & SYMPTOMS OF MUSCULOSKELETAL SYSTEM & CONN TISSUE0.559020.417.0
248TENDONITIS, MYOSITIS & BURSITIS0.728823.919.9
249AFTERCARE, MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE0.800527.122.5
250FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE >17 W CC0.837331.826.5
251FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE >17 W/O CC0.690426.021.6
252FX, SPRN, STRN & DISL OF FOREARM, HAND, FOOT AGE 0-17*0.405516.814.0
253FX, SPRN, STRN & DISL OF UPARM,LOWLEG EX FOOT AGE >17 W CC0.805428.023.3
254FX, SPRN, STRN & DISL OF UPARM,LOWLEG EX FOOT AGE >17 W/O CC0.699926.422.0
255FX, SPRN, STRN & DISL OF UPARM,LOWLEG EX FOOT AGE 0-17*0.405516.814.0
256OTHER MUSCULOSKELETAL SYSTEM & CONNECTIVE TISSUE DIAGNOSES0.800225.120.9
257TOTAL MASTECTOMY FOR MALIGNANCY W CC 20.665521.918.2
258TOTAL MASTECTOMY FOR MALIGNANCY W/O CC*0.665521.918.2
259SUBTOTAL MASTECTOMY FOR MALIGNANCY W CC*0.665521.918.2
260SUBTOTAL MASTECTOMY FOR MALIGNANCY W/O CC*0.665521.918.2
261BREAST PROC FOR NON-MALIGNANCY EXCEPT BIOPSY & LOCAL EXCISION*0.405516.814.0
262BREAST BIOPSY & LOCAL EXCISION FOR NON-MALIGNANCY 10.405516.814.0
263SKIN GRAFT &/OR DEBRID FOR SKN ULCER OR CELLULITIS W CC1.538845.037.5
264SKIN GRAFT &/OR DEBRID FOR SKN ULCER OR CELLULITIS W/O CC1.164538.832.3
265SKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER OR CELLULITIS W CC1.656945.638.0
266SKIN GRAFT &/OR DEBRID EXCEPT FOR SKIN ULCER OR CELLULITIS W/O CC 30.828423.319.4
267PERIANAL & PILONIDAL PROCEDURES*0.405516.814.0
268SKIN, SUBCUTANEOUS TISSUE & BREAST PLASTIC PROCEDURES 41.249331.326.0
269OTHER SKIN, SUBCUT TISS & BREAST PROC W CC1.391541.734.7
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270OTHER SKIN, SUBCUT TISS & BREAST PROC W/O CC1.387941.634.6
271SKIN ULCERS0.971431.125.9
272MAJOR SKIN DISORDERS W CC0.684621.017.5
273MAJOR SKIN DISORDERS W/O CC 20.665521.918.2
274MALIGNANT BREAST DISORDERS W CC 70.787222.018.3
275MALIGNANT BREAST DISORDERS W/O CC 70.787222.018.3
276NON-MALIGANT BREAST DISORDERS 20.665521.918.2
277CELLULITIS AGE >17 W CC0.770424.420.3
278CELLULITIS AGE >17 W/O CC0.635322.418.6
279CELLULITIS AGE 0-17*0.665521.918.2
280TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE >17 W CC1.009730.925.7
281TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE >17 W/O CC0.736327.422.8
282TRAUMA TO THE SKIN, SUBCUT TISS & BREAST AGE 0-17*0.665521.918.2
283MINOR SKIN DISORDERS W CC0.857424.820.6
284MINOR SKIN DISORDERS W/O CC 10.405516.814.0
285AMPUTAT OF LOWER LIMB FOR ENDOCRINE,NUTRIT,& METABOL DISORDERS1.369231.726.4
286ADRENAL & PITUITARY PROCEDURES*1.249331.326.0
287SKIN GRAFTS & WOUND DEBRID FOR ENDOC, NUTRIT & METAB DISORDERS1.319539.633.0
288O.R. PROCEDURES FOR OBESITY 51.878346.338.5
289PARATHYROID PROCEDURES*0.405516.814.0
290THYROID PROCEDURES 10.405516.814.0
291THYROGLOSSAL PROCEDURES*0.405516.814.0
292OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W CC 41.249331.326.0
293OTHER ENDOCRINE, NUTRIT & METAB O.R. PROC W/O CC*0.665521.918.2
294DIABETES AGE >350.767825.120.9
295DIABETES AGE 0-35 30.828423.319.4
296NUTRITIONAL & MISC METABOLIC DISORDERS AGE >17 W CC0.771024.320.2
297NUTRITIONAL & MISC METABOLIC DISORDERS AGE >17 W/O CC0.632121.117.5
298NUTRITIONAL & MISC METABOLIC DISORDERS AGE 0-17*0.665521.918.2
299INBORN ERRORS OF METABOLISM 30.828423.319.4
300ENDOCRINE DISORDERS W CC0.867023.319.4
301ENDOCRINE DISORDERS W/O CC 10.405516.814.0
302KIDNEY TRANSPLANT 60.00000.00.0
303KIDNEY, URETER & MAJOR BLADDER PROCEDURES FOR NEOPLASM 51.878346.338.5
304KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-NEOPL W CC 41.249331.326.0
305KIDNEY, URETER & MAJOR BLADDER PROC FOR NON-NEOPL W/O CC 20.665521.918.2
306PROSTATECTOMY W CC 30.828423.319.4
307PROSTATECTOMY W/O CC 10.405516.814.0
308MINOR BLADDER PROCEDURES W CC 30.828423.319.414.0
309MINOR BLADDER PROCEDURES W/O CC*0.405516.826.0
310TRANSURETHRAL PROCEDURES W CC 41.249331.314.0
311TRANSURETHRAL PROCEDURES W/O CC 10.405516.838.5
312URETHRAL PROCEDURES, AGE >17 W CC 51.878346.314.0
313URETHRAL PROCEDURES, AGE >17 W/O CC*0.405516.814.0
314URETHRAL PROCEDURES, AGE 0-17*0.405516.814.0
315OTHER KIDNEY & URINARY TRACT O.R. PROCEDURES1.580039.532.9
316RENAL FAILURE0.930824.120.0
317ADMIT FOR RENAL DIALYSIS 41.249331.326.0
318KIDNEY & URINARY TRACT NEOPLASMS W CC0.807521.517.9
319KIDNEY & URINARY TRACT NEOPLASMS W/O CC 20.665521.918.2
320KIDNEY & URINARY TRACT INFECTIONS AGE >17 W CC0.742423.919.9
321KIDNEY & URINARY TRACT INFECTIONS AGE >17 W/O CC0.612320.417.0
322KIDNEY & URINARY TRACT INFECTIONS AGE 0-17*0.665521.918.2
323URINARY STONES W CC, &/OR ESW LITHOTRIPSY 20.665521.918.2
324URINARY STONES W/O CC 20.665521.918.2
325KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE >17 W CC0.812326.722.2
326KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE >17 W/O CC 20.665521.918.2
327KIDNEY & URINARY TRACT SIGNS & SYMPTOMS AGE 0-17*0.405516.814.0
328URETHRAL STRICTURE AGE >17 W CC*0.665521.918.2
329URETHRAL STRICTURE AGE >17 W/O CC 10.405516.814.0
330URETHRAL STRICTURE AGE 0-17*0.405516.814.0
331OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE >17 W CC0.926724.620.5
332OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE >17 W/O CC0.639320.917.4
333OTHER KIDNEY & URINARY TRACT DIAGNOSES AGE 0-17*0.405516.814.0
334MAJOR MALE PELVIC PROCEDURES W CC*1.249331.326.0
335MAJOR MALE PELVIC PROCEDURES W/O CC*0.828423.319.4
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336TRANSURETHRAL PROSTATECTOMY W CC 30.828423.319.4
337TRANSURETHRAL PROSTATECTOMY W/O CC*0.665521.918.2
338TESTES PROCEDURES, FOR MALIGNANCY*0.665521.918.2
339TESTES PROCEDURES, NON-MALIGNANCY AGE >17 10.405516.814.0
340TESTES PROCEDURES, NON-MALIGNANCY AGE 0-17*0.405516.814.0
341PENIS PROCEDURES 20.665521.918.2
342CIRCUMCISION AGE >17 41.249331.326.0
343CIRCUMCISION AGE 0-170.405516.814.0
344OTHER MALE REPRODUCTIVE SYSTEM O.R. PROCEDURES FOR MALIGNANCY 41.249331.326.0
345OTHER MALE REPRODUCTIVE SYSTEM O.R. PROC EXCEPT FOR MALIGNANCY 30.828423.319.4
346MALIGNANCY, MALE REPRODUCTIVE SYSTEM, W CC0.707021.618.0
347MALIGNANCY, MALE REPRODUCTIVE SYSTEM, W/O CC 20.665521.918.2
348BENIGN PROSTATIC HYPERTROPHY W CC 10.405516.814.0
349BENIGN PROSTATIC HYPERTROPHY W/O CC*0.405516.814.0
350INFLAMMATION OF THE MALE REPRODUCTIVE SYSTEM0.605819.916.5
351STERILIZATION, MALE*0.405516.814.0
352OTHER MALE REPRODUCTIVE SYSTEM DIAGNOSES 30.828423.319.4
353PELVIC EVISCERATION, RADICAL HYSTERECTOMY & RADICAL VULVECTOMY*1.878346.338.5
354UTERINE, ADNEXA PROC FOR NON-OVARIAN/ADNEXAL MALIG W CC*1.249331.326.0
355UTERINE, ADNEXA PROC FOR NON-OVARIAN/ADNEXAL MALIG W/O CC*1.249331.326.0
356FEMALE REPRODUCTIVE SYSTEM RECONSTRUCTIVE PROCEDURES*1.249331.326.0
357UTERINE & ADNEXA PROC FOR OVARIAN OR ADNEXAL MALIGNANCY*1.249331.326.0
358UTERINE & ADNEXA PROC FOR NON-MALIGNANCY W CC 51.878346.338.5
359UTERINE & ADNEXA PROC FOR NON-MALIGNANCY W/O CC 10.405516.814.0
360VAGINA, CERVIX & VULVA PROCEDURES 10.405516.814.0
361LAPAROSCOPY & INCISIONAL TUBAL INTERRUPTION*0.665521.918.2
362ENDOSCOPIC TUBAL INTERRUPTION*0.665521.918.2
363D&C, CONIZATION & RADIO-IMPLANT, FOR MALIGNANCY*0.828423.319.4
364D&C, CONIZATION EXCEPT FOR MALIGNANCY*0.665521.918.2
365OTHER FEMALE REPRODUCTIVE SYSTEM O.R. PROCEDURES 51.878346.338.5
366MALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W CC0.965423.919.9
367MALIGNANCY, FEMALE REPRODUCTIVE SYSTEM W/O CC 30.828423.319.4
368INFECTIONS, FEMALE REPRODUCTIVE SYSTEM 41.249331.326.0
369MENSTRUAL & OTHER FEMALE REPRODUCTIVE SYSTEM DISORDERS 20.665521.918.2
370CESAREAN SECTION W CC*0.828423.319.4
371CESAREAN SECTION W/O CC*0.665521.918.2
372VAGINAL DELIVERY W COMPLICATING DIAGNOSES*0.665521.918.2
373VAGINAL DELIVERY W/O COMPLICATING DIAGNOSES*0.405516.814.0
374VAGINAL DELIVERY W STERILIZATION &/OR D&C*0.405516.814.0
375VAGINAL DELIVERY W O.R. PROC EXCEPT STERIL &/OR D&C*0.405516.814.0
376POSTPARTUM & POST ABORTION DIAGNOSES W/O O.R. PROCEDURE*0.405516.814.0
377POSTPARTUM & POST ABORTION DIAGNOSES W O.R. PROCEDURE*0.405516.814.0
378ECTOPIC PREGNANCY*0.665521.918.2
379THREATENED ABORTION*0.405516.814.0
380ABORTION W/O D&C*0.405516.814.0
381ABORTION W D&C, ASPIRATION CURETTAGE OR HYSTEROTOMY*0.405516.814.0
382FALSE LABOR*0.405516.814.0
383OTHER ANTEPARTUM DIAGNOSES W MEDICAL COMPLICATIONS*0.405516.814.0
384OTHER ANTEPARTUM DIAGNOSES W/O MEDICAL COMPLICATIONS*0.405516.814.0
385NEONATES, DIED OR TRANSFERRED TO ANOTHER ACUTE CARE FACILITY*0.405516.814.0
386EXTREME IMMATURITY*0.665521.918.2
387PREMATURITY W MAJOR PROBLEMS*0.665521.918.2
388PREMATURITY W/O MAJOR PROBLEMS*0.405516.814.0
389FULL TERM NEONATE W MAJOR PROBLEMS 41.249331.326.0
390NEONATE W OTHER SIGNIFICANT PROBLEMS*0.665521.918.2
391NORMAL NEWBORN*0.405516.814.0
392SPLENECTOMY AGE >17*0.828423.319.4
393SPLENECTOMY AGE 0-17*0.665521.918.2
394OTHER O.R. PROCEDURES OF THE BLOOD AND BLOOD FORMING ORGANS 51.878346.338.5
395RED BLOOD CELL DISORDERS AGE >170.858425.120.9
396RED BLOOD CELL DISORDERS AGE 0-17*0.405516.814.0
397COAGULATION DISORDERS0.756719.416.1
398RETICULOENDOTHELIAL & IMMUNITY DISORDERS W CC0.900823.419.5
399RETICULOENDOTHELIAL & IMMUNITY DISORDERS W/O CC 10.405516.814.0
400LYMPHOMA & LEUKEMIA W MAJOR O.R. PROCEDURE 30.828423.319.4
401LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC W CC 41.249331.326.0
Start Printed Page 11291
402LYMPHOMA & NON-ACUTE LEUKEMIA W OTHER O.R. PROC W/O CC*0.828423.319.4
403LYMPHOMA & NON-ACUTE LEUKEMIA W CC0.965123.919.9
404LYMPHOMA & NON-ACUTE LEUKEMIA W/O CC0.898019.115.9
405ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE 0-17*0.665521.918.2
406MYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ O.R.PROC W CC 51.878346.338.5
407MYELOPROLIF DISORD OR POORLY DIFF NEOPL W MAJ O.R.PROC W/O CC*0.828423.319.4
408MYELOPROLIF DISORD OR POORLY DIFF NEOPL W OTHER O.R.PROC 41.249331.326.0
409RADIOTHERAPY0.522019.516.2
410CHEMOTHERAPY W/O ACUTE LEUKEMIA AS SECONDARY DIAGNOSIS 10.405516.814.0
411HISTORY OF MALIGNANCY W/O ENDOSCOPY*0.405516.814.0
412HISTORY OF MALIGNANCY W ENDOSCOPY*0.405516.814.0
413OTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL DIAG W CC 70.906123.719.7
414OTHER MYELOPROLIF DIS OR POORLY DIFF NEOPL DIAG W/O CC 70.906123.719.7
415O.R. PROCEDURE FOR INFECTIOUS & PARASITIC DISEASES1.493338.732.2
416SEPTICEMIA AGE >170.961225.921.5
417SEPTICEMIA AGE 0-17*0.828423.319.4
418POSTOPERATIVE & POST-TRAUMATIC INFECTIONS0.877125.821.5
419FEVER OF UNKNOWN ORIGIN AGE >17 W CC0.594820.517.0
420FEVER OF UNKNOWN ORIGIN AGE >17 W/O CC 10.405516.814.0
421VIRAL ILLNESS AGE >17 41.249331.326.0
422VIRAL ILLNESS & FEVER OF UNKNOWN ORIGIN AGE 0-17*0.405516.814.0
423OTHER INFECTIOUS & PARASITIC DISEASES DIAGNOSES0.870124.720.5
424O.R. PROCEDURE W PRINCIPAL DIAGNOSES OF MENTAL ILLNESS 51.878346.338.5
425ACUTE ADJUSTMENT REACTION & PSYCHOLOGICAL DYSFUNCTION0.617726.021.6
426DEPRESSIVE NEUROSES0.573926.922.4
427NEUROSES EXCEPT DEPRESSIVE 20.665521.918.2
428DISORDERS OF PERSONALITY & IMPULSE CONTROL 41.249331.326.0
429ORGANIC DISTURBANCES & MENTAL RETARDATION0.546625.020.8
430PSYCHOSES0.447922.919.0
431CHILDHOOD MENTAL DISORDERS0.434522.718.9
432OTHER MENTAL DISORDER DIAGNOSES 20.665521.918.2
433ALCOHOL/DRUG ABUSE OR DEPENDENCE, LEFT AMA0.248913.110.9
439SKIN GRAFTS FOR INJURIES1.320042.535.4
440WOUND DEBRIDEMENTS FOR INJURIES1.356740.133.4
441HAND PROCEDURES FOR INJURIES*0.665521.918.2
442OTHER O.R. PROCEDURES FOR INJURIES W CC1.644239.733.0
443OTHER O.R. PROCEDURES FOR INJURIES W/O CC 20.665521.918.2
444TRAUMATIC INJURY AGE >17 W CC0.961430.725.5
445TRAUMATIC INJURY AGE >17 W/O CC0.844827.322.7
446TRAUMATIC INJURY AGE 0-17*0.828423.319.4
447ALLERGIC REACTIONS AGE >17 20.665521.918.2
448ALLERGIC REACTIONS AGE 0-17*0.405516.814.0
449POISONING & TOXIC EFFECTS OF DRUGS AGE >17 W CC 30.828423.319.4
450POISONING & TOXIC EFFECTS OF DRUGS AGE >17 W/O CC 20.665521.918.2
451POISONING & TOXIC EFFECTS OF DRUGS AGE 0-17*0.405516.814.0
452COMPLICATIONS OF TREATMENT W CC0.959625.521.2
453COMPLICATIONS OF TREATMENT W/O CC0.666623.119.2
454OTHER INJURY, POISONING & TOXIC EFFECT DIAG W CC 30.828423.319.4
455OTHER INJURY, POISONING & TOXIC EFFECT DIAG W/O CC 10.405516.814.0
461O.R. PROC W DIAGNOSES OF OTHER CONTACT W HEALTH SERVICES1.338338.031.6
462REHABILITATION0.646923.519.5
463SIGNS & SYMPTOMS W CC0.761826.822.3
464SIGNS & SYMPTOMS W/O CC0.623424.320.2
465AFTERCARE W HISTORY OF MALIGNANCY AS SECONDARY DIAGNOSIS 30.828423.319.4
466AFTERCARE W/O HISTORY OF MALIGNANCY AS SECONDARY DIAGNOSIS0.811923.919.9
467OTHER FACTORS INFLUENCING HEALTH STATUS 20.665521.918.2
468EXTENSIVE O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS2.217745.537.9
469PRINCIPAL DIAGNOSIS INVALID AS DISCHARGE DIAGNOSIS 60.00000.00.0
470UNGROUPABLE 60.00000.00.0
471BILATERAL OR MULTIPLE MAJOR JOINT PROCS OF LOWER EXTREMITY*1.878346.338.5
473ACUTE LEUKEMIA W/O MAJOR O.R. PROCEDURE AGE >170.804717.114.2
475RESPIRATORY SYSTEM DIAGNOSIS WITH VENTILATOR SUPPORT2.090635.529.5
476PROSTATIC O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS 51.878346.338.5
477NON-EXTENSIVE O.R. PROCEDURE UNRELATED TO PRINCIPAL DIAGNOSIS1.679139.733.0
478OTHER VASCULAR PROCEDURES W CC1.624437.831.5
479OTHER VASCULAR PROCEDURES W/O CC 20.665521.918.2
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480LIVER TRANSPLANT 60.00000.00.0
481BONE MARROW TRANSPLANT*1.878346.338.5
482TRACHEOSTOMY FOR FACE, MOUTH & NECK DIAGNOSES*0.665521.918.2
483TRACH W MECH VENT 96+ HRS OR PDX EXCEPT FACE, MOUTH & NECK DIAG3.231954.645.5
484CRANIOTOMY FOR MULTIPLE SIGNIFICANT TRAUMA*1.878346.338.5
485LIMB REATTACHMENT, HIP AND FEMUR PROC FOR MULTIPLE SIGNIFICANT TR*1.878346.338.5
486OTHER O.R. PROCEDURES FOR MULTIPLE SIGNIFICANT TRAUMA 30.828423.319.4
487OTHER MULTIPLE SIGNIFICANT TRAUMA1.088529.524.5
488HIV W EXTENSIVE O.R. PROCEDURE 51.878346.338.5
489HIV W MAJOR RELATED CONDITION0.884622.919.0
490HIV W OR W/O OTHER RELATED CONDITION0.695220.417.0
491MAJOR JOINT & LIMB REATTACHMENT PROCEDURES OF UPPER EXTREMITY*1.878346.338.5
492CHEMOTHERAPY W ACUTE LEUKEMIA AS SECONDARY DIAGNOSIS 30.828423.319.4
493LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W CC 30.828423.319.4
494LAPAROSCOPIC CHOLECYSTECTOMY W/O C.D.E. W/O CC 10.405516.814.0
495LUNG TRANSPLANT 60.00000.00.0
496COMBINED ANTERIOR/POSTERIOR SPINAL FUSION*1.249331.326.0
497SPINAL FUSION W CC 51.878346.338.5
498SPINAL FUSION W/O CC 30.828423.319.4
499BACK & NECK PROCEDURES EXCEPT SPINAL FUSION W CC 51.878346.338.5
500BACK & NECK PROCEDURES EXCEPT SPINAL FUSION W/O CC*0.828423.319.4
501KNEE PROCEDURES W PDX OF INFECTION W CC 51.878346.338.5
502KNEE PROCEDURES W PDX OF INFECTION W/O CC*0.828423.319.4
503KNEE PROCEDURES W/O PDX OF INFECTION 51.878346.338.5
504EXTENSIVE 3RD DEGREE BURNS W SKIN GRAFT*1.878346.338.5
505EXTENSIVE 3RD DEGREE BURNS W/O SKIN GRAFT 41.249331.326.0
506FULL THICKNESS BURN W SKIN GRAFT OR INHAL INJ W CC OR SIG TRAUMA 51.878346.338.5
507FULL THICKNESS BURN W SKIN GRFT OR INHAL INJ W/O CC OR SIG TRAUMA*0.828423.319.4
508FULL THICKNESS BURN W/O SKIN GRFT OR INHAL INJ W CC OR SIG TRAUMA 30.828423.319.4
509FULL THICKNESS BURN W/O SKIN GRFT OR INH INJ W/O CC OR SIG TRAUMA 30.828423.319.4
510NON-EXTENSIVE BURNS W CC OR SIGNIFICANT TRAUMA1.073432.226.8
511NON-EXTENSIVE BURNS W/O CC OR SIGNIFICANT TRAUMA 30.828423.319.4
512SIMULTANEOUS PANCREAS/KIDNEY TRANSPLANT 60.00000.00.0
513PANCREAS TRANSPLANT 60.00000.00.0
514CARDIAC DEFIBRILATOR IMPLANT W CARDIAC CATH*0.828423.319.4
515CARDIAC DEFIBRILATOR IMPLANT W/O CARDIAC CATH 41.249331.326.0
516PERCUTANEOUS CARDIVASCULAR PROCEDURE W AMI*0.828423.319.4
517PERCUTANEOUS CARDIVASCULAR PROC W NON-DRUG ELUTING STENT W/O AMI 51.878346.338.5
518PERCUTANEOUS CARDIVASCULAR PROC W/O CORONARY ARTERY STENT OR AMI 41.249331.326.0
519CERVICAL SPINAL FUSION W CC 30.828423.319.4
520CERVICAL SPINAL FUSION W/O CC 20.665521.918.2
521ALCOHOL/DRUG ABUSE OR DEPENDENCE W CC0.375518.615.5
522ALCOHOL/DRUG ABUSE OR DEPENDENCE W REHABILITATION THERAPY W/O CC 10.405516.814.0
523ALCOHOL/DRUG ABUSE OR DEPENDENCE W/O REHABILITATION THERAPY W/O CC0.386021.217.6
524TRANSIENT ISCHEMIA0.625023.119.2
525HEART ASSIST SYSTEM IMPLANT*1.878346.338.5
526PERCUTANEOUS CARVIOVASCULAR PROC W DRUG-ELUTING STENT W AMI*0.828423.319.4
527PERCUTANEOUS CARVIOVASCULAR PROC W DRUG-ELUTING STENT W/O AMI*0.828423.319.4
* Relative weights for these LTC-DRGs were determined by assigning these cases to the appropriate low volume quintile because they had no LTCH cases in the FY 2001 MedPAR.
1 Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile 1.
2 Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile 2.
3 Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile 3.
4 Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile 4.
5 Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile 5.
6 Relative weights for these LTC-DRGs were assigned a value of 0.0.
7 Relative weights for these LTC-DRGs were determined after adjusting to account for nonmonotonically (see step 5 above).
End Part End Supplemental Information

[FR Doc. 03-5206 Filed 3-3-03; 10:29 am]

BILLING CODE 4120-01-P