Académique Documents
Professionnel Documents
Culture Documents
Book 2 of 2 Books
Pages 23995–24550
Part II
Department of
Health and Human
Services
Centers for Medicare & Medicaid Services
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23996 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
DEPARTMENT OF HEALTH AND community hospitals and Medicare- (Because access to the interior of the
HUMAN SERVICES dependent, small rural hospitals; and Hubert H. Humphrey Building is not
provisions governing emergency readily available to persons without
Centers for Medicare & Medicaid services under the Emergency Medical Federal Government identification,
Services Treatment and Labor Act of 1986 commenters are encouraged to leave
(EMTALA). their comments in the CMS drop slots
42 CFR Parts 409, 410, 412, 413, 424, We are also inviting comments on a located in the main lobby of the
485, and 489 number of issues including building. A stamp-in clock is available
[CMS–1488–P]
performance-based hospital payments for persons wishing to retain proof of
for services and health information filing by stamping in and retaining an
RIN 0938–AO12 technology, as well as how to improve extra copy of the comments being filed.)
data transparency for consumers. Comments mailed to the addresses
Medicare Program; Proposed Changes
DATES: To be assured consideration, indicated as appropriate for hand or
to the Hospital Inpatient Prospective
comments must be received at one of courier delivery may be delayed and
Payment Systems and Fiscal Year 2007
the addresses provided below, no later received after the comment period.
Rates Submission of comments on
than 5 p.m. on June 12, 2006.
AGENCY: Centers for Medicare & ADDRESSES: In commenting, please refer paperwork requirements. You may
Medicaid Services (CMS), HHS. to file code CMS–1488–P. Because of submit comments on this document’s
ACTION: Proposed rule. staff and resource limitations, we cannot paperwork requirements by mailing
accept comments by facsimile (FAX) your comments to the addresses
SUMMARY: We are proposing to revise the transmission. provided at the end of the ‘‘Collection
Medicare hospital inpatient prospective You may submit comments in one of of Information Requirements’’ section in
payment systems (IPPS) for operating three ways (no duplicates, please): this document.
and capital-related costs to implement 1. Electronically. You may submit For information on viewing public
changes arising from our continuing electronic comments on specific issues comments, see the beginning of the
experience with these systems, and to in this regulation to http:// SUPPLEMENTARY INFORMATION section.
implement a number of changes made www.cms.hhs.gov/eRulemaking. Click FOR FURTHER INFORMATION CONTACT:
by the Deficit Reduction Act of 2005 on the link ‘‘Submit electronic Marc Hartstein, (410) 786–4548,
(Pub. L. 109–171). In addition, in the comments on CMS regulations with an Operating Prospective Payment,
Addendum to this proposed rule, we open comment period’’. (Attachments Diagnosis-Related Groups (DRGs),
describe the proposed changes to the should be in Microsoft Word, Wage Index, New Medical Services
amounts and factors used to determine WordPerfect, or Excel; however, we and Technology Add-On Payments,
the rates for Medicare hospital inpatient prefer Microsoft Word.) Hospital Geographic Reclassifications,
services for operating costs and capital- 2. By regular mail. You may mail Sole Community Hospital,
related costs. We also are setting forth written comments (one original and two Disproportionate Share Hospital, and
proposed rate-of-increase limits as well copies) to the following address ONLY: Medicare-Dependent, Small Rural
as proposed policy changes for hospitals Centers for Medicare & Medicaid Hospital Issues.
and hospital units excluded from the Services, Department of Health and Tzvi Hefter, (410) 786–4487, Capital
IPPS that are paid in full or in part on Human Services, Attention: CMS–1488– Prospective Payment, Excluded
a reasonable cost basis subject to these P, P.O. Box 8011, Baltimore, MD 21244– Hospitals, Graduate Medical
limits. These proposed changes would 1850. Education, Critical Access Hospitals,
be applicable to discharges occurring on Please allow sufficient time for mailed and Long-Term Care (LTC)–DRG
or after October 1, 2006. comments to be received before the Issues.
In this proposed rule, we discuss our close of the comment period. Siddhartha Mazumdar, (410) 786–6673,
proposals to refine the diagnosis-related 3. By express or overnight mail. You Rural Community Hospital
group (DRG) system under the IPPS to may send written comments (one Demonstration Issues.
better recognize severity of illness original and two copies) to the following Sheila Blackstock, (410) 786–3502,
among patients—for FY 2007, we are address ONLY: Centers for Medicare & Quality Data for Annual Payment
proposing to use a hospital-specific Medicaid Services, Department of Update Issues.
relative value cost center weighting Health and Human Services, Attention: Thomas Valuck, (410) 786–7479,
methodology to adjust DRG relative CMS–1488–P, Mail Stop C4–26–05, Hospital Value-Based Purchasing
weights and in FY 2008 (if not earlier), 7500 Security Boulevard, Baltimore, MD Issues.
to implement consolidated severity- 21244–1850. Frederick Grabau, (410) 786–0206,
adjusted DRGs or alternative severity 4. By hand or courier. If you prefer, Services in Foreign Hospitals Issues.
adjustment methods. you may deliver (by hand or courier) Brian Reitz, (410) 786–5001, Obsolete
Among the other policy changes that your written comments (one original Paper Claims Forms Issues.
we are proposing to make are changes and two copies) before the close of the SUPPLEMENTARY INFORMATION:
related to: limited revisions of the comment period to one of the following Submitting Comments: We welcome
reclassification of cases to DRGs; the addresses. If you intend to deliver your comments from the public on all issues
long-term care (LTC)–DRGs and relative comments to the Baltimore address, set forth in this rule to assist us in fully
weights; the wage data, including the please call telephone number (410) 786– considering issues and developing
occupational mix data, used to compute 7195 in advance to schedule your policies. You can assist us by
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the wage index; applications for new arrival with one of our staff members. referencing the file code CMS–1488–P
technologies and medical services add- Room 445–G, Hubert H. Humphrey and the specific ‘‘issue identifier’’ that
on payments; payments to hospitals for Building, 200 Independence Avenue, precedes the section on which you
the direct and indirect costs of graduate SW., Washington, DC 20201, or 7500 choose to comment.
medical education; submission of Security Boulevard, Baltimore, MD Inspection of Public Comments: All
hospital quality data; payments to sole 21244–1850. comments received before the close of
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the comment period are available for Program] Benefits Improvement and HSRVcc Hospital-specific relative
viewing by the public, including any Protection Act of 2000, Public Law value cost center
personally identifiable or confidential 106–554 HQA Hospital Quality Alliance
business information that is included in BLS Bureau of Labor Statistics HQI Hospital Quality Initiative
a comment. We post all comments CAH Critical access hospital HwH Hospital-within-a-hospital
received before the close of the CART CMS Abstraction & Reporting ICD–9–CM International Classification
comment period on the following Web Tool of Diseases, Ninth Revision, Clinical
site as soon as possible after they have CBSAs Core-based statistical areas Modification
been received: http://www.cms.hhs.gov/ CC Complication or comorbidity ICD–10–PCS International
eRulemaking. Click on the link CDAC Clinical Data Abstraction Center Classification of Diseases, Tenth
‘‘Electronic Comments on CMS CIPI Capital input price index Edition, Procedure Coding System
Regulations’’ on that Web site to view CPI Consumer price index ICU Intensive care unit
public comments. CMI Case-mix index IHS Indian Health Service
Comments received timely will also CMS Centers for Medicare & Medicaid IME Indirect medical education
be available for public inspection as Services IOM Institute of Medicine
they are received, generally beginning CMSA Consolidated Metropolitan IPF Inpatient psychiatric facility
approximately 3 weeks after publication Statistical Area IPPS Acute care hospital inpatient
of a document, at the headquarters of COBRA Consolidated Omnibus prospective payment system
the Centers for Medicare & Medicaid Reconciliation Act of 1985, Public IRF Inpatient rehabilitation facility
Services, 7500 Security Boulevard, Law 99–272 JCAHO Joint Commission on
Baltimore, Maryland 21244, Monday CPI Consumer price index Accreditation of Healthcare
through Friday of each week from 8:30 CRNA Certified registered nurse Organizations
a.m. to 4 p.m. To schedule an anesthetist LAMCs Large area metropolitan
appointment to view public comments, CY Calendar year counties
phone 1–800–743–3951. DRA Deficit Reduction Act of 2005, LTC–DRG Long-term care diagnosis-
Public Law 109–171 related group
Electronic Access
DRG Diagnosis-related group LTCH Long-term care hospital
This Federal Register document is DSH Disproportionate share hospital MCE Medicare Code Editor
also available from the Federal Register ECI Employment cost index MCO Managed care organization
online database through GPO Access, a EMR Electronic medical record MCV Major cardiovascular condition
service of the U.S. Government Printing EMTALA Emergency Medical MDC Major diagnostic category
Office. Free public access is available on Treatment and Labor Act of 1986, MDH Medicare-dependent, small rural
a Wide Area Information Server (WAIS) Public Law 99–272 hospital
through the Internet and via FDA Food and Drug Administration MedPAC Medicare Payment Advisory
asynchronous dial-in. Internet users can FFY Federal fiscal year Commission
access the database by using the World FIPS Federal information processing MedPAR Medicare Provider Analysis
Wide Web; the Superintendent of standards and Review File
Documents’ home page address is FQHC Federally qualified health MEI Medicare Economic Index
http://www.gpoaccess.gov/, by using center MGCRB Medicare Geographic
local WAIS client software, or by telnet FTE Full-time equivalent Classification Review Board
to swais.access.gpo.gov, then login as FY Fiscal year MMA Medicare Prescription Drug,
guest (no password required). Dial-in GAAP Generally Accepted Accounting Improvement, and Modernization Act
users should use communications Principles of 2003, Public Law 108–173
software and modem to call (202) 512– GAF Geographic Adjustment Factor MRHFP Medicare Rural Hospital
1661; type swais, then login as guest (no GME Graduate medical education Flexibility Program
password required). HCAHPS Hospital Consumer MSA Metropolitan Statistical Area
Acronyms Assessment of Healthcare Providers NAICS North American Industrial
and Systems Classification System
AHA American Hospital Association HCFA Health Care Financing NCD National coverage determination
AHIMA American Health Information Administration NCHS National Center for Health
Management Association HCRIS Hospital Cost Report Statistics
AHRO Agency for Health Care Information System NCQA National Committee for Quality
Research and Quality HHA Home health agency Assurance
AMI Acute myocardial infarction HHS Department of Health and
AOA American Osteopathic NCVHS National Committee on Vital
Human Services and Health Statistics
Association
APR DRG All Patient Refined HIC Health insurance card NECMA New England County
Diagnosis Related Group System HIPAA Health Insurance Portability Metropolitan Areas
ASC Ambulatory surgical center and Accountability Act of 1996, NICU Neonatal intensive care unit
ASP Average sales price Public Law 104–191 NQF National Quality Forum
AWP Average wholesale price HIPC Health Information Policy NTIS National Technical Information
BBA Balanced Budget Act of 1997, Council Service
Public Law 105–33 HIS Health information system NVHRI National Voluntary Hospital
BBRA Medicare, Medicaid, and SCHIP HIT Health information technology Reporting Initiative
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[State Children’s Health Insurance HMO Health maintenance OES Occupational employment
Program] Balanced Budget organization statistics
Refinement Act of 1999, Public Law HSA Health savings account OIG Office of the Inspector General
106–113 HSCRC Maryland Health Services Cost OMB Executive Office of Management
BIPA Medicare, Medicaid, and SCHIP Review Commission and Budget
[State Children’s Health Insurance HSRV Hospital-specific relative value O.R. Operating room
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OSCAR Online Survey Certification 7. Payment for Blood Clotting Factor d. Manifestations Not Allowed as Principal
and Reporting (System) Administered to Inpatients With Diagnosis Edit
PRM Provider Reimbursement Manual Hemophilia e. Nonspecific Principal Diagnosis Edit
PPI Producer price index 8. Limitation on Payments to Skilled f. Unacceptable Principal Diagnosis Edit
Nursing Facilities for Bad Debt g. Nonspecific O.R. Procedures Edit
PMSAs Primary metropolitan
9. Determining Proposed Prospective h. Noncovered Procedures Edit
statistical areas Payment Operating and Capital Rates i. Bilateral Procedure Edit
PPS Prospective payment system and Rate-of-Increase Limits 7. Surgical Hierarchies
PRA Per resident amount 10. Impact Analysis 8. Refinement of Complications and
ProPAC Prospective Payment 11. Recommendation of Update Factors for Comorbidities (CC) List
Assessment Commission Operating Cost Rates of Payment for a. Background
PRRB Provider Reimbursement Inpatient Hospital Services b. Comprehensive Review of the CC List
Review Board 12. Discussion of Medicare Payment c. CC Exclusions List Proposed for FY 2007
PS&R Provider Statistical and Advisory Commission Recommendations 9. Review of Procedure Codes in DRGs 468,
Reimbursement (System) 13. Appendix C—Combinations of 476, and 477
QIG Quality Improvement Group, CMS Consolidated Severity-Adjusted DRGs a. Moving Procedure Codes From DRG 468
and Appendix D—Crosswalk of or DRG 477 to MDCs
QIO Quality Improvement Consolidated Severity-Adjusted DRGs to b. Reassignment of Procedures Among
Organization Respective APR DRGs DRGs 468, 476, and 477
RHC Rural health clinic II. Proposed Changes to DRG Classifications c. Adding Diagnosis or Procedure Codes to
RHQDAPU Reporting hospital quality and Relative Weights MDCs
data for annual payment update A. Background 10. Changes to the ICD–9–CM Coding
RNHCI Religious Nonmedical Health B. DRG Reclassifications System
care Institution 1. General E. Proposed Recalibration of DRG Weights
RRC Rural referral center 2. Yearly Review for Making DRG Changes F. Proposed LTC–DRG Reclassifications
RUCAs Rural-urban commuting area 3. Refinement of DRGs Based on Severity and Relative Weights for LTCHs for FY
codes of Illness 2007
RY Rate year C. Proposals for Revisions to the DRG 1. Background
System Used Under the IPPS 2. Proposed Changes in the LTC–DRG
SAF Standard Analytic File
1. MedPAC Recommendations Classifications
SCH Sole community hospital 2. Refinement of the Relative Weight a. Background
SFY State fiscal year Calculation b. Patient Classifications into DRGs
SIC Standard Industrial Classification 3. Refinement of DRGs Based on Severity 3. Development of the Proposed FY 2007
SNF Skilled nursing facility of Illness LTC–DRG Relative Weights
SOCs Standard occupational a. Comparison of the CMS DRG System and a. General Overview of Development of the
classifications the APR DRG System LTC–DRG Relative Weights
SOM State Operations Manual b. Consolidated Severity-Adjusted DRGs b. Data
SSA Social Security Administration for Use in the IPPS c. Hospital-Specific Relative Value
SSI Supplemental Security Income c. Changes to Case-Mix Index (CMI) From Methodology
TAG Technical Advisory Group a New DRG System d. Proposed Low-Volume LTC–DRGs
TEFRA Tax Equity and Fiscal 4. Effect of Consolidated Severity-Adjusted 4. Steps for Determining the Proposed FY
DRGs on the Outlier Threshold 2007 LTC–DRG Relative Weights
Responsibility Act of 1982, Pub. L.
5. Impact of Refinement of DRG System on G. Proposed Add-On Payments for New
97–248 Payments Services and Technologies
UHDDS Uniform hospital discharge 6. Conclusions 1. Background
data set D. Proposed Changes to Specific DRG 2. Public Input Before Publication of This
Classifications Notice of Proposed Rulemaking on Add-
Table of Contents
1. Pre-MDCs: Pancreas Transplants On Payments
I. Background 2. MDC 1 (Diseases and Disorders of the 3. FY 2007 Status of Technologies
A. Summary Nervous System) Approved for FY 2006 Add-On Payments
1. Acute Care Hospital Inpatient a. Implantation of Intracranial a. Kinetra Implantable Neurostimulator
Prospective Payment System (IPPS) Neurostimulator System for Deep Brain for Deep Brain Stimulation
2. Hospitals and Hospital Units Excluded Stimulation (DBS) b. Endovascular Graft Repair of the
From the IPPS b. Carotid Artery Stents Thoracic Aorta
a. Inpatient Rehabilitation Facilities (IRFs) 3. MDC 5 (Diseases and Disorders of the c. Restore Rechargeable Implantable
b. Long-Term Care Hospitals (LTCHs) Circulatory System) Neurostimulator
c. Inpatient Psychiatric Facilities (IPFs) a. Insertion of Epicardial Leads for 4. FY 2007 Applicants for New Technology
3. Critical Access Hospitals (CAHs) Defibrillator Devices Add-On Payments
4. Payments for Graduate Medical b. Application of Major Cardiovascular a. C-Port Distal Anastomosis System
Education (GME) Diagnoses (MCVs) List to Defibrillator b. NovoSeven for Intracerebral
B. Provisions of the Deficit Reduction Act DRGs Hemorrhage
of 2005 (DRA) 4. MDC 8 (Diseases and Disorders of the c. X STOP Interspinous Process
C. Major Contents of this Proposed Rule Musculoskeletal System and Connective Decompression System
1. Proposed DRG Reclassifications and Tissue) III. Proposed Changes to the Hospital Wage
Recalibrations of Relative Weights a. Hip and Knee Replacements Index
2. Proposed Changes to the Hospital Wage b. Spinal Fusion A. Background
Index c. ChariteTM Spinal Disc Replacement B. Core-Based Statistical Areas for the
3. Other Decisions and Proposed Changes Device Proposed Hospital Wage Index
to the IPPS for Operating Costs and GME 5. MDC 18 (Infectious and Parasitic C. Proposed Occupational Mix Adjustment
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D. Worksheet S–3 Wage Data for the D. Rural Referral Centers B. Treatment of Certain Urban Hospitals
Proposed FY 2007 Wage Index Update 1. Case-Mix Index Reclassified as Rural Hospitals Under
E. Verification of Worksheet S–3 Wage 2. Discharges § 412.103
Data E. Indirect Medical Education (IME) C. Other Technical Corrections Relating to
F. Computation of the Proposed FY 2007 Adjustment the Capital PPS Geographic Adjustment
Unadjusted Wage Index 1. Background Factors
G. Computation of the Proposed FY 2007 2. IME Adjustment Factor for FY 2007 VI. Proposed Changes for Hospitals and
Blended Wage Index 3. Technical Change to Revise Cross- Hospital Units Excluded From the IPPS
H. Proposed Revisions to the Wage Index Reference A. Payments to Existing Hospitals and
Based on Hospital Redesignations F. Payment Adjustment for Hospital Units
1. General Disproportionate Share Hospitals (DSHs) 1. Payments to Existing Excluded Hospitals
2. Effects of Reclassification 1. Background and Hospital Units
3. FY 2007 MGCRB Reclassifications 2. Technical Corrections 2. Separate PPS for IRFs
4. Proposed FY 2007 Redesignations Under 3. Proposed Reinstatement of Inadvertently 3. Separate PPS for LTCHs
Section 1886(d)(8)(B) of the Act Deleted Provisions on DSH Payment 4. Separate PPS for IPFs
5. Reclassifications Under Section 508 of Adjustment Factors 5. Grandfathering of Hospitals-Within-
Pub. L. 108–173 4. Enhanced DSH Adjustment for MDHs Hospitals (HwHs) and Satellite Facilities
6. Proposed Wage Indices for Reclassified G. Geographic Reclassifications 6. Proposed Changes to the Methodology
Hospitals and Proposed Reclassification 1. Background for Determining LTCH Cost-to-Charge
Budget Neutrality Factor 2. Reclassifications under Section 508 of Ratios (CCRs) and the Reconciliation of
I. Proposed FY 2007 Wage Index Pub. L. 108–173 High-Cost and Short-Stay Outlier
Adjustment Based on Commuting 3. Multicampus Hospitals Payments Under the LTCH PPS
Patterns of Hospital Employees 4. Urban Group Hospital Reclassifications a. Background
J. Process for Requests for Wage Index Data 5. Effect of Change of Ownership on Urban b. High-Cost Outliers
Corrections County Group Reclassifications c. Short-Stay Outliers
K. Labor-Related Share for the Wage Index 6. Requested Reclassification for Hospitals 7. Technical Corrections Relating to LTCHs
for FY 2007 Located in a Single Hospital MSA 8. Proposed Cross-Reference Correction in
L. Proxy for the Hospital Market Basket Surrounded by Rural Counties Authority Citations for 42 CFR 412 and
IV. Other Decisions and Proposed Changes to H. Payment for Direct Graduate Medical 413
the IPPS for Operating Costs and GME Education B. Critical Access Hospitals (CAHs)
Costs 1. Background 1. Background
2. Sunset of Designation of CAHs as
A. Reporting of Hospital Quality Data for 2. Determination of Weighted Average Per
Necessary Providers: Technical
Annual Hospital Payment Update Resident Amounts (PRAs) for Merged
Correction
1. Background Teaching Hospitals
VII. Payment for Services Furnished Outside
2. New Procedures for Hospital Reporting 3. Determination of Per Resident Amounts
the United States
of Quality Data (PRAs) for New Teaching Hospitals
A. Background
3. Electronic Medical Records 4. Requirements for Counting and B. Proposed Clarification of Regulations
B. Value-Based Purchasing Appropriate Documentation of FTE VIII. Payment for Blood Clotting Factor
1. Introduction Residents: Clarification Administered to Inpatients With
2. Premier Hospital Quality Incentive 5. Resident Time Spent in Nonpatient Care Hemophilia
Demonstration Activities as Part of Approved Residency IX. Limitation on Payments to Skilled
3. RHQDAPU Program Programs Nursing Facilities for Bad Debt
a. Section 501(b) of Pub. L. 108–173 6. Medicare GME Affiliated Groups: A. Background
(MMA) Technical Changes to Regulations B. Changes Made by Section 5004 of the
b. Section 5001(a) of Pub. L. 109–171 I. Payment for the Costs of Nursing and DRA
(DRA) Allied Health Education Activities: C. Proposed Regulation Changes
4. Plan for Implementing Hospital Value- Clarification X. MedPAC Recommendations
Based Purchasing Beginning With FY J. Hospital Emergency Services Under XI. Other Required Information
2009 EMTALA A. Requests for Data From the Public
a. Measure Development and Refinement 1. Background B. Collection of Information Requirements
b. Data Infrastructure 2. Role of the EMTALA Technical C. Public Comments
c. Incentive Methodology Advisory Group (TAG) XII. Regulation Text
d. Public Reporting 3. Definition of ‘‘Labor’’ Addendum—Proposed Schedule of
5. Considerations Related to Certain 4. Application of EMTALA Requirements Standardized Amounts Effective With
Conditions, Including Hospital-Acquired to Hospitals Without Dedicated Discharges Occurring On or After
Infections Emergency Departments October 1, 2006 and Update Factors and
6. Promoting Effective Use of Health 5. Clarification of Reference to ‘‘Referral Rate-of-Increase Percentages Effective
Information Technology Centers’’ With Cost Reporting Periods Beginning
C. Sole Community Hospitals (SCHs) and K. Other Proposed Technical Changes on or After October 1, 2006
Medicare-Dependent, Small Rural 1. Proposed Cross-Reference Correction in I. Summary and Background
Hospitals (MDHs) Regulations on Limitations on II. Proposed Changes to Prospective Payment
1. Background Beneficiary Charges Rates for Hospital Inpatient Operating
2. Volume Decrease Adjustment for SCHs 2. Proposed Cross-Reference Corrections in Costs for FY 2007
and MDHs Regulations on Payment Denials Based A. Calculation of the Adjusted
a. HAS/Monitrend Data on Admissions and Quality Reviews Standardized Amount
b. HAS/Monitrend Data Book Replacement 3. Proposed Cross-Reference Correction in 1. Standardization of Base-Year Costs or
Alternative Regulations on Outlier Payments Target Amounts
3. Mandatory Reporting Requirements for 4. Removing References to Two Paper 2. Computing the Average Standardized
Any Changes in the Circumstances Claims Forms Amount
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Under Which a Hospital Was Designated L. Rural Community Hospital 3. Updating the Average Standardized
as an SCH or MDH Demonstration Program Amount
4. Proposed Payment Changes for MDHs M. Health Care Information Transparency 4. Other Adjustments to the Average
Under the DRA of 2005 Initiative Standardized Amount
a. Background V. Proposed Changes to the PPS for Capital- a. Recalibration of DRG Weights and
b. Proposed Regulation Changes Related Costs Updated Wage Index—Budget Neutrality
5. Proposed Technical Change A. Background Adjustment
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b. Reclassified Hospitals—Budget Table 1C—Adjusted Operating Under Section 508 of Pub. L. 108–173—
Neutrality Adjustment Standardized Amounts for Puerto Rico, FY 2007
c. Outliers Labor/Nonlabor Table 9C—Hospitals Redesignated as Rural
d. Rural Community Hospital Table 1D—Capital Standard Federal Under Section 1886(d)(8)(E) of the Act—
Demonstration Program Adjustment Payment Rate FY 2007
(Section 410A of Pub. L. 108–173) Table 2—Hospital Case-Mix Indexes for Table 10—Geometric Mean Plus the Lesser
5. Proposed FY 2007 Standardized Amount Discharges Occurring in Federal Fiscal of .75 of the National Adjusted Operating
B. Adjustments for Area Wage Levels and Year 2005; Hospital Wage Indexes for Standardized Payment Amount
Cost-of-Living Federal Fiscal Year 2007; Hospital (Increased to Reflect the Difference
1. Adjustment for Area Wage Levels Average Hourly Wage for Federal Fiscal Between Costs and Charges) or .75 of
2. Adjustment for Cost-of-Living in Alaska Years 2005 (2001 Wage Data), 2006 (2002 One Standard Deviation of Mean Charges
and Hawaii Wage Data), and 2007 (2003 Wage Data); by Diagnosis-Related Groups (DRGs)—
C. DRG Relative Weights Wage Indexes and 3-Year Average of March 2006
D. Calculation of the Proposed Prospective Hospital Average Hourly Wages Table 11—Proposed FY 2007 LTC–DRGs,
Payment Rates for FY 2007 Table 3A—FY 2007 and 3-Year Average
Relative Weights, Geometric Average
1. Federal Rate Hourly Wage for Urban Areas by CBSA
Length of Stay, and 5⁄6ths of the
2. Hospital-Specific Rate (Applicable Only Table 3B—FY 2007 and 3-Year Average
Geometric Average Length of Stay
to SCHs and MDHs) Hourly Wage for Rural Areas by CBSA
a. Calculation of Hospital-Specific Rate Table 4A–1—Wage Index and Capital Appendix A—Regulatory Impact Analysis
b. Updating the FY 1982, FY 1987, FY Geographic Adjustment Factor (GAF) for I. Overall Impact
1996, and FY 2002 Hospital-Specific Urban Areas by CBSA—FY2007 II. Objectives
Rates for FY 2007 Table 4A–2—Wage Index and Capital III. Limitations on Our Analysis
3. General Formula for Calculation of Geographic Adjustment Factor (GAF) for IV. Hospitals Included In and Excluded From
Proposed Prospective Payment Rates for Certain Urban Areas by CBSA for the the IPPS
Hospitals Located in Puerto Rico Period April 1 through September 30, V. Effects on Excluded Hospitals and
Beginning On or After October 1, 2006 2007 Hospital Units
and Before October 1, 2007 Table 4B—Wage Index and Capital VI. Quantitative Effects of the Proposed
a. Puerto Rico Rate Geographic Adjustment Factor (GAF) for Policy Changes Under the IPPS for
b. National Rate Rural Areas by CBSA—FY 2007 Operating Costs
III. Proposed Changes to Payment Rates for Table 4C–1—Wage Index and Capital A. Basis and Methodology of Estimates
Acute Care Hospital Inpatient Capital- Geographic Adjustment Factor (GAF) for B. Analysis of Table I
Related Costs for FY 2007 Hospitals That Are Reclassified by C. Effects on the Hospitals that Failed the
A. Determination of Proposed Federal CBSA—FY 2007 Quality Data Submission Process
Hospital Inpatient Capital-Related Table 4C–2—Wage Index and Capital (Column 2)
Prospective Payment Rate Update Geographic Adjustment Factor (GAF) for D. Effects of the DRA Provision Related to
1. Projected Capital Standard Federal Rate Certain Hospitals That Are Reclassified MDHs (Column 3)
Update by CBSA for the Period April 1 Through E. Effects of the Changes to the DRG
a. Description of the Update Framework September 30, 2007 Reclassifications and Relative Cost-Based
b. Comparison of CMS and MedPAC Table 4F—Puerto Rico Wage Index and Weights (Column 4)
Update Recommendation Capital Geographic Adjustment Factor F. Effects of Proposed Wage Index Changes
2. Proposed Outlier Payment Adjustment (GAF) by CBSA—FY 2007 (Column 5)
Factor Table 4J—Out-Migration Wage G. Combined Effects of Proposed DRG and
3. Proposed Budget Neutrality Adjustment Adjustment—FY 2007 Wage Index Changes, Including Budget
Factor for Changes in DRG Table 5—List of Diagnosis-Related Groups Neutrality Adjustment (Column 6)
Classifications and Weights and the GAF (DRGs), Relative Weighting Factors, and H. Effects of the 3-Year Provision Allowing
4. Proposed Exceptions Payment Geometric and Arithmetic Mean Length Urban Hospitals that Were Converted to
Adjustment Factor of Stay (LOS) Rural as a Result of the FY 2005 Labor
5. Proposed Capital Standard Federal Rate Table 6A—New Diagnosis Codes Market Area Changes to Maintain the
for FY 2007 Table 6B—New Procedure Codes Wage Index of the Urban Labor Market
6. Proposed Special Capital Rate for Puerto Table 6C—Invalid Diagnosis Codes
Area in Which They Were Formerly
Rico Hospitals Table 6D—Invalid Procedure Codes
Located (Column 7)
B. Calculation of the Proposed Inpatient Table 6E—Revised Diagnosis Code Titles
I. Effects of MGCRB Reclassifications
Capital-Related Prospective Payments for Table 6F—Revised Procedure Code Titles
(Column 8)
FY 2007 Table 6G—Additions to the CC Exclusions
J. Effects of the Proposed Wage Index
C. Capital Input Price Index List
1. Background Table 6H—Deletions from the CC Adjustment for Out-Migration (Column
2. Forecast of the CIPI for FY 2007 Exclusions List 9)
IV. Payment Rates for Excluded Hospitals Table 7A—Medicare Prospective Payment K. Effects of All Changes (Column 10)
and Hospital Units: Proposed Rate-of- System Selected Percentile Lengths of L. Effects of Policy on Payment
Increase Percentages Stay: FY 2005 MedPAR Update Adjustments for Low-Volume Hospitals
A. Payments to Existing Excluded December 2005 GROUPER V23.0 M. Impact Analysis of Table II
Hospitals and Units Table 7B—Medicare Prospective Payment VII. Effects of Other Proposed Policy Changes
B. New Excluded Hospitals and Units System Selected Percentile Lengths of A. Effects of LTC–DRG Reclassifications
V. Proposed Payment for Blood Clotting Stay: FY 2005 MedPAR Update and Relative Weights for LTCHs
Factor Administered to Inpatients With December 2005 GROUPER V24.0 B. Effects of Proposed New Technology
Hemophilia Table 8A—Statewide Average Operating Add-On Payments
Tables Cost-to-Charge Ratios—March 2006 C. Effects of Requirements for Hospital
Table 1A—National Adjusted Operating Table 8B—Statewide Average Capital Cost- Reporting of Quality Data for Annual
Standardized Amounts, Labor/Nonlabor to-Charge Ratios—March 2006 Hospital Payment Update
(69.7 Percent Labor Share/30.3 Percent Table 8C—Proposed Statewide Average D. Effects of Other Proposed Policy
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Nonlabor Share If Wage Index Is Greater Total Cost-to-Charge Ratios for LTCHs— Changes Affecting Sole Community
Than 1) March 2006 Hospitals (SCHs) and Medicare-
Table 1B—National Adjusted Operating Table 9A—Hospital Reclassifications and Dependent, Small Rural Hospitals
Standardized Amounts, Labor/Nonlabor Redesignations by Individual Hospital (MDHs)
(62 Percent Labor Share/38 Percent and CBSA—FY 2007 E. Effects of Proposed Policy on Payment
Nonlabor Share If Wage Index Is Less Table 9B—Hospital Reclassifications and for Direct Costs of Graduate Medical
Than or Equal to 1) Redesignation by Individual Hospital Education
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1. Determination of Weighted Average into a labor-related share and a areas. Both of these categories of
GME PRAs for Merged Teaching nonlabor-related share. The labor- hospitals are afforded this special
Hospitals related share is adjusted by the wage payment protection in order to maintain
2. Determination of PRAs for New
index applicable to the area where the access to services for beneficiaries.
Teaching Hospitals
3. Requirements for Counting and hospital is located; and if the hospital is (Until FY 2007, an MDH has received
Appropriate Documentation of FTE located in Alaska or Hawaii, the the IPPS rate plus 50 percent of the
Residents nonlabor-related share is adjusted by a difference between the IPPS rate and its
4. Resident Time Spent in Nonpatient Care cost-of-living adjustment factor. This hospital-specific rate if the hospital-
Activities as Part of an Approved base payment rate is multiplied by the specific rate is higher than the IPPS rate.
Residency Program DRG relative weight. In addition, an MDH does not have the
F. Effects of Proposed Policy Changes If the hospital treats a high percentage option of using FY 1996 as the base year
Relating to Emergency Services Under of low-income patients, it receives a for its hospital-specific rate. As
EMTALA
G. Effects of Policy on Rural Community
percentage add-on payment applied to discussed below, for discharges
Hospital Demonstration Program the DRG-adjusted base payment rate. occurring on or after October 1, 2007,
H. Effects of Proposed Policy on Hospitals- This add-on payment, known as the but before October 1, 2011, an MDH will
Within-Hospitals and Satellite Facilities disproportionate share hospital (DSH) receive the IPPS rate plus 75 percent of
I. Effects of Proposed Policy Changes to the adjustment, provides for a percentage the difference between the IPPS rate and
Methodology for Determining LTCH increase in Medicare payments to its hospital-specific rate, if the hospital-
CCRs and the Reconciliation LTCH PPS hospitals that qualify under either of specific rate is higher than the IPPS
Outlier Payments two statutory formulas designed to rate.)
J. Effects of Proposed Policy on Payment identify hospitals that serve a Section 1886(g) of the Act requires the
for Services Furnished Outside the
United States
disproportionate share of low-income Secretary to pay for the capital-related
K. Effects of Proposed Policy on Limitation patients. For qualifying hospitals, the costs of inpatient hospital services ‘‘in
on Payments to SNFs amount of this adjustment may vary accordance with a prospective payment
VIII. Effects of Proposed Changes in the based on the outcome of the statutory system established by the Secretary.’’
Capital PPS calculations. The basic methodology for determining
A. General Considerations If the hospital is an approved teaching capital prospective payments is set forth
B. Results hospital, it receives a percentage add-on in our regulations at 42 CFR 412.308
IX. Alternatives Considered payment for each case paid under the and 412.312. Under the capital PPS,
X. Overall Conclusion IPPS, known as the indirect medical payments are adjusted by the same DRG
XI. Accounting Statement
education (IME) adjustment. This for the case as they are under the
XII. Executive Order 12866
Appendix B—Recommendation of Update percentage varies, depending on the operating IPPS. Capital PPS payments
Factors for Operating Cost Rates of ratio of residents to beds. are also adjusted for IME and DSH,
Payment for Inpatient Hospital Services Additional payments may be made for similar to the adjustments made under
I. Background cases that involve new technologies or the operating IPPS. In addition,
II. Inpatient Hospital Update for FY 2007 medical services that have been hospitals may receive outlier payments
III. Secretary’s Recommendation approved for special add-on payments. for those cases that have unusually high
IV. MedPAC Recommendation for Assessing To qualify, a new technology or medical costs.
Payment Adequacy and Updating service must demonstrate that it is a The existing regulations governing
Payments in Traditional Medicare substantial clinical improvement over payments to hospitals under the IPPS
Appendix C—Combinations of Proposed
Consolidated Severity-Adjusted DRGs
technologies or services otherwise are located in 42 CFR Part 412, Subparts
Appendix D—Crosswalk of Proposed available, and that, absent an add-on A through M.
Consolidated Severity-Adjusted DRGs to payment, it would be inadequately paid
under the regular DRG payment. 2. Hospitals and Hospital Units
Respective APR DRGs
The costs incurred by the hospital for Excluded From the IPPS
I. Background a case are evaluated to determine Under section 1886(d)(1)(B) of the
A. Summary whether the hospital is eligible for an Act, as amended, certain specialty
additional payment as an outlier case. hospitals and hospital units are
1. Acute Care Hospital Inpatient This additional payment is designed to excluded from the IPPS. These hospitals
Prospective Payment System (IPPS) protect the hospital from large financial and units are: rehabilitation hospitals
Section 1886(d) of the Social Security losses due to unusually expensive cases. and units; long-term care hospitals
Act (the Act) sets forth a system of Any outlier payment due is added to the (LTCHs); psychiatric hospitals and
payment for the operating costs of acute DRG-adjusted base payment rate, plus units; children’s hospitals; and cancer
care hospital inpatient stays under any DSH, IME, and new technology or hospitals. Religious nonmedical health
Medicare Part A (Hospital Insurance) medical service add-on adjustments. care institutions (RNHCIs) are also
based on prospectively set rates. Section Although payments to most hospitals excluded from the IPPS. Various
1886(g) of the Act requires the Secretary under the IPPS are made on the basis of sections of the Balanced Budget Act of
to pay for the capital-related costs of the standardized amounts, some 1997 (Pub. L. 105–33), the Medicare,
hospital inpatient stays under a categories of hospitals are paid the Medicaid and SCHIP [State Children’s
prospective payment system (PPS). higher of a hospital-specific rate based Health Insurance Program] Balanced
Under these PPSs, Medicare payment on their costs in a base year (the higher Budget Refinement Act of 1999 (Pub. L.
for hospital inpatient operating and of FY 1982, FY 1987, FY 1996, or FY 106–113), and the Medicare, Medicaid,
capital-related costs is made at 2002) or the IPPS rate based on the and SCHIP Benefits Improvement and
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predetermined, specific rates for each standardized amount. For example, sole Protection Act of 2000 (Pub. L. 106–554)
hospital discharge. Discharges are community hospitals (SCHs) are the sole provide for the implementation of PPSs
classified according to a list of source of care in their areas, and for rehabilitation hospitals and units
diagnosis-related groups (DRGs). Medicare-dependent, small rural (referred to as inpatient rehabilitation
The base payment rate is comprised of hospitals (MDHs) are a major source of facilities (IRFs)), LTCHs, and psychiatric
a standardized amount that is divided care for Medicare beneficiaries in their hospitals and units (referred to as
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24002 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
inpatient psychiatric facilities (IPFs)), as based on a blend of reasonable cost- payment (but permits them to continue
discussed below. Children’s hospitals, based payment and a Federal per diem to use either their 1982 or 1987 hospital-
cancer hospitals, and RNHCIs continue payment rate, effective for cost reporting specific rate if using either of those rates
to be paid solely under a reasonable periods beginning on or after January 1, results in higher payments), and
cost-based system. 2005 (November 15, 2004 IPF PPS final removes the application of the 12-
The existing regulations governing rule (69 FR 66922) and January 23, 2006 percent cap on the DSH payment
payments to excluded hospitals and IPF PPS proposed rule (71 FR 3616)). adjustment factor for MDHs.
hospital units are located in 42 CFR For cost reporting periods beginning on • Section 5004, which reduces certain
Parts 412 and 413. or after January 1, 2008, all IPFs will be allowable SNF bad debt payments by 30
a. Inpatient Rehabilitation Facilities paid 100 percent of the Federal per percent. Payments for the bad debts of
(IRFs) diem payment amount. The existing full-benefit, dual eligible individuals are
regulations governing payment under not reduced.
Under section 1886(j) of the Act, as the IPF PPS are located in 42 CFR 412, In this proposed rule, we also discuss
amended, rehabilitation hospitals and Subpart N. and invite comments on the
units (IRFs) have been transitioned from
3. Critical Access Hospitals (CAHs) requirements of section 5001(b) of Pub.
payment based on a blend of reasonable
L. 109–171, which require us to develop
cost reimbursement subject to a Under sections 1814, 1820, and a plan to implement, beginning with FY
hospital-specific annual limit under 1834(g) of the Act, payments are made 2009, a value-based purchasing plan for
section 1886(b) of the Act and the to critical access hospitals (CAHs) (that section 1886(d) hospitals. This
adjusted facility Federal prospective is, rural hospitals or facilities that meet discussion also includes the provisions
payment rate for cost reporting periods certain statutory requirements) for of section 5001(c) of Pub. L. 109–171,
beginning on or after January 1, 2002 inpatient and outpatient services based which requires a quality adjustment in
through September 30, 2002, to payment on 101 percent of reasonable cost. DRG payments for certain hospital-
at 100 percent of the Federal rate Reasonable cost is determined under the acquired conditions, effective for FY
effective for cost reporting periods provisions of section 1861(v)(1)(A) of 2008.
beginning on or after October 1, 2002. the Act and existing regulations under
IRFs subject to the blend were also 42 CFR Parts 413 and 415. C. Major Contents of This Proposed Rule
permitted to elect payment based on 100
4. Payments for Graduate Medical In this proposed rule, we are setting
percent of the Federal rate. The existing
Education (GME) forth proposed changes to the Medicare
regulations governing payments under
IPPS for operating costs and for capital-
the IRF PPS are located in 42 CFR Part Under section 1886(a)(4) of the Act,
related costs in FY 2007. We also are
412, Subpart P. costs of approved educational activities
setting forth proposed changes relating
are excluded from the operating costs of
b. Long-Term Care Hospitals (LTCHs) to payments for GME costs, payments to
inpatient hospital services. Hospitals
Under the authority of sections 123(a) certain hospitals and units that continue
with approved graduate medical
and (c) of Pub. L. 106–113 and section to be excluded from the IPPS and paid
education (GME) programs are paid for
307(b)(1) of Pub. L. 106–554, LTCHs on a reasonable cost basis, and
the direct costs of GME in accordance
that do not meet the definition of ‘‘new’’ payments for SCHs and MDHs. The
with section 1886(h) of the Act; the
under § 412.23(e)(4) are being changes being proposed would be
amount of payment for direct GME costs
transitioned from being paid for effective for discharges occurring on or
for a cost reporting period is based on
inpatient hospital services based on a after October 1, 2006, unless otherwise
the hospital’s number of residents in
blend of reasonable cost-based noted.
that period and the hospital’s costs per
reimbursement under section 1886(b) of resident in a base year. The existing The following is a summary of the
the Act to 100 percent of the Federal regulations governing payments to the major changes that we are proposing to
rate during a 5-year period, beginning various types of hospitals are located in make:
with cost reporting periods that start on 42 CFR Part 413. 1. Proposed DRG Reclassifications and
or after October 1, 2002. These LTCHs Recalibrations of Relative Weights
that do not meet the definition of ‘‘new’’ B. Provisions of the Deficit Reduction
may elect to be paid based on 100 Act of 2005 (DRA) In section II. of the preamble to this
percent of the Federal prospective On February 8, 2006, the Deficit proposed rule, as required by section
payment rate instead of a blended Reduction Act of 2005 (DRA), Pub. L. 1886(d)(4)(C) of the Act, we are
payment in any year during the 5-year 109–171, was enacted. Pub. L. 109–171 proposing limited revisions to the DRG
transition. For cost reporting periods made a number of changes to the Act classifications structure. In this section,
beginning on or after October 1, 2006, relating to prospective payments to we respond to several recommendations
LTCHs will be paid 100 percent of the hospitals and other providers for made by MedPAC intended to improve
Federal rate. The existing regulations inpatient services. This proposed rule the DRG system. We are also proposing
governing payment under the LTCH PPS would implement amendments made by to use, for FY 2007, hospital-specific
are located in 42 CFR Part 412, Subpart the following sections of Pub. L. 109– relative values for 10 cost centers to
O. 171: compute DRG relative weights. In
• Section 5001(a), which, effective addition, we are proposing to use
c. Inpatient Psychiatric Facilities (IPFs) for FY 2007 and subsequent years, consolidated severity-adjusted DRGs or
Under the authority of sections 124(a) expands the requirements for hospital alternative severity adjustment methods
and (c) of Pub. L. 106–113, inpatient quality data reporting. in FY 2008 (if not earlier).
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psychiatric facilities (IPFs) (formerly • Section 5003, which makes various We also are presenting our
psychiatric hospitals and psychiatric improvements to the MDH program. It reevaluation of certain FY 2006
units of acute care hospitals) are paid extends special payment provisions, applicants for add-on payments for
under the IPF PPS. Under the IPF PPS, requires MDHs to use FY 2002 as their high-cost new medical services and
some IPFs are transitioning from being base year for determining whether use technologies, and our analysis of FY
paid for inpatient hospital services of their hospital-specific rate enhances 2007 applicants (including public input,
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24003
as directed by Pub. L. 108–173, obtained (PRAs) for merged hospitals and new to reduction in payments to SNFs for
in a town hall meeting). teaching hospitals, counting and bad debt.
We are proposing the annual update appropriate documentation of FTE
9. Determining Proposed Prospective
of the long-term care diagnosis-related residents, and counting of resident time
Payment Operating and Capital Rates
group (LTC–DRG) classifications and spent in nonpatient care activities as
and Rate-of-Increase Limits
relative weights for use under the LTCH part of approved residency programs.
PPS for FY 2007. • Proposed changes relating to In the Addendum to this proposed
payment for costs of nursing and allied rule, we set forth proposed changes to
2. Proposed Changes to the Hospital
health education programs. the amounts and factors for determining
Wage Index
• Proposed changes relating to the FY 2007 prospective payment rates
In section III. of the preamble to this requirements for emergency services for for operating costs and capital-related
proposed rule, we are proposing hospitals under EMTALA. costs. We also establish the proposed
revisions to the wage index and the • Discussion of the third year of threshold amounts for outlier cases. In
annual update of the wage data. Specific implementation of the Rural addition, we address the proposed
issues addressed include the following: Community Hospital Demonstration update factors for determining the rate-
• The FY 2007 wage index update, Program. of-increase limits for cost reporting
using wage data from cost reporting We also are inviting comments on periods beginning in FY 2007 for
periods that began during FY 2003. promoting hospitals’ effective use of hospitals and hospital units excluded
• The proposed FY 2007 occupational health information technology. from the PPS.
mix adjustment to the wage index.
• The proposed revisions to the wage 4. Proposed Changes to the PPS for 10. Impact Analysis
index based on hospital redesignations Capital-Related Costs
In Appendix A of this proposed rule,
and reclassifications. In section V. of the preamble to this we set forth an analysis of the impact
• The proposed adjustment to the proposed rule, we discuss the payment that the proposed changes would have
wage index for FY 2007 based on policy requirements for capital-related on affected hospitals.
commuting patterns of hospital costs and capital payments to hospitals
employees who reside in a county and and propose several technical 11. Recommendation of Update Factors
work in a different area with a higher corrections to the regulations. for Operating Cost Rates of Payment for
wage index. Inpatient Hospital Services
• The timetable for reviewing and 5. Proposed Changes for Hospitals and
Hospital Units Excluded From the IPPS In Appendix B of this proposed rule,
verifying the wage data that will be in as required by sections 1886(e)(4) and
effect for the proposed FY 2007 wage In section VI. of the preamble to this (e)(5) of the Act, we provided our
index. proposed rule, we discuss payments to recommendations of the appropriate
• The labor-related share for the FY excluded hospitals and hospital units, percentage changes for FY 2007 for the
2007 wage index, including the labor- proposed policy changes regarding following:
related share for Puerto Rico. increases or decreases in square footage
• A single average standardized
or decreases in the number of beds of
3. Other Decisions and Proposed amount for all areas for hospital
the ‘‘grandfathering’’ HwHs and satellite
Changes to the IPPS for Operating Costs, inpatient services paid under the IPPS
facilities, proposed changes to the
GME Costs, and Promoting Hospitals’ for operating costs (and hospital-specific
methodology for determining LTCH
Effective Use of Health Information rates applicable to SCHs and MDHs).
CCRs and the reconciliation of high-cost
Technology
and short-stay outlier payments under • Target rate-of-increase limits to the
In section IV. of the preamble to this the LTCH PPS, and a proposed technical allowable operating costs of hospital
proposed rule, we discuss a number of change relating to the designation of inpatient services furnished by hospitals
provisions of the regulations in 42 CFR CAHs as necessary providers. and hospital units excluded from the
Parts 412 and 413 including the IPPS.
following: 6. Payments for Services Furnished
Outside the United States 12. Discussion of Medicare Payment
• The reporting of hospital quality Advisory Commission
data as a condition for receiving the full In section VII. of the preamble to this Recommendations
annual payment update increase. proposed rule, we set forth proposed
• Proposed changes in payments to changes to clarify what is considered Under section 1805(b) of the Act,
SCHs and MDHs. ‘‘outside the United States’’ for MedPAC is required to submit a report
• Proposed updated national and Medicare payment purposes. to Congress, no later than March 1 of
regional case-mix values and discharges each year, in which MedPAC reviews
for purposes of determining rural 7. Payment for Blood Clotting Factor and makes recommendations on
referral center status. Administered to Inpatients With Medicare payment policies. MedPAC’s
• The statutorily-required IME Hemophilia March 2006 recommendation
adjustment factor for FY 2007. In section VIII. of the preamble to this concerning hospital inpatient payment
• Proposed changes relating to proposed rule, we discuss the proposed policies addressed the update factor for
hospitals’ geographic classifications, changes in payment for blood clotting inpatient hospital operating costs and
including reclassifications under section factor administered to Medicare capital-related costs under the IPPS and
508 of Pub. L. 108–173, multicampus beneficiaries with hemophilia for FY for hospitals and distinct part hospital
hospitals, urban group hospital 2007. units excluded from the IPPS. This
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24004 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
MedPAC’s Web site at: represents the average resources eight additional diagnoses, and up to six
www.medpac.gov. required to care for cases in that procedures performed during the stay.
particular DRG, relative to the average In a small number of DRGs,
13. Appendix C and Appendix D
resources used to treat cases in all classification is also based on the age,
In Appendix C of this proposed rule, DRGs. sex, and discharge status of the patient.
we list the combinations of the Congress recognized that it would be The diagnosis and procedure
consolidated severity-adjusted DRGs necessary to recalculate the DRG information is reported by the hospital
that we are proposing to implement on relative weights periodically to account using codes from the International
FY 2008 (if not earlier), as discussed in for changes in resource consumption. Classification of Diseases, Ninth
section II.C. of the preamble of this Accordingly, section 1886(d)(4)(C) of Revision, Clinical Modification (ICD–9–
proposed rule. In Appendix D of this the Act requires that the Secretary CM).
proposed rule, we provide a crosswalk adjust the DRG classifications and
of the proposed consolidated severity- The process of forming the DRGs was
relative weights at least annually. These begun by dividing all possible principal
adjusted DRG system to the respective adjustments are made to reflect changes
All Patient Related Diagnosis-Related diagnoses into mutually exclusive
in treatment patterns, technology, and principal diagnosis areas, referred to as
Group (APR DRG) system. any other factors that may change the Major Diagnostic Categories (MDCs).
II. Proposed Changes to DRG relative use of hospital resources. The MDCs were formed by physician
Classifications and Relative Weights B. DRG Reclassifications panels as the first step toward ensuring
(If you choose to comment on issues that the DRGs would be clinically
1. General coherent. The diagnoses in each MDC
in this section, please include the
caption ‘‘DRG Reclassifications’’ at the For FY 2007, we are proposing only correspond to a single organ system or
beginning of your comment.) limited changes to the current DRG etiology and, in general, are associated
classifications, as discussed in section with a particular medical specialty.
A. Background II.D. of the preamble to this proposed Thus, in order to maintain the
Section 1886(d) of the Act specifies rule, that would be applicable to requirement of clinical coherence, no
that the Secretary shall establish a discharges occurring on or after October final DRG could contain patients in
classification system (referred to as 1, 2006. We are limiting our proposed different MDCs. Most MDCs are based
DRGs) for inpatient discharges and changes because, as discussed in detail on a particular organ system of the
adjust payments under the IPPS based in section II.C. of the preamble to this body. For example, MDC 6 is Diseases
on appropriate weighting factors proposed rule, we are focusing our and Disorders of the Digestive System.
assigned to each DRG. Therefore, under efforts on addressing the This approach is used because clinical
the IPPS, we pay for inpatient hospital recommendations made last year by care is generally organized in
services on a rate per discharge basis MedPAC to refine the entire CMS DRG accordance with the organ system
that varies according to the DRG to system by taking into account severity affected. However, some MDCs are not
which a beneficiary’s stay is assigned. of illness (if not earlier) and applying constructed on this basis because they
The formula used to calculate payment hospital-specific relative value (HSRV) involve multiple organ systems (for
for a specific case multiplies an weights to DRGs. example, MDC 22 (Burns)). For FY 2006,
individual hospital’s payment rate per Currently, cases are classified into cases are assigned to one of 526 DRGs
case by the weight of the DRG to which CMS DRGs for payment under the IPPS in 25 MDCs. The table below lists the 25
the case is assigned. Each DRG weight based on the principal diagnosis, up to MDCs.
22 ................................. Burns.
23 ................................. Factors Influencing Health Status and Other Contacts with Health Services.
24 ................................. Multiple Significant Trauma.
25 ................................. Human Immunodeficiency Virus Infections.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24005
In general, cases are assigned to an procedure codes. These DRGs are for pancreas transplants, and for
MDC based on the patient’s principal heart transplant or implant of heart tracheostomies. Cases are assigned to
diagnosis before assignment to a DRG. assist systems, liver and/or intestinal these DRGs before they are classified to
However, for FY 2006, there are nine transplants, bone marrow transplants, an MDC. The table below lists the nine
DRGs to which cases are directly lung transplants, simultaneous current pre-MDCs.
assigned on the basis of ICD–9–CM pancreas/kidney transplants, and
Once the MDCs were defined, each at least 75 percent of the patients. Each 30, 1999 IPPS final rule (64 FR 41500),
MDC was evaluated to identify those medical and surgical class within an we discussed a process for considering
additional patient characteristics that MDC was tested to determine if the non-MedPAR data in the recalibration
would have a consistent effect on the presence of any substantial CC would process. In order for us to consider
consumption of hospital resources. consistently affect the consumption of using particular non-MedPAR data, we
Because the presence of a surgical hospital resources. must have sufficient time to evaluate
procedure that required the use of the A patient’s diagnosis, procedure, and test the data. The time necessary to
operating room would have a significant discharge status, and demographic do so depends upon the nature and
effect on the type of hospital resources information is fed into the Medicare quality of the non-MedPAR data
used by a patient, most MDCs were claims processing systems and subjected submitted. Generally, however, a
initially divided into surgical DRGs and to a series of automated screens called significant sample of the non-MedPAR
medical DRGs. Surgical DRGs are based the Medicare Code Editor (MCE). The data should be submitted by mid-
on a hierarchy that orders operating MCE screens are designed to identify October for consideration in
room (O.R.) procedures or groups of cases that require further review before conjunction with the next year’s
O.R. procedures by resource intensity. classification into a DRG. proposed rule. This allows us time to
Medical DRGs generally are After patient information is screened test the data and make a preliminary
differentiated on the basis of diagnosis through the MCE and any further assessment as to the feasibility of using
and age (0 to 17 years of age or greater development of the claim is conducted, the data. Subsequently, a complete
than 17 years of age). Some surgical and the cases are classified into the database should be submitted by early
medical DRGs are further differentiated appropriate DRG by the Medicare December for consideration in
based on the presence or absence of a GROUPER software program. The conjunction with the next year’s
complication or a comorbidity (CC). GROUPER program was developed as a proposed rule.
Generally, nonsurgical procedures means of classifying each case into a The limited changes that we are
and minor surgical procedures that are DRG on the basis of the diagnosis and proposing to the DRG classification
not usually performed in an operating procedure codes and, for a limited system for FY 2007 for the FY 2007
room are not treated as O.R. procedures. number of DRGs, demographic GROUPER, version 24.0 and to the
However, there are a few non-O.R. information (that is, sex, age, and methodology used to recalibrate the
procedures that do affect DRG discharge status). DRG weights are set forth under section
assignment for certain principal After cases are screened through the II.E. of this proposed rule. Unless
diagnoses, for example, extracorporeal MCE and assigned to a DRG by the otherwise noted in this proposed rule,
shock wave lithotripsy for patients with GROUPER, the PRICER software our DRG analysis is based on data from
a principal diagnosis of urinary stones. calculates a base DRG payment. The the December 2005 update of the FY
Once the medical and surgical classes PRICER calculates the payment for each 2005 MedPAR file, which contains
for an MDC were formed, each class of case covered by the IPPS based on the hospital bills received through
diagnoses was evaluated to determine if DRG relative weight and additional December 31, 2005, for discharges
complications, comorbidities, or the factors associated with each hospital, occurring in FY 2005.
patient’s age would consistently affect such as IME and DSH adjustments.
2. Yearly Review for Making DRG
the consumption of hospital resources. These additional factors increase the
Changes
Physician panels classified each payment amount to hospitals above the
diagnosis code based on whether the base DRG payment. Many of the changes to the DRG
diagnosis, when present as a secondary The records for all Medicare hospital classifications are the result of specific
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condition, would be considered a inpatient discharges are maintained in issues brought to our attention by
substantial CC. A substantial CC was the Medicare Provider Analysis and interested parties. We encourage
defined as a condition which, because Review (MedPAR) file. The data in this individuals with concerns about DRG
of its presence with a specific principal file are used to evaluate possible DRG classifications to bring those concerns to
diagnosis, would cause an increase in classification changes and to recalibrate our attention in a timely manner so they
the length of stay by at least one day in the DRG weights. However, in the July can be carefully considered for possible
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24006 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
inclusion in the annual proposed rule values (HSRVs) for each DRG (using implications in more detail in the
and, if included, may be subjected to hospital-specific costs to derive the following sections.
public review and comment. Therefore, HSRVs). As we present below, we believe that
similar to the timetable for interested • Adjust the DRG relative weights to the recommendations made by
parties to submit non-MedPAR data for account for differences in the MedPAC, or some variants of them,
consideration in the DRG recalibration prevalence of high-cost outlier cases. have significant promise to improve the
process, concerns about DRG • Implement the case-mix accuracy of the payment rates in the
classification issues should be brought measurement and outlier policies over a IPPS. For instance, the percent of DRGs
to our attention no later than early transitional period. with payment-to-cost ratios between
December in order to be considered and As we noted in the FY 2006 IPPS final 0.95 and 1.05 will increase substantially
possibly included in the next annual rule, we had insufficient time to from adoption of these
proposed rule updating the IPPS. complete a thorough evaluation of these recommendations.1 We agree with
The actual process of forming the recommendations for full MedPAC about exploring possible
DRGs was, and continues to be, highly implementation in FY 2006. However, refinements to our payment
iterative, involving a combination of we did adopt severity-weighted cardiac methodology even in the absence of
statistical results from test data DRGs in FY 2006 to address public concerns about the proliferation of
combined with clinical judgment. For comments on this issue and the specific specialty hospitals. In the FY 2006 final
purposes of this proposed rule, in concerns of MedPAC regarding cardiac rule, we indicated that until we had
deciding whether to create a separate surgery DRGs. We also indicated that we completed further analysis of the
DRG, we consider whether the resource planned to further consider all of options and their effects, we could not
consumption and clinical characteristics MedPAC’s recommendations and predict the extent to which changing to
of the patients with a given set of thoroughly analyze options and their APR DRGs would provide payment
conditions are significantly different impacts on the various types of equity between specialty and general
than the remaining patients in the hospitals in the FY 2007 IPPS proposed hospitals. In fact, we cautioned that any
existing DRG. We evaluate patient care rule. Following the publication of the system that groups cases will always
costs using average charges and lengths FY 2006 IPPS final rule, we contracted present some opportunities for
of stay as proxies for costs and rely on with 3M Health Information Systems to providers to specialize in cases they
the judgment of our medical officers to assist us in performing this analysis. believe to have higher margins. We
decide whether patients are clinically Beginning with MedPAC’s relative believe that improving payment
distinct or similar to other patients in weight recommendations, we analyzed accuracy should reduce these
the DRG. In evaluating resource costs, MedPAC’s recommendations to move to opportunities, and potentially reduce
we consider both the absolute and a cost-based HSRV weighting the incentives that Medicare payments
percentage differences in average methodology. In performing this portion may provide for the further
charges between the cases we are of the analysis, we studied hospital cost development of specialty hospitals.
selecting for review and the remainder We considered MedPAC’s
report data, departmental cost-to-charge
of cases in the DRG. We also consider recommendation to adjust the relative
ratios (CCRs), MedPAR claims data, and
variation in charges within these weights to account for differences in the
HSRV weighting methodology. Our
groups; that is, whether observed prevalence of outlier cases. However,
intention in undertaking this portion of
average differences are consistent across we placed most of our attention and
the analysis was to find an
patients or attributable to cases that are resources on the recommendations
administratively feasible approach to
extreme in terms of charges or length of related to refinement of the current
improving the accuracy of the DRG
stay, or both. Further, we also consider DRGs to more fully capture differences
weights. As we describe in detail below,
the number of patients who will have a in severity of illness among patients as
we believe some changes can be made
given set of characteristics and generally we do not have the statutory authority
to MedPAC’s methodology for
prefer not to create a new DRG unless to make the specific changes to our
determining the relative weights that
it will include a substantial number of outlier policy that MedPAC
will make it more feasible to replicate
cases. recommended. While we have not made
on an annual basis but will result in
MedPAC’s recommendation regarding
C. Proposals for Revisions to the DRG similar impacts.
outliers a central focus of our analysis,
System Used Under the IPPS In conjunction with analyzing
we do intend to examine this issue in
MedPAC’s relative weight
1. MedPAC Recommendations more detail in the future. In the
recommendations, we looked at refining
following sections II.C.2. through C.6. of
In the FY 2006 IPPS final rule, we the current DRG system to better
this proposed rule, we present our
discussed a number of recognize severity of illness. Starting
analysis and discuss a number of issues
recommendations made by MedPAC with the APR DRG GROUPER used by
related to the MedPAC
regarding revisions to the DRG system MedPAC in its analysis, we studied
recommendations. We also present the
used under the IPPS (70 FR 47473 Medicare claims data. Based on this
estimated impacts of implementing the
through 47482). analysis, we developed a consolidated
recommendations and conclude with a
In Recommendation 1–3 in the 2005 severity-adjusted DRG GROUPER that
specific proposal for FY 2007 and some
Report to Congress on Physician-Owned we believe could be a better alternative
proposed intended actions for
Specialty Hospitals, MedPAC for recognizing severity of illness among
implementation for FY 2008. We also
recommended that CMS: the Medicare population. We note that
are soliciting comments on other
• Refine the current DRGs to more MedPAC’s recommendations with
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2. Refinement of the Relative Weight ancillary services are not marked up by the relative weight calculation. Lastly,
Calculation a consistent amount. For example, the MedPAC acknowledged that its method
(If you choose to comment on issues markup amounts for cardiology services was too difficult to replicate on an
in this section, please include the are higher than average. Because charges annual basis and suggested that the
caption ‘‘HSRV Weights’’ at the are the current basis for the DRG relative weights be recalculated once every 5
beginning of your comment.) weights, the practice of differential years with other adjustments based on
MedPAC made two recommendations markups can lead to bias in the DRG charges during the intervening years.
weights because various DRGs use, on We have developed an alternative to
with respect to the DRG relative weight
average, more or less of particular MedPAC’s approach that we believe
calculation. First, MedPAC
ancillary services. MedPAC believes would achieve similar results in a more
recommended that CMS base the DRG
that the bias in the national DRG administratively feasible manner. This
relative weights on the estimated cost of
relative weights that may arise as a method involves developing hospital-
providing care. Second, MedPAC
result of differential markups across specific charge relative weights at the
recommended that CMS base the
various cost centers can be removed by cost center level to remove the bias
weights on the national average of the
moving from charge-based to cost-based introduced by hospital characteristics
HSRVs in each DRG (using hospital-
weights. (that is, teaching, disproportionate
specific costs to derive the HSRVs). Based on the analysis we have share, location, and size, among others)
Because both of these recommendations conducted, we agree that it may be and then scaling the weights to costs
address the relative weight calculation, appropriate to adjust the DRG relative using the national cost center charge
we are addressing them together. The weights to account for the differences in ratios developed from the cost report
work we have done to address these charge markups across cost centers and data. After studying Medicare cost
recommendations is discussed below. to adopt an HSRV methodology. report data, we established 10 cost
MedPAC recommended that CMS However, we have several concerns center categories based upon broad
replace its charge-based relative weight about the methodology used by hospital accounting definitions. In our
methodology with cost-based HSRV MedPAC. MedPAC’s methodology to cost center categories, there are 8
weights as it believed that the charge- reduce hospital charges to cost is ancillary cost groups in addition to
based relative weight methodology that administratively burdensome, not only routine day costs and intensive care day
CMS has utilized since 1983 has to develop, but also to maintain. costs, and each category represents at
introduced bias into the weights due to First, MedPAC developed CCRs for least 5 percent of the charges in the
differential markups for ancillary individual hospitals at the most detailed claims data. The specific cost report
services among the DRGs. In analyzing department level. Specifically, in lines that contribute to each category
claims data, it is evident to us that some calculating costs as the basis for the and the corresponding charge lines from
hospital types (for example, teaching relative weights, MedPAC applied the MedPAR claims data are itemized in
hospitals) are systematically more hospital-specific CCRs from each Table A below.
expensive overall than the average provider’s cost report to the line item We believe this alternative approach,
hospital and certain case types are more charges on the claims that the hospital which we are labeling as the HSRV cost
commonly treated at these more submitted during the same time period. center (HSRVcc) methodology, has
expensive facilities. This fact results in This methodology required matching several advantages. First, the use of
an upward bias in the weights for these cost report data to claims data, and national average rather than hospital-
types of cases. The HSRV methodology because cost report data take longer to specific CCRs avoids the complexity
recommended by MedPAC would help compile and file, the method encountered with cost center CCRs at
reduce the bias that may be present in necessitates using older claims data to the hospital level and allows us to retain
the national relative weights due to set relative weights. The most recent more data for use in the relative weight
differences in case-mix adjusted costs. complete set of Medicare cost reports calculation. In addition, the
Under the HSRV method available to us is from FY 2003. Thus, methodology eliminates the need to
recommended by MedPAC, charges are if we were to model the exact approach match claims to the time period of the
standardized for each provider by used by MedPAC and use claims data CCRs, resulting in the ability to use
converting its charges for each case to for a matching year, we would be using more timely claims data. Furthermore,
hospital-specific relative charge values claims data from FY 2003. If we set DRG the alternative approach makes it more
and then adjusting those values for the weights for FY 2007 using our current feasible to update the relative weights
hospital’s case-mix. The first step in this charge-based method, we would use FY annually using a single methodology.
process involves dividing the charge for 2005 hospital claims to set the proposed We do not have to replicate the
each case at the hospital by the average relative weights. In addition, MedPAC’s methodology once every 5 years and
charge for all cases at the hospital in hospital-specific approach required make adjustments based on changes in
which the case was treated. The detailed cost center distinctions for each charges in the intervening years.
hospital-specific relative charge value, hospital that are difficult to define, map, In developing an alternative method
by definition, averages 1.0 for each and apply. This approach also required of calculating DRG weights, we utilized
hospital. The resulting ratio is then the use of the Standard Analytic File two data sources: claims data and cost
multiplied by the hospital’s case-mix (SAF) because MedPAR data that we report data. The claims data are taken
index (CMI). In this way, each hospital’s currently use to set DRG weights did not from the FY 2004 MedPAR file. This file
relative charge value is adjusted by its have the necessary level of detail. Using is based on fully coded diagnostic and
case-mix to an average that reflects the the SAF increases processing time and procedure data for all Medicare
complexity of the cases it treats relative adds further complexity to the process inpatient hospital bills. The FY 2004
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to the complexity of the cases treated by of setting the relative weights. MedPAR data include discharges
all other hospitals. Second, because MedPAC applied occurring between October 1, 2003, and
Our analysis of departmental-level these CCRs at the individual claim level, September 30, 2004, based on bills
CCRs from the Medicare cost report data missing or invalid data resulted in received by CMS through March 30,
has shown that charges for routine days, MedPAC deleting a large number of 2005, from all hospitals subject to the
intensive care days, and various claims (approximately 10 percent) from IPPS. The full FY 2004 MedPAR file
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24008 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
includes data for approximately the charges for the eight ancillary cost averaged to 1.0 for each cost center. We
13,673,607 Medicare discharges. We centers were included in the routine believed that the CMI was a reasonable
excluded discharges for Medicare days and intensive care days cost scale factor to use to further adjust the
beneficiaries enrolled in a centers. Had we included these claims, relative charges to reflect the complexity
Medicare+Choice managed care plan the charges for the routine days and of cases treated by the provider. We
from the analysis. In addition, we intensive care days would have been assigned a starting CMI of 1 to the cost
excluded data for any hospital that was inflated. After applying these edits, we center for each provider. However, an
paid under the IPPS during FY 2004 but identified 11,142,651 claims that we alternative starting CMI could have been
became a CAH at any time before used in this analysis. assigned because the algorithm is not
February 28, 2005; data from IPFs, IRFs, (3) Statistical outliers were eliminated sensitive to starting values of CMI.
and LTCHs; data from Maryland by removing all cases that were beyond
3.0 standard deviations from the mean After the relative charges (cost center
hospitals; data from Indian Health
of the log distribution of both the claim charge divided by the average cost
Service hospitals; and data from all-
inclusive rate providers. The Medicare charges per case and the charges per day center charge for the provider) were
cost report data used in the analysis for each DRG. multiplied by the hospital’s matching
were from FY 2003, the most recent full cost center CMI, they were summed by
b. Step Two: Compute HSRVs for Each DRG. The transfer adjusted case count
set of data available. Under our Cost Center for Each DRG
alternative methodology, we calculated for each DRG was also summed.
DRG weights from MedPAR and cost Once the MedPAR data were edited, Average charges by DRG were
report data as follows: we sorted the data by provider so that calculated for each cost center by taking
charges could be standardized under the the sum of the relative CMI-adjusted
a. Step One: Clean the Data HSRVcc methodology. To do this, an charges for that DRG and dividing by
(1) All of the claims were grouped average charge was computed for each the transfer-adjusted case count for that
using Version 23.0 of the CMS DRGs. provider for each of 10 proposed cost DRG. A national average charge for each
• The transplant cases that were used centers (see Table A). The average cost center was calculated summing all
to establish the alternative relative charge was computed by summing the relative CMI-adjusted charges in the
weights for heart and heart-lung, liver charges for each cost center and trimmed MedPAR data set and dividing
and/or intestinal, and lung transplants dividing by the transfer-adjusted case by the total transfer-adjusted case count.
(DRGs 103, 480, and 495 under the count for each provider. A transfer case, We then created a set of cost center DRG
current Version 23.0 GROUPER) were identified by discharge code, DRG, and weights by dividing the national average
limited to those Medicare-approved length of stay, was counted as a fraction charge for each DRG for each cost center
transplant centers that have cases in the of a case based on the ratio of its length by the national average charge for that
FY 2004 MedPAR file. (Medicare of stay plus 1 day relative to the cost center. The result was a set of 10
coverage for heart, heart and lung, liver geometric mean length of stay for that weights for each DRG. These 10 weights
and/or intestinal, and lung transplants DRG. That is, a transfer case with a are then assigned to each claim, and a
is limited to those facilities that have length of stay of 2 days in a DRG with new CMI is created for each provider.
received approval from CMS as a geometric mean length of stay of 6 Then the relative charges for each cost
transplant centers.) days would be counted as 3 (2 days plus center on the claim (total charge for cost
• Organ acquisition for kidney, heart, 1 extra day) divided by 6 or 0.5 of a total center is divided by the provider’s
heart-lung, liver, lung, pancreas, and case. This treatment of transfer cases is average charge for that cost center) are
intestinal (or multivisceral organs) consistent with payment rules. multiplied by this new CMI and the
transplants continue to be paid on a After computing the average charge weights are iterated until the national
reasonable cost basis. Because these for each provider for each cost center, average CMI for each cost center stops
acquisition costs are paid separately the cost center charges on each claim changing between iterations. In
from the prospective payment rate, it is were divided by the provider’s average preparing the proposed weights for their
necessary to subtract the acquisition charge for the matching cost center simulation, we used a transfer-adjusted
charges from the total charges on each across all services. For example, the CMI that was computed by taking the
transplant bill that showed acquisition routine day charges on each individual sum of the transfer-adjusted weights and
charges before adjusting the charges claim were divided by the average dividing by a full case count, where the
under the HSRVcc methodology and routine day charge for the provider transfer-adjusted weight is computed by
before eliminating statistical outliers. across all services, the intensive care
multiplying the transfer-adjusted case
(2) The FY 2004 MedPAR data were unit charges on the same claim were
count (length of stay for the claim plus
edited to exclude claims for hospitals divided by the average intensive care
with no cost report data. Claims with 1 day divided by geometric mean length
unit charge for the provider across all
total charges or total length of stay less of stay for the DRG) by the DRG weight.
services, and so on.
than or equal to zero were eliminated. By using a hospital’s relative charge Table A below illustrates the charge
Claims that had an amount in the total structure, we found that the resulting line items from MedPAR that were
charge field that differed by more or less weights did not reflect differences in included in each cost center charge
than $10 from the sum of charges for charges among providers for factors group. In addition, it shows the
routine days, intensive care, pharmacy, such as location, size, wages, relative corresponding line items from
special equipment, therapy, operating efficiency, average markup, IME Worksheet C, Part 1, columns 5, 6, and
room, cardiology, laboratory, radiology, adjustment, DSH adjustment, and the 7 of the Medicare cost reports. The
and other services were deleted. In variety of cases treated. Therefore, once name of each cost report line item
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addition, we deleted claims for charge weights were computed at the appears as it is listed in the Hospital
providers that had charges only in the hospital cost center level, they were Cost Report Information System (HCRIS)
routine days and intensive care days multiplied by the provider’s CMI. We cost report database record layout which
cost centers and had no charges in any made this adjustment for the CMI to is available for download via the Web
of the eight ancillary cost centers. These rescale the hospital-specific relative site: www.cms.hhs.gov.
claims were deleted because we believe charge values which, by definition, BILLING CODE 4120–01–P
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c. Step Three: Compute CCRs From the inclusive rate hospitals, and cost reports greater or less than the mean log plus/
Cost Reports for Each of the 10 Cost that represented time periods of less minus 1.96 standard deviations of the
Center Groups Identified in Table A than 1 year (365 days). We then created log of that cost center CCR. We used
CCRs for each provider for each group 1.96 standard deviations as a trim factor
After the iteration process was of cost centers (see Table A for line because the logs of the cost center CCRs
completed, we removed the effects of items used in the calculations) while are normally distributed and 1.96
differential markups within cost centers. removing any cost center CCRs that standard deviations represent the 95th
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The first step in this process was to were greater than 10 or less than .01, as percentile of the T-Distribution for large
develop national cost center CCRs. we believe that these CCRs are outside sample size, for which 2,000 to 3,000
Taking FY 2003 cost report data, we of a reasonable range. We then took the hospitals qualify. Once the cost report
edited the data to remove data for CAHs, logs of all of the cost center CCRs and data were trimmed, we calculated the
IPFs, IRFs, LTCHs, Maryland hospitals, removed any cost center CCRs where geometric mean CCR for each cost
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Indian Health Service hospitals, and all the log of the cost center CCR was center.
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d. Step Four: Sum the Average Charge means the severity DRG system hospital prospective global budgeting
for Each Cost Center From the MedPAR designed by 3M Health Information system since 2002. The State of
Data and Apply the National CCRs From Systems that currently is used by the Maryland began using APR DRGs as the
the MedPAR File State of Maryland; and the term basis of its all-payer hospital payment
Once the national average CCRs from ‘‘consolidated severity-adjusted DRGs’’ system in July 2005. More than a third
Step Three were computed, they were means the DRG system based on a of the hospitals in the United States are
multiplied by the total unadjusted consolidated version of the APR DRGs already using APR DRG software to
charges for the matching cost centers in (as described in detail below). Although analyze comparative hospital
the MedPAR file. The estimated costs we discuss the consolidated severity- performance. Many major health
were then summed to derive a total cost adjusted DRGs in this proposed rule, we information system vendors have
for all cases across the Nation. The are interested in public comments on integrated this system into their
percentage that each cost center was whether there are alternative DRG products. Several State agencies utilize
contributing to the overall total costs is systems that could result in better the APR DRGs for the public
calculated by dividing the individual recognition of severity than the dissemination of comparative hospital
cost center cost by the total. For consolidated severity-adjusted DRGs we performance reports. APR DRGs have
example, the total cost for routine days are proposing. We refer to adopting been widely applied in policy and
was divided by the total cost for all consolidated severity-adjusted DRGs health services research. In addition to
cases to arrive at 0.29, which indicated numerous times in this proposed rule. being used in research by MedPAC, the
that routine costs were responsible for As we make clear in the detailed APR DRGs also contain a separate
approximately 29 percent of total costs. discussion below, there are still further measure of risk of mortality that is used
The 10 scaling factors sum to 1.0. changes that we believe may be in the Quality Indicators of the Agency
important to make to this proposed for Healthcare Research and Quality, the
e. Step Five: Adjust Relative Weights system before it is ready for adoption. In Premier Hospital Quality Incentive
From Step Two to Cost by Applying the remainder of this proposed rule, Demonstration discussed in section
Scaling Factors From Step Four ‘‘consolidated severity-adjusted DRGs’’ IV.B. of this preamble, and the Joint
For each DRG, the cost center weights refers to the DRG system we have Commission on Accreditation of
are multiplied by these scaling factors analyzed. However, it is possible that Healthcare Organizations (JCAHO)
(that is, the routine day weight is the public comment process will hospital accreditation survey process
multiplied by the routine day scaling present compelling evidence that there (Shared Visions-New Pathways).
factor, the intensive care unit weight is are potential alternatives to the Below we present a comparison of the
multiplied by the intensive care unit consolidated severity-adjusted DRG CMS DRG system and the APR DRG
scaling factor, and so on). After the system for us to consider that could system.
weights are adjusted by the scaling more effectively recognize severity of a. Comparison of the CMS DRG System
factor, they are summed by DRG to illness. and the APR DRG System
create one final weight for each DRG. In the FY 2006 IPPS final rule (70 FR
47474), we stated that we would The CMS DRG and APR DRG systems
f. Step Six: Normalize the Weights consider making changes to the CMS have a similar basic structure. There are
In order to compare the weights DRGs to better reflect severity of illness 25 MDCs in both systems. The DRG
calculated in Step Five to the charge- among patients. We indicated that we assignments for both systems are based
based weights that are in effect in FY would conduct a comprehensive review on the reporting of ICD–9–CM diagnosis
2006, the weights were normalized by of the CC list as well as consider the and procedure codes. Both DRG systems
the FY 2006 normalization factor of possibility of using the APR DRGs for are composed of a base DRG that
1.47462 (70 FR 47332). This factor was FY 2007. We did not adopt APR DRGs describes the reason for hospital
applied to the charge-based weights for FY 2006 because such an adoption admission and a subdivision of the base
from FY 2006 to ensure that would represent a significant DRG based on other patient attributes
recalibration by itself neither increases undertaking that could have a that affect the care of the patient. For
nor decreases total payments under the substantial effect on all hospitals. There surgical patients, the base DRG is
IPPS. We used the same normalization was insufficient time between the defined based on the type of procedure
factor that we applied for purposes of release of the MedPAC reports in March performed. For medical patients, the
calculating the DRG relative weights in 2005 and the publication of the FY 2006 base DRG is defined based on the
the FY 2006 IPPS final rule because we IPPS final rule for us to analyze fully a principal diagnosis. In Version 23.0 of
used the same FY 2004 MedPAR data change of this magnitude. Instead, we the CMS DRG system, there are 367 base
and FY 2003 cost report data that we adopted a more limited policy by DRGs and 526 total DRGs. In Version 23
used to set the FY 2006 DRG relative implementing severity-adjusted cardiac of the APR DRG system, there are 314
weights. We note that we likely will DRGs. base DRGs and 1,258 total APR DRGs.
have more recent data available when After publication of the FY 2006 IPPS Some of the base DRGs in the two
we determine the DRG relative weights final rule, CMS contracted with 3M systems are virtually identical. For
for the FY 2007 IPPS final rule. Health Information Systems to further example, there is no significant
analyze the MedPAC recommendations difference between the base DRG under
3. Refinement of DRGs Based on in support of our consideration of both systems for medical treatment of
Severity of Illness possible changes to the IPPS for FY congestive heart failure. For other base
(If you choose to comment on issues 2007. Under one task of this contract, DRGs, there are substantial differences.
in this section, please include the 3M Health Information Systems For example, in the CMS DRG system,
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caption ‘‘DRGs: Severity of Illness’’ at analyzed the feasibility of using a there are two base DRGs for
the beginning of your comment.) revised DRG system under the IPPS that appendectomy (simple and complex); in
For purposes of the following is modeled on the APR DRGs Version 23 the APR DRG system, there is only one
discussions, the term ‘‘CMS DRGs’’ to better recognize severity of illness. base DRG for appendectomy (the
means the DRG system we currently use The APR DRGs have been used relative complexity of the patient is
under the IPPS; the term ‘‘APR DRGs’’ successfully as the basis of Belgium’s addressed in the subsequent subdivision
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of the base DRG into severity of illness based on a pediatric subdivision major (3), and extreme (4) severity of
subclasses). followed by a CC subdivision of the illness.
The focus of the CMS DRGs is on adult patients. In addition, some base The APR DRG system does not
complexity. Complexity is defined as DRGs in MDC 5 (Diseases and Disorders subdivide base DRGs based on the age
the relative volume and types of of the Circulatory System) have a
diagnostic, therapeutic, and bed services of the patient. Instead, patient age is
subdivision based on the presence of a
required for the treatment of a particular used in the determination of the severity
major cardiovascular condition or
illness. Thus, the focus of payment in complex diagnosis. of illness subclass. In the CMS DRG
the CMS DRG system reflects the The APR DRG system subdivides the system, the CC list is generally the same
relative resource use needed by the base DRGs by adding four severity of across all base DRGs. However, there are
patient in one DRG group compared to illness subclasses to each DRG. Under CC list exclusions for secondary
another. Resource use is generally the APR DRG system, severity of illness diagnoses that are related to the
correlated with severity of illness but an is defined as the extent of physiologic principal diagnosis. In the APR DRG
intensive resource use does not decompensation or organ system loss of system, the significance of a secondary
necessarily indicate a high level of function. The underlying clinical diagnosis is dependent on the base DRG.
severity in every case. It is possible that principle of APR DRGs is that the For example, an infection is considered
some patients will be resource-intensive severity of illness of a patient is highly more significant for an immune-
and require high-cost services even dependent on the patient’s underlying suppressed patient than for a patient
though they are less severely ill than problem and that patients with high with a broken arm. The logic of the CC
other patients. The CMS DRG system severity of illness are usually subdivision in the CMS DRG system is
subdivides the base DRGs using age and characterized by multiple serious a simple binary split for the presence or
the presence of a secondary diagnosis diseases or illnesses. The assessment of absence of a CC. In the APR DRG
that represents a CC. The age the severity of illness of a patient is system, the determination of the
subdivisions primarily relate to specific to the base APR DRG to which severity subclass is based on an 18-step
pediatric patients (those who are less a patient is assigned. In other words, the process that takes into account
than 18 years of age). Patients are determination of the severity of illness secondary diagnoses, principal
assigned to the CC subgroup if they have is disease-specific. High severity of diagnosis, age, and procedures. The 18
at least one secondary diagnosis that is illness is primarily determined by the steps are divided into three phases.
considered a CC. The diagnoses that are interaction of multiple diseases. Patients
There are six steps in Phase I, three
designated as CCs are the same across with multiple comorbid conditions
steps in Phase II, and nine steps in
all base DRGs. The subdivisions of the involving multiple organ systems are
Phase III.
base CMS DRGs are not uniform: some assigned to the higher severity of illness
base DRGs have no subdivision; some subclasses. The four severity of illness The diagram below illustrates the
base DRGs have a two-way subdivision subclasses under the APR DRG system three-phase process for determining
based on the presence of a CC; and other are numbered sequentially from 1 to 4, patient severity of illness subclass.
base DRGs have a three-way subdivision indicating minor (1), moderate (2), BILLING CODE 4120–01–P
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Under the CMS DRG system, a patient included in DRGs with other patients classifications and weighting factors at
is assigned to the DRG with CC if there that are dissimilar clinically or in costs. least annually to reflect changes in
is at least one secondary diagnosis Requests for new base DRGs formed on treatment patterns, technology, and
present that is a CC. There is no the use of a specific technology may other factors that may change the
recognition of the impact of multiple also be difficult to accommodate. Base relative use of hospital resources.
CCs. Under the APR DRG system, high DRGs formed based on the use of a Therefore, we believe a method of
severity of illness is primarily specific technology would result in the recognizing technologies that represent
determined by the interaction of payment weight for the DRG being increased complexity, but not
multiple diseases. Under the CMS DRG dominated by the price set by the necessarily greater severity of illness,
system, patients are assigned to an MDC manufacturer for the technology. should be included in the system. We
based on their principal diagnosis. The structure of the APR DRGs plan to develop criteria for determining
While the principal diagnosis is provides a means of addressing high when it is appropriate to recognize
generally used to assign the patient to severity cases that occur in low volume increased complexity in the structure of
an MDC in the APR DRG system, there through assignment of the case to a the DRG system and how these criteria
is a rerouting step that assigns some severity of illness subclass. However, interact with the existing statutory
patients to another MDC. For example, the APR DRG structure does not provisions for new technology add-on
lower leg amputations can be performed currently accommodate distinctions payments. We invite public comments
for circulatory, endocrine, or based on complexity. Technologies that on this particular issue.
musculoskeletal principal diagnoses. represent increased complexity, but not
Instead of having three separate necessarily greater severity of illness, Another difference between the CMS
amputation base DRGs in different are not explicitly recognized in the APR DRG system and the APR DRG system
MDCs as is done in the CMS DRG DRG system. For example, in the CMS is the assignment of diagnosis codes in
system, the APR DRG system reroutes DRGs, there are separate DRGs for category 996 (Complications peculiar to
all of these amputation patients into a coronary angioplasty with or without certain specified procedures). The CMS
single base APR DRG in the insertion of stents. The APR DRGs do DRG system treats virtually all of these
musculoskeletal MDC. The CMS DRG not make such a differentiation. The codes as CCs. With the exceptions of
system uses death as a variable in the insertion of the stent makes the patient’s complications of organ transplant and
DRG definitions but the APR DRG case more complex but does not mean limb reattachments, these complication
system does not. Both DRG systems are the patient is more severely ill. codes do not contribute to the severity
based on the information contained in However, the inability to insert a stent of illness subclass in the APR DRG
the Medicare Uniform Bill. The APR may be indicative of a patient’s more system. While these codes could be
DRG system requires the same advanced coronary artery disease. added to the severity logic, the
information used by the current CMS Although such conflicts are relatively appropriateness of recognizing codes
DRG system. No changes to the claims few in number, they do represent an such as code 998.4 (Foreign body
form or the data reported would be underlying difference between the two accidentally left during a procedure) as
necessary if CMS were to adopt APR systems. If Medicare were to adopt a a factor in payment calculation could
DRGs or a variant of them. severity DRG system based on the APR create the appearance of incentives for
The CMS DRG structure makes some DRG logic but assign cases based on less than optimal quality. Although
DRG modifications difficult to complexity as well as severity as we do there is no direct recognition of the
accommodate. For example, high under the current Medicare DRG codes under the 996 category, the
severity diseases that occur in low system, such a distinction would precise complication, in general, can be
volume are difficult to accommodate represent a departure from the exclusive coded separately and could contribute
because the only choice is to form a focus on severity of illness that to the severity of illness subclass
separate base DRG with relatively few currently forms the basis of assigning assignment.
patients. Such an approach would lead cases in the APR DRG system. Table B below summarizes the
to a proliferation of low-volume DRGs. Section 1886(d)(4) of the Act specifies differences between the two DRG
Alternatively, these cases may be that the Secretary must adjust the systems:
TABLE B.—COMPARISON OF THE CMS DRG SYSTEM AND THE APR DRG SYSTEM
Element CMS DRG system APR DRG system
To illustrate the differences between the colon and who has a multiple (Multiple segmental resection of large
the two DRG systems, we compare in segmental resection of the large intestine) would be reported to capture
Table C below four cases that have been intestine performed. ICD–9–CM this case. In both DRG systems, the
assigned to CMS DRGs and APR DRGs. diagnosis code 562.11 (Diverticulitis of patient would be assigned to the base
In all four cases, the patient is a 67-year- colon (without mention of hemorrhage)) DRG for major small and large bowel
old who is admitted for diverticulitis of and ICD–9–CM procedure code 45.71 procedures. These four cases would fall
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into two different CMS DRGs and four and rectum and an additional secondary assigned to DRG 148. Under the APR
different APR DRGs. We include diagnosis of unspecified intestinal DRG system, the patient is assigned to
Medicare average charges in the table to obstruction (ICD–9–CM diagnosis code base DRG 221 and the severity of illness
illustrate the differences in hospital 560.9). Under the CMS DRG system, the subclass increases to 3 (major).
resource use. patient is assigned to DRG 148 (Major
Case 4: The patient receives multiple
Case 1: The patient receives only a Small and Large Bowel Procedures With
secondary diagnosis of an ulcer of anus secondary diagnoses of an ulcer of anus
CC). Under the APR DRG system, the
and rectum (ICD–9–CM diagnosis code patient is assigned to base DRG 221 and and rectum, unspecified intestinal
569.41). Under the CMS DRG system, the severity of illness subclass increases obstruction, acute myocarditis,
the patient is assigned to base DRG 149 to 2 (moderate). atrioventricular block, complete, and
(Major Small and Large Bowel Case 3: The patient receives multiple the additional diagnosis of acute renal
Procedures Without CC). Under the APR secondary diagnoses of an ulcer of anus failure, unspecified (ICD–9–CM
DRG system, the patient is assigned to and rectum, unspecified intestinal diagnosis code 584.9). Under the CMS
base DRG 221 (Major Small and Large obstruction, acute myocarditis (ICD–9– DRG system, the patient is assigned to
Bowel Procedures) with a severity of CM diagnosis code 422.99), and DRG 148. Under the APR DRG system,
illness subclass of 1 (minor). atrioventricular block, complete (ICD– the patient is assigned to base DRG 221
Case 2: The patient receives a 9–CM diagnosis code 426.0). Under the and the severity of illness subclass
secondary diagnosis of an ulcer of anus CMS DRG system, the patient is increases to 4 (extreme).
TABLE C.—EXAMPLE OF SAMPLE CASES ASSIGNED UNDER THE CMS DRG SYSTEM AND UNDER THE APR DRG SYSTEM
CMS DRG system APR DRG system
Principal diagnosis code: 562.11
Procedure code: 45.71 DRG Average DRG Average
assigned charge assigned charge
Case 1—Secondary Diagnosis: 569.41 ............................ 149 without CC ................... $25,147 221 with severity of illness $25,988
subclass 1.
Case 2—Secondary Diagnoses: 569.41, 560.9 ............... 148 with CC ........................ 59,519 221 with severity of illness 38,209
subclass 2.
Case 3—Secondary Diagnoses: 569.41, 560.9, 422.99, 148 with CC ........................ 59,519 221 with severity of illness 66,597
426.0. subclass 3.
Case 4—Secondary Diagnoses: 569.41, 560.9, 422.99, 148 with CC ........................ 59,519 221 with severity of illness 130,750
426.0, 584.9. subclass 4.
The largest significant difference in consolidation of severity of illness inconsistencies in the number of
average charges is seen in case 4 where subclasses within a base DRG should be severity levels across different DRGs.
the average charge under the APR DRG restricted to contiguous severity of The objective to simultaneously take
assigned to the patient ($130,750) is illness subclasses. Thus, it would not be into consideration patient volume and
more than double the average charge reasonable clinically to combine average charges often produced conflict.
under the CMS DRG assigned to the severity of illness subclasses 1 and 4 Table D below contains the overall
patient ($59,519). solely because both consist of low- patient volume and average charge by
volume cases. We analyzed APR DRG severity of illness subclass.
b. Consolidated Severity-Adjusted DRGs
consolidating APR DRGs by either While severity of illness subclass 4
for Use in the IPPS
combining the base DRGs or the severity (extreme) has had the lowest patient
APR DRGs were developed to of illness subclasses within a base DRG. volume of 5.80 percent, we found that
encompass all-payer patient For consolidation across base APR the dramatically different average
populations. As a result, we found that, charges between severity of illness
DRGs, we considered patient volume,
for the Medicare population, some of subclass 3 (major) and subclass 4
similarity of hospital charges across all
the APR DRGs have very low volume. (extreme) patients of approximately
MedPAC noted that the larger number of four severity of illness subclasses and $32,426 and $81,952, respectively,
DRGs under a severity-weighted system clinical similarity of the base APR would make it difficult to consolidate
might mean that CMS would be faced DRGs. For consolidations of severity of severity of illness subclass 3 and 4
with establishing weights in many illness subclasses within a base DRG, patients. Conversely, we found that,
categories that have few cases and, thus, we considered patient volume and the while the average charge difference
potentially creating unstable estimates. similarity of hospital charges between between severity of illness subclass 1
While volume is an important severity of illness subclasses. In (minor) and 2 (moderate) patients was
consideration in evaluating any considering how to consolidate severity much smaller, of approximately $17,649
potential consolidation of APR DRGs for of illness subclasses, we believed it was and $20,021, respectively, the majority
use under the IPPS, we believe that important to use uniform criteria across of patient volume (68.08 percent) is in
hospital resource use and clinical all DRGs to avoid creating confusing these two subclasses. Thus, low patient
interpretability also need to be taken and difficult to interpret results. That is, volume and small average charge
into consideration. For example, any we were concerned about differences rarely coincided.
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TABLE D.—OVERALL AVERAGE CHARGES AND PATIENT VOLUME BY APR DRG SEVERITY OF ILLNESS SUBCLASS
APR DRG APR DRG APR DRG APR DRG
severity of severity of severity of severity of
All cases illness illness illness illness
subclass 1 subclass 2 subclass 3 subclass 4
There were also few opportunities to impact on hospital resource use than the single group having 5,492 patients and
consolidate base DRGs. For base DRGs reason for admission (that is, the base an average charge of $107,258. However,
for which there was a clinical basis for APR DRG within an MDC). Thus, we we decided not to include kidney
considering a consolidation, there were believe that, within each MDC, the transplant patients in this severity of
usually significant differences in severity of illness subclass 4 medical illness 4 subclass due to their very high
average charges for one or more of the and surgical patients, respectively, average charges (approximately
severity of illness subclasses. APR DRGs could be consolidated into a single $203,732 or more than $100,000 greater
already represented a considerable group. than other patients in MDC 11 having a
consolidation of base DRGs (314) In some MDCs, it was not possible to
severity of illness 4 subclass). Average
compared to CMS DRGs (367). Thus, we consolidate into a single medical and a
charges within the consolidated severity
expected that further base DRG single surgical severity of illness
subclass 4 group. In these MDCs, more of illness 4 surgical DRG in MDC 11
consolidation would be difficult.
We reviewed the patient volume and than one group was necessary. For show some variation but are much
average charges across APR DRGs and instance, Table E below contains the higher than the corresponding average
found that medical cases assigned patient volume and average charges for charges for the severity of illness
severity of illness subclass 4 within an severity of illness subclass 4 cases in subgroup 3 patients of $48,863. Thus,
MDC have similar average charges. We MDC 11 (Diseases and Disorders of the our analysis suggests that the data
observed the same pattern in average Kidney and Urinary Tract). Taking into support maintaining three severity of
charges across severity of illness consideration volume and average illness levels for each base DRG in MDC
subclass 4 surgical patients within an charges, except for APR DRG 440 11; a separate severity of illness 4
MDC. The data suggest that, in cases (Kidney Transplant), surgical cases subclass for all patients other than those
with a severity of illness of subclass 4, assigned severity of illness subclass 4 in having kidney transplant; and a separate
the severity of the cases had more MDC 11 could be consolidated into a DRG for kidney transplants.
TABLE E.—SUMMARY STATISTICS FOR SURGICAL CASES WITH SEVERITY OF ILLNESS SUBCLASS 4 IN MDC 11
Number of Average Average total
APR DRG cases length of stay charges
The consolidation of severity of DRG, except for cesarean section and In MDC 19, we consolidated 12 base
illness 4 subclass APR DRG into fewer vaginal deliveries, which were DRGs into 4 base DRGs. We retained the
groups was done for all MDCs except maintained as separate APR DRGs. This 4 severity of illness subclasses in MDC
MDC 15 (Newborn and Other Neonates consolidation reduced the total number 19 for each of the 4 base DRGs. In MDC
With Conditions Originating in the of obstetric APR DRGs from 48 to 22. 20, the base APR DRG for patients who
Perinatal Period), MDC 19 (Mental left against medical advice has severity
The Medicare patient volume in MDC
Diseases and Disorders), and MDC 20 of illness subclass 1 and 2 consolidated
15 was very low, allowing for a more
(Alcohol/Drug Use and Alcohol/Drug and severity of illness subclass 3 and 4
Induced Organic Mental Disorders). In aggressive consolidation. For MDC 15, consolidated. The remaining 4 base
the 22 MDCs in which the severity of we consolidated 28 base APR DRGs into DRGs were consolidated into 1 base
illness subclass 4 consolidation was 7 base consolidated severity-adjusted DRG and retained in 4 severity of illness
applied, the number of separate severity DRGs. For each of the 7 consolidated subclasses.
of illness subclass 4 groups was reduced base MDC 15 DRGs, we combined
We did not consolidate any of the pre-
from 262 to 69. severity of illness subclasses 1 and 2
MDC subclass 4 APR DRGs such as
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transplants, bone marrow transplants, with multiple or major HIV-related Table F below includes a description
pancreas transplants, and conditions had severity of illness of the consolidations that we did within
tracheotomies. For the pre-MDC DRGs, subclasses 1 and 2 consolidated. each individual MDC and includes
except for Bone Marrow Transplant, we In total, we reduced 1,258 APR DRGs information about the total number of
consolidated severity of illness to 861 consolidated severity-adjusted DRGs that were eliminated from the
subclasses 1 and 2 into one DRG. In DRGs. In Appendix C of this proposed APR DRGs to develop the consolidated
addition, the three base APR DRGs for rule, we present the 861 unique severity-adjusted DRGs.
Human Immunodeficiency Virus (HIV) combinations of consolidated severity- BILLING CODE 4120–01–P
adjusted DRGs.
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Appendix D of this proposed rule the annual rate of CMI growth observed Congress amend the law to give the
shows the crosswalk of each post-PPS.2 Secretary authority to adjust the DRG
consolidated severity-adjusted DRG to We believe that adoption of relative weights to account for the
its respective APR DRG. We numbered consolidated severity-adjusted DRGs differences in the prevalence of high-
the DRGs sequentially and incorporated would create a risk of increased cost outlier cases. MedPAC
the severity of illness subclass into the aggregate levels of payment as a result recommended DRG-specific outlier
DRG description. However, within the of increased documentation and coding. thresholds that are financed by each
range of sequential numbers used for an MedPAC notes that ‘‘refinements in DRG rather than through an across-the-
MDC, we retained some unused DRG definitions have sometimes led to board adjustment to the standardized
numbers to allow for future DRG substantial unwarranted increase in amounts. Furthermore, in comments
expansion. By using a three-digit payments to hospitals, reflecting more that MedPAC submitted during the
number for the consolidated severity- complete reporting of patients’ comment period for the FY 2006 IPPS
adjusted DRGs, we also avoid the need diagnoses and procedures.’’ MedPAC proposed rule, MedPAC stated its belief
for reprogramming of computer systems further notes that ‘‘refinements to the that the current policy makes DRGs with
that would be necessary to DRG definitions and weights would a high prevalence of outliers profitable
accommodate a change from the current substantially strengthen providers’ for two reasons: (1) These DRGs receive
three-digit DRG number to separate incentives to accurately report patients’ more in outlier payments than the 5.1
fields for the base consolidated severity- comorbidities and complications.’’ To percent that is removed from the
adjusted DRG number and the severity address this issue, MedPAC national standardized amount; and (2)
of illness subclass. recommended that the Secretary the relative weight calculation results in
‘‘project the likely effect of reporting these DRGs being overvalued because of
Severity DRGs represent a significant improvements on total payments and the high standardized charges of outlier
change from our current DRG system. In make an offsetting adjustment to the cases. MedPAC also noted that, under
addition to changing the way claims are national average base payment its recommendations, outlier thresholds
grouped, severity DRGs introduce other amounts.’’ 3 in each DRG would reduce the
issues requiring additional analysis, The Secretary has broad discretion distortion in the relative weights that
including possible increases in reported under section 1886(d)(3)(A)(vi) of the comes from including the outlier cases
case-mix and changes to the outlier Act to adjust the standardized amount in the calculation of the weight and
threshold. Our analysis of these issues so as to eliminate the effect of changes would correct the differences in
is outlined below. in coding or classification of discharges profitability that stem from using a
c. Changes to CMI From a New DRG that do not reflect real changes in case- uniform outlier offset for all cases.
System mix. While we modeled the changes to MedPAC added that its
the DRG system and relative weights to recommendation would help make
After the 1983 implementation of the ensure budget neutrality, we are relative profitability more uniform
IPPS DRG classification system, CMS concerned that the large increase in the across all DRGs.
observed unanticipated growth in number of DRGs will provide In the FY 2006 IPPS final rule (70 FR
inpatient hospital case-mix (the average opportunities for hospitals to do more 47481), we responded to MedPAC’s
relative weight of all inpatient hospital accurate documentation and coding of recommendation on outliers by noting
cases) that is used as proxy information contained in the medical that a change in policy to replace the 5.1
measurement for severity of illness. record. Coding that has no effect on percent offset to the standardized
There are three factors that determine payment under the current DRG system amount would require a change in law.
changes in a hospital’s CMI: may result in a case being assigned to However, because the Secretary has
a higher paid DRG under the broad discretion to consider all factors
(1) Admitting and treating a more consolidated severity-adjusted system. that change the relative use of hospital
resource intensive patient-mix (due, for Thus, more accurate and complete resources in the calculation of the DRG
example, to technical changes that allow documentation and coding may occur relative weights, we stated we would
treatment of previously untreatable under the consolidated severity- consider changes that would reduce or
conditions and/or an aging population); adjusted system because it will result in eliminate the effect of high-cost outliers
(2) Providing services (such as higher higher payments under the more on the DRG relative weights. At this
cost surgical treatments, medical sophisticated DRG system. We are time, we have not completed a detailed
devices, and imaging services) on an soliciting comments on this issue. analysis of MedPAC’s outlier
inpatient basis that previously were recommendation because we do not
more commonly furnished in an 4. Effect of Consolidated Severity-
have the authority to adopt such a
outpatient setting; and Adjusted DRGs on the Outlier
change under current law. Instead, we
Threshold
(3) Changes in documentation (more have focused our resources on analyzing
complete medical records) and coding (If you choose to comment on issues MedPAC’s recommendations with
practice (more accurate and complete in this section, please include the respect to adopting severity DRGs and
coding of the information contained in caption ‘‘Cost-Based Weights: Outlier calculating cost-based HSRV weights
the medical record). Threshold’’ at the beginning of your that can be adopted without a change in
comment.) law. While we intend to study
Changes in CMI as a result of In its March 2005 Report to Congress MedPAC’s recommendation in more
improved documentation and coding do on Physician-Owned Specialty detail at a future date, we note that the
not represent real increases in Hospitals, MedPAC recommended that changes described above with respect to
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the number of DRGs from 526 under the 5. Impact of Refinement of DRG System changes should be viewed as part of a
current CMS DRG system to 861 under on Payments unified effort to improve Medicare’s
a consolidated severity-adjusted DRG Using the FY 2004 MedPAR claims inpatient hospital payment system. Our
system. Using FY 2004 Medicare charge data, we simulated the payment impacts findings in support of these proposals
data, 3M Health Information Systems of moving to the consolidated severity- are discussed below.
simulated the effect of adopting adjusted DRG GROUPER and the In examining the effects of moving to
consolidated severity-adjusted DRGs in alternative HSRVcc method for consolidated severity-adjusted DRGs
conjunction with cost-based HSRV developing HSRV weights. These with HSRVcc relative weights, the
weights (described below) on the FY payment simulations do not make any primary impact of the changes generally
2006 outlier threshold using the same adjustments for changes in coding or results from a redistribution of the
estimation parameters used by CMS in case-mix. For purposes of this analysis, relative weights from the surgical DRGs
the FY 2006 final rule (that is, the estimated payments were held budget to the medical DRGs. In Table G below,
charge inflation factor of 14.94 percent) neutral to the estimated FY 2006 we show an analysis of the total case-
(70 FR 47494). Under these payments because we have a statutory mix change for the medical and surgical
assumptions, 3M Health Information requirement to make any changes to the DRGs. We are comparing the percent
Systems estimated that the outlier weights or GROUPER budget neutral. change in case-mix between the FY
threshold would be reduced from Based on the results of this impact 2006 DRGs with HSRVcc relative
$23,600 under the current system to analysis, we are proposing to adopt both weights and the FY 2006 GROUPER
$18,758 under a consolidated severity- the HSRVcc weighting methodology and with the FY 2006 charge-based relative
adjusted DRG system. By increasing the the consolidated severity-adjusted weights. We also show the percent
number of DRGs to better recognize DRGs. However, for reasons described change in case-mix between the
severity, the DRG system itself would in more detail below, we are proposing consolidated severity-adjusted DRGs
provide better recognition for cases that to implement the HSRVcc weighting with HSRVcc relative weights and the
are currently paid as outliers. That is, methodology we described above for FY FY 2006 GROUPER with the FY 2006
many cases that are high-cost outlier 2007 and future fiscal years and the charge-based relative weights and the
cases under the current DRG system consolidated severity-adjusted DRG percent change between the
would be paid using a severity of illness GROUPER for implementation in FY consolidated severity-adjusted DRGs
subclass 3 or 4 under the consolidated 2008 (if not earlier). Although we are with HSRVcc relative weights and the
severity-adjusted DRGs and could proposing to adopt each of these FY 2006 DRGs with HSRVcc relative
potentially be paid as nonoutlier cases. changes to the IPPS sequentially, the weights.
TABLE G.—PERCENT CHANGE IN CASE-MIX AMONG MEDICAL AND SURGICAL DRGS BY MDC
Percent
change in
Percent case-mix due Total impact
change in
MDC description Cases to consoli- all changes
case-mix due dated severity- (percent)
to HSRVcc adjusted
DRGs
Surgical DRGs experience a decline of but to a much lesser extent. The Table H below shows department
5.7 percent in weights, while medical redistribution of payments from charges as a percent of total charges and
DRGs overall increase by approximately adopting the HSRVcc weighting the CCRs for the two routine cost
6 percent when we apply the HSRVcc methodology can be explained by the centers (routine days and intensive care
method to the FY6 DRGs. Adoption of much lower CCRs for ancillary cost unit) and eight ancillary cost centers
the consolidated severity-adjusted DRGs centers that account for a higher that we used to develop the cost-based
also shows a redistribution of payment proportion of total charges in the weights.
from the surgical to the medical DRGs, surgical DRGs than the medical DRGs.
TABLE H.—DEPARTMENTAL CHARGES AS PERCENT OF TOTAL CHARGES FOR MEDICAL AND SURGICAL DRGS AND
DEPARTMENTAL COST-TO-CHARGE RATIOS (CCRS)
[In percent]
Routine Intensive Supplies & Therapy Lab Radiology Other O.R. Pharmacy Cardiac
days care unit equipment
Cost-to-Charge
Ratio ............... 85 72 34 35 25 24 51 37 26 20
Medical ............... 24 12 5 7 14 10 7 1 16 5
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Surgical .............. 10 10 23 4 8 5 4 17 13 6
As the above Table H shows, the 12 percent for intensive care unit) and of total charges in the medical and
routine cost centers account for 36 20 percent (10 percent for routine days surgical DRGs, respectively. These
percent (24 percent for routine days and and 10 percent for intensive care unit) departments have CCRs that range from
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85 (routine days) to 72 percent weights will more closely reflect actual and 20 percent for medical supplies and
(intensive care unit). However, the relative costs. cardiology respectively). For this DRG,
markup over costs is much higher in the In addition to examining the change routine cost center charges account for
ancillary than in the routine cost in weights by MDC for the medical and only 7 percent of total hospital charges.
centers. The CCRs in the ancillary surgical DRGs, we also looked at the Thus, similar to the MDC analysis
departments range from 20 percent percent change to the relative weights presented above, payment for this DRG
(cardiac) to 51 percent (other). Ancillary for several DRGs that account for the can be expected to decline because
cost centers account for 64 percent of high Medicare spending. Again, the ancillary departments with higher
total charges in the medical and 80 payment impacts illustrate that a change
markups account for a larger proportion
percent of total charges in the surgical from the charge-based relative weights
of total charges.
DRGs. Thus, because ancillary to the HSRVcc weighting methodology
departments have higher markups and will result in significant payment The data are similar for many of the
account for a larger proportion of total redistribution for selected DRGs. Table other DRGs presented in Table I that are
charges in the medical than the surgical I below also shows payment reductions showing large reductions in the relative
DRGs, adopting HSRVcc redistributes from adopting HSRVcc for several DRGs weights from adopting the HSRVcc
payments to the more routine-intensive where ancillary charges represent a high weighting methodology. Conversely,
medical DRGs. Table H supports the proportion of total charges and the Table I shows payment increases from
hypothesis that the charge-based ancillary department has a low CCR. For adopting HSRVcc for DRGs where
relative weight methodology results in instance, Table I shows a 30-percent routine charges represent a high
high payments to surgical DRGs that use reduction in payment for DRG 558 from proportion of total charges. These
more ancillary services relative to adopting HSRVcc weights. For this departments have high CCRs. Below we
medical DRGs that use more routine DRG, charges for the medical supplies illustrate the charges by cost center as
services. By changing the relative and the cardiac care represent over 60 a percent of total charges for DRGs 558
weight methodology from the charge- percent of average total hospital charges. and 089.
based to the HSRVcc method, the These cost centers have low CCRs (34
ILLUSTRATION
Supplies
Routine and Labora-
ICU Therapy Radiology Other O.R. Pharmacy Cardiac
days equip- tory
(percent) (percent) (percent) (percent) (percent) (percent) (percent)
(percent) ment (percent)
(percent)
CCRs ........................ 85 72 34 35 25 24 51 37 26 20
DRG 558 .................. 2 5 39 0 3 2 1 2 8 29
DRG 089 .................. 25 9 7 9 14 8 6 1 19 3
Table I below shows a 30-percent the MDC analysis presented above, increases in payments. For instance,
reduction in payment for DRG 558 from payment for this DRG can be expected payment for DRG 089 is increasing
adopting HSRVcc weights. For this to decline because ancillary nearly 10 percent from adoption of
DRG, charges for the medical supplies departments with higher markups HSRVcc weights. Routine day charges
and the cardiac care represent nearly 80 account for a larger proportion of total account for 34 percent of total charges
percent of average total hospital charges. charges. The data are similar for many for DRG 089. Thus, because routine
These cost centers have low CCRs (34 of the other DRGs presented in Table I charges represent a high proportion of
percent and 20 percent for medical that are showing large reductions in the total charges and these cost centers have
supplies and cardiology, respectively). relative weights from adopting HSRVcc. relatively low markups, the HSRVcc
For this DRG, routine cost center Conversely, routine charges account for methodology will lead to higher
charges account for only 7 percent of a higher proportion of total charges for payments for this DRG.
total hospital charges. Thus, similar to the DRGs that are showing large BILLING CODE 4120–01–P
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EP25AP06.004</GPH>
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24024 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
Our payment impacts were similar to impact estimates to those simulated by consolidated severity-adjusted DRG
MedPAC’s in both magnitude and MedPAC 4 using our alternative HSRVcc GROUPER.
direction. Table J below compares our weighting methodology and the
TABLE J.—COMPARISON OF MEDPAC’S TABLE OF COMBINED PAYMENT IMPACT OF SEVERITY-ADJUSTED DRGS AND
COST-BASED, HOSPITAL-SPECIFIC RELATIVE VALUES (HSRVS) TO THE CMS/3M ANALYSIS
[The percent changes estimated by CMS/3M are shown in parenthesis.]
Decrease/in-
Decrease Decrease be- Increase be- Increase
crease be-
Type of hospital greater than tween ¥5% tween +1% greater than
tween ¥1%
¥5% and ¥1% and +5% +5%
and 1%
Specialty:
Heart ............................................................................. 87% (95%) 13% (5%) 0% (0%) 0% (0%) 0% (0%)
Orthopedic .................................................................... 76% (91%) 24% (2%) 0% (2%) 0% (2%) 0% (2%)
Surgical ......................................................................... N/A (67%) N/A (17%) N/A (0%) N/A (17%) N/A (0%)
All Other IPPS:
Urban ............................................................................ 7% (8%) 22% (25%) 16% (19%) 33% (31%) 22% (17%)
Rural ............................................................................. 8% (11%) 25% (35%) 17% (20%) 33% (26%) 16% (9%)
High IME/DSH .............................................................. 8% (10%) 28% (25%) 14% (15%) 25% (28%) 24% (23%)
**Numbers may not add to 100 percent due to rounding.
As shown in Table J above, the shifts to receive increases of greater than 5 hospitals may experience an 11.2 and
in payment from MedPAC’s method percent from these combined changes, 8 4.4 percent decline in payments,
compared to the alternative approach percent of urban hospitals and 11 respectively, from the move to the
that we developed are fairly similar. percent of rural hospitals are expected HSRVcc weighting method alone. Urban
Both methods introduce refinements to to experience decreases of greater than hospitals experience a small decline of
the DRG GROUPER and relative weight 5 percent in payment and an additional 0.3 but rural hospitals experience a gain
methods that expand the DRG groups 25 percent of urban providers and 35 of 2.7 percent. While urban hospitals as
and create greater homogeneity among percent of rural providers are expected a group are not expected to experience
the cases within each DRG. These to experience a decrease of between 1 a change in overall payments with the
changes will significantly reduce and 5 percent. combined introduction of the
payments to hospitals that specialize in Table K below shows the impact on
consolidated severity-adjusted DRGs
certain DRGs experiencing a reduction specific categories of hospitals of
and the HSRVcc weighting
in payment. There are also payment adopting HSRVcc weights and the
impacts across all other hospitals. consolidated severity-adjusted DRGs. As methodology, rural hospitals would
Although some urban (17 percent) and illustrated in Table K, cardiac specialty likely experience a 0.4 percent decline
rural (9 percent) providers are estimated hospitals and orthopedic specialty in payments.
TABLE K.—PAYMENT IMPACT OF HOSPITAL-SPECIFIC COST WEIGHTS AND CONSOLIDATED SEVERITY-ADJUSTED DRGS BY
HOSPITAL TYPE
Percent
change in
Percent case-mix due
Number of change in Total impact
Cases to consoli-
hospitals case-mix due all changes
dated severity-
to HSRVcc adjusted
DRGs
In Table L, we provide a more Hospitals with more than 60 percent of increase, and hospitals with 50 to 100
detailed impact analysis by hospital Medicare patients are projected to beds are also projected to benefit with
type. Column 1 shows the estimated receive the greatest benefit in payments a 2.54 percent increase.
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impact of moving from the current with a 7.6 percent increase. Hospitals Payments to major and other teaching
charge-based relative weight with less than 50 beds are estimated to hospitals are estimated to decrease by
methodology to the HSRVcc method. experience an additional 4.1 percent 1.1 percent and 1 percent, respectively,
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24025
while payments to nonteaching this section from adopting HSRVcc may Column 3 shows the estimated total
hospitals are estimated to increase by differ from those shown in the impact impact of moving from the FY 2006
1.3 percent. Hospitals with less than 20 section in the Addendum to this GROUPER with the current charge-
percent DSH payments will experience proposed rule. based relative weights to the
declines in payment from 0.48 to 1.45 Column 2 shows the estimated consolidated severity-adjusted DRG
percent, while hospitals with DSH incremental impacts of transitioning GROUPER with HSRVcc relative
payments greater than 50 percent will from the FY 2006 GROUPER with weights. While large urban hospitals are
experience a 2.3 percent increase. HSRVcc relative weights to the expected to gain 0.7 percent from the
consolidated severity-adjusted DRG
Because we are proposing to implement combined changes, other urban
GROUPER with HSRVcc relative
the HSRVcc weighting methodology for hospitals and rural hospitals are
weights. Hospitals with high Medicare
FY 2007, we are also showing the patient percentages experience the projected to experience declines of 0.7
impact of this proposal on FY 2007 largest payment increases of 1.1 percent, percent and 0.4 percent, respectively.
payments in the impact section in the followed by hospitals in the East North Hospitals with high percentages of
Addendum to this proposed rule. We Central Region where increases are Medicare patients would see the greatest
note that the impact section models estimated at 0.9 percent. Hospitals with increase in payments, while hospitals
adopting the HSRVcc in isolation using less than 50 beds, rural hospitals, and with low DSH percentages, hospitals
FY 2005 Medicare charge data. The hospitals with 50 to 100 beds with under 50 beds, and hospitals in the
impacts shown here were simulated experience the greatest estimated West North Central Region are projected
with FY 2004 Medicare charge data. decreases in payment of 5.2, 3.1, and 2.8 to experience the greatest decreases.
Thus, the payment changes shown in percent, respectively.
TABLE L.—PAYMENT IMPACT OF HOSPITAL-SPECIFIC COST WEIGHTS AND CONSOLIDATED SEVERITY-ADJUSTED DRGS BY
HOSPITAL CATEGORY
Percent
change in
Percent case-mix due
Number of change in Total impact
Cases to consoli-
hospitals case mix due all changes (3)
dated severity-
to HSRVcc (1) adjusted
DRGs (2)
Geographic Location:
Large Urban .................................................................. 1,454 5,159,405 ¥0.1 0.7 0.7
Other Urban .................................................................. 1,158 4,313,598 ¥0.7 0.0 ¥0.7
Rural ............................................................................. 1,035 1,669,648 2.8 ¥3.1 ¥0.4
Census:
New England ................................................................ 150 550,391 0.3 ¥0.5 ¥0.2
Middle Atlantic .............................................................. 473 1,750,452 0.1 ¥0.5 ¥0.4
South Atlantic ................................................................ 556 2,191,787 ¥0.2 0.4 0.2
East North Central ........................................................ 541 1,973,092 ¥0.1 0.9 0.8
East South Central ....................................................... 368 973,664 0.3 ¥1.3 ¥1.0
West North Central ....................................................... 314 846,046 ¥0.5 ¥0.8 ¥1.3
West South Central ...................................................... 572 1,332,819 ¥0.1 ¥0.1 ¥0.2
Mountain ....................................................................... 234 502,128 ¥0.6 0.6 ¥0.1
Pacific ........................................................................... 439 1,022,272 0.6 0.3 0.9
Bed Size:
Less than 50 beds ........................................................ 761 423,096 4.1 ¥5.2 ¥1.3
50–100 beds ................................................................. 717 1,028,840 2.5 ¥2.8 ¥0.3
100–200 beds ............................................................... 1,096 2,895,808 1.8 ¥0.6 1.2
200–300 beds ............................................................... 509 2,396,739 0.0 0.5 0.5
300–400 beds ............................................................... 269 1,666,872 ¥0.9 0.7 ¥0.2
400–500 beds ............................................................... 138 1,017,724 ¥1.5 0.7 ¥0.8
Greater than 500 beds ................................................. 157 1,713,572 ¥1.8 0.8 ¥1.0
Teaching Status:
Major Teaching ............................................................. 268 1,552,985 ¥1.1 0.5 ¥0.5
Other Teaching ............................................................. 760 3,856,302 ¥0.9 0.6 ¥0.3
Non Teaching ............................................................... 2,619 5,733,364 1.3 ¥0.8 0.5
Disproportionate Share:
%DSH Less than 5% .................................................... 202 339,171 ¥1.4 ¥0.8 ¥2.2
%DSH 5–10% ............................................................... 335 1,048,420 ¥0.6 ¥0.1 ¥0.7
%DSH 10–15% ............................................................. 460 1,429,319 ¥0.6 0.1 ¥0.4
%DSH 15–20% ............................................................. 582 2,061,387 ¥0.5 ¥0.1 ¥0.6
%DSH 20–25% ............................................................. 528 1,812,743 0.1 ¥0.1 0.0
%DSH 25–30% ............................................................. 455 1,497,940 0.0 0.2 0.2
%DSH 30–40% ............................................................. 516 1,586,376 0.0 0.0 ¥0.1
%DSH 40–50% ............................................................. 262 693,815 0.6 ¥0.1 0.4
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%DSH Greater than 50% ............................................. 307 673,480 2.3 0.5 2.9
Percent Medicare Discharges:
Less than 10% Medicare Cases .................................. 1,194 3,210,704 ¥0.7 ¥0.1 ¥0.8
10%–20% Medicare Cases .......................................... 1,471 5,109,042 0.1 0.0 0.0
20%–30% Medicare Cases .......................................... 617 1,934,947 ¥0.1 0.1 ¥0.1
30%–40% Medicare Cases .......................................... 226 617,518 0.9 0.1 1.0
40%–50% Medicare Cases .......................................... 86 197,882 2.0 0.8 2.8
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24026 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE L.—PAYMENT IMPACT OF HOSPITAL-SPECIFIC COST WEIGHTS AND CONSOLIDATED SEVERITY-ADJUSTED DRGS BY
HOSPITAL CATEGORY—Continued
Percent
change in
Percent case-mix due
Number of change in Total impact
Cases to consoli-
hospitals case mix due all changes (3)
dated severity-
to HSRVcc (1) adjusted
DRGs (2)
6. Conclusions system. Conversely, cases that group to condition (MCV). We are considering
As we describe in more detail below, multiple MDCs and DRGs under the whether a similar approach applied to
we believe that adopting HSRVcc current system may group to a single other DRGs would improve payment.
MDC and DRG under the current Much like the approach we took last
weights and the consolidated severity-
system. We welcome public comments year to identify MCV conditions that
adjusted DRGs as recommended by
on this issue. represented higher severity in
MedPAC has the potential to result in
One potential alternative to partially cardiovascular patients, we plan to
significant improvements to Medicare’s
adopting consolidated severity-adjusted examine which conditions identify
IPPS payments. This rule proposes the
DRGs would involve applying a clinical more severely ill cases in selected MDCs
HSRVcc methodology effective for FY severity concept to an expanded set of and DRGs. We are soliciting comments
2007. DRGs in FY 2007. For example, we have as to whether it would be appropriate to
Because we believe that accounting received correspondence that raised the adopt these types of limited changes in
more appropriately for severity of concern that hospitals may have FY 2007 as an intermediate step to
illness may significantly improve the incentives under the current DRG adopting consolidated severity-adjusted
effectiveness of the IPPS, we are also system to avoid severely ill, resource- DRGs in FY 2008. We also encourage
proposing implementation of the intensive back and spine surgical cases commenters to send suggestions
consolidated severity-adjusted DRGs or (as discussed in section II.D.3.b. of this regarding this method for modifying the
alternative severity adjustment methods proposed rule; the correspondence DRGs. Under the final alternative, we
in FY 2008 (if not earlier). In developing specifically requested that we apply a would implement the consolidated
this proposal, we considered a range of clinical severity concept to DRG 546). severity-adjusted DRGs in FY 2007 and
alternatives outlined below, and we are Other surgical DRGs may not accurately the HSRVcc methodology in FY 2008.
soliciting comments on both the recognize case severity. Because of the As the impacts presented in this
proposal and the alternatives. We ask frequency of DRG use and the potential proposed rule are based on the latest
commenters to consider both the for risk selection, certain DRGs may be and best available data, we believe the
consolidated severity-adjusted DRGs particularly important in creating a estimated yearly impacts due to
and alternative severity adjustment financial incentive for hospitals to select implementing the HSRVcc methodology
methods for accounting for severity a less severely ill patient whose case in FY 2007 described in the regulatory
more comprehensively in the DRG would be assigned to the same DRG as impact section of Appendix A of this
payment system. For example, under a more severely ill patient. proposed rule would be similar to the
one alternative, we would implement Therefore, while we are proposing to annual impact of adopting the HSRVcc
the consolidated severity-adjusted DRGs adopt the consolidated severity-adjusted methodology in FY 2008.
in FY 2007 along with the HSRVcc DRGs in FY 2008, we are considering With respect to the relative weight
weighting methodology. In this event, as whether to make more limited changes calculations, we believe that adopting
discussed above, to maintain budget to the current DRG system to better HSRVcc weights has the potential to
neutrality, we would also implement in recognize severity of illness in FY 2007. significantly improve payment equity
FY 2007 an adjustment to the In the FY 2006 IPPS final rule (70 FR between DRGs. As MedPAC notes, ‘‘a
standardized amounts to eliminate the 47474 through 47478), we took steps to survey of hospitals’ charging practices
effect of changes in coding or better recognize severity of illness suggest that hospitals use diverse
classification of discharges that do not among cardiovascular patients. For all strategies for setting service charges and
reflect real changes in case-mix. Under DRGs except cardiac DRGs, we currently raising them over time.’’ MedPAC found
another alternative, as proposed, we distinguish between more complex and that data from the Medicare cost reports
would adopt and implement less complex cases based on the indicate that hospital markups for
consolidated severity-adjusted DRGs in presence or absence of a CC. However, ancillary services (for example,
FY 2008. Under yet another alternative, the diagnoses that we designate as CCs operating room, radiology, and
we would consider partially are the same across all base DRGs. laboratory) are generally higher than for
implementing the consolidated severity- Because the CC list is not dependent on routine services (for example, intensive
adjusted DRGs in FY 2007 and complete the patient’s underlying condition, CCs care unit and room and board).5 Thus,
implementation in FY 2008. However, may not accurately recognize severity in MedPAC has concluded that the relative
there are practical difficulties associated a given case. The changes we made in weights for DRGs that use more
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with partial implementation of FY 2006 to the cardiac DRGs ancillary services may be too high
consolidated severity-adjusted DRGs significantly improved recognition of compared to other DRGs where the
because cases in a single DRG under the severity between patients by routine costs account for a higher
current CMS DRG system may group to distinguishing between more and less proportion of hospital costs. We agree.
multiple DRGs and MDCs under a severe cases based on the presence or
consolidated severity-adjusted DRG absence of a major cardiovascular 5 Ibid., p. 26.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24027
The CCRs that we are using to develop recognize that there may be system also raises issues regarding the
the HSRVccs support MedPAC’s countervailing views, and we IME and DSH adjustments. It is possible
conclusion. As indicated above, we specifically seek comment on the that a consolidated severity-adjusted
summarized hospital-level cost and wisdom of adopting consolidated DRG system would have important
charge information to 2 routine and 8 severity-adjusted DRGs in FY 2007. implications for these payment
ancillary departmental cost centers and Below are our concerns with immediate adjustments. We believe further study of
found that national average routine cost implementation of consolidated this issue is warranted.
center CCRs ranged from 72 percent severity-adjusted DRGs: • To this point, we have only
(intensive care unit days) to 85 percent • These changes would represent a considered one alternative DRG system
(routine days), while ancillary cost major change to how hospitals are paid to better recognize severity of illness. It
center CCRs ranged from 20 percent for Medicare inpatient services. Given is possible that the public comment
(cardiology) to 37 percent (operating the number of new DRGs and logic for process will present compelling
room). assigning cases in a consolidated evidence that there are potential
MedPAC also found that relative severity-adjusted DRG system, we alternatives to the consolidated severity-
profitability ratios were higher among believe it may be appropriate to provide adjusted DRG system that could also
cardiovascular surgical DRGs than the hospitals with additional time to plan better recognize severity of illness.
medical DRGs.6 We believe the relative for these changes. We also are Therefore, for the reasons indicated
profitability of the surgical considering whether hospitals should above, we are seeking comment on the
cardiovascular DRGs has been an have more than the 60-day public most effective approach to address
important factor in the development of comment period and the additional 60- severity of illness in the IPPS. However,
specialty heart hospitals. Our payment day delay between the publication of we reserve the option to adopt
impact analysis indicates that this issue the final rule and implementation on consolidated severity-adjusted DRGs in
will be addressed by adopting HSRVccs. October 1, 2006, to fully understand and FY 2007, based upon the comments that
Moving from the current system of plan for the changes that we are we receive. Between now and the
charge-based weights to HSRVcc proposing. Further, we welcome public eventual implementation, we will
weights increases payment in the comment on the changes we are carefully study the additional impact of
medical DRGs relative to the surgical proposing; these DRGs on payment accuracy after
DRGs. We expected this result, given • If, based on analysis of data and our proposed refinements in relative
that routine costs will generally account public comments received, we were to weights are implemented, as well as
for a higher proportion of total costs in make significant revisions in the final their impact on hospitals before
the medical DRGs than in the surgical rule to the consolidated severity- reaching a final decision.
DRGs. Adopting HSRVcc weights would adjusted DRGs we describe above, Given the changes we are proposing,
result in the most significant hospitals would have only 60 total days we believe that hospitals would be
improvement in hospital payment-to- between the publication of the final rule interested in understanding how a given
cost ratios among the changes to the and the October 1, 2006 effective date of case would be assigned to a
IPPS recommended by MedPAC.7 For the IPPS rule to understand and plan for consolidated severity-adjusted DRG
these reasons described above, we are the new DRG system. under the new system. In order to
proposing to adopt HSRVccs for FY • While we modeled the changes to facilitate understanding of the
2007. the DRG system and relative weights to underlying severity DRG concepts and
Based on our analysis, we concur reflect budget neutrality, we believe the logic, we are providing a link below to
with MedPAC that the modified version large increase in the number of DRGs 3M’s Web site for the duration of the
of the APR DRGs would account more would provide opportunities for comment period where users can access
completely for differences in severity of hospitals to more accurately and information related to the proposed
illness and associated costs among completely code the information consolidated severity-adjusted DRGs.
hospitals. MedPAC observed some contained in the medical record. Coding Users will have access to a tool that
modest improvements in hospitals’ that has no effect on payment under the allows them to build case examples
payment-to-cost ratios from adopting current DRG system may result in a case using this proposed DRG classification
APR DRGs.8 We modeled the being assigned to a higher paid DRG system. The report produced by the tool
consolidated severity-adjusted DRGs under the consolidated severity- will provide a detailed explanation of
discussed above and observed a 12- adjusted DRG system. Thus, more how the severity of illness was assigned
percent increase in the explanatory accurate and complete coding may and the diagnostic and demographic
power (or R-square statistic) of the DRG occur under the new system because the factors affecting that assignment. In
system to explain total hospital charges. more sophisticated DRG system would addition, users will be able to view the
That is, we found more uniformity mean that more comprehensive coding APR DRG Definitions Manual, a report
among hospital total charges within the could result in higher payments. Section showing the mapping from the standard
consolidated severity-adjusted DRG 1886(d)(3)(A)(vi) of the Act provides the APR DRGs to the consolidated severity-
system than we did with Medicare’s Secretary with the authority to adjust adjusted DRGs, a report showing basic
current DRG system. While we believe the standardized amounts to account for APR DRG statistics, and other APR DRG
the consolidated severity-adjusted DRG the effect of coding or classification background and educational materials.
system that we described above has the changes that do not reflect real changes This site can be accessed at http://
potential to improve the IPPS, we have in case-mix. We are interested in public www.aprdrgassign.com.
the following concerns about adopting comments on this issue. In addition to the above information,
these changes for FY 2007, which is • As described above, adoption of a CMS makes available for purchase the
wwhite on PROD1PC61 with PROPOSALS2
why we have proposed not adopting the consolidated severity-adjusted DRG Expanded Modified MedPAR data that
changes in FY 2007. However, we system could have implications for the were used in simulating the policies
outlier threshold. proposed in the IPPS rule. If readers
6 Ibid., p. 29. • As we indicated in the introduction have already ordered the proposed rule
7 Ibid., p. 37. to this section, adoption of a data, we are in the process of filling the
8 Ibid., p. 37. consolidated severity-adjusted DRG orders and will be providing the FY
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24028 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
2005 MedPAR data that were used to We are seeking public comments on increases for some types of cases or
model the proposed changes to the both of these proposals and whether we categories of hospitals. For this reason,
DRGs and relative weights for FY 2007 should provide a transition to the we are considering whether to provide
as well as the FY 2004 MedPAR data HSRVcc weights. The proposed changes a transition to the HSRVcc weights.
that we used to model the consolidated to the relative weights, in some cases, Under such a transition, we would
severity-adjusted DRGs that we are could result in significant changes to blend the HSRVcc weights with the
proposing to implement in FY 2008 (if hospital payments. Using FY 2005 charge-based weights over a period of 2,
not earlier). If readers have not ordered MedPAR data, we computed an 3, or 4 years. For instance, if we were
the proposed rule MedPAR data but are estimated FY 2006 CMI (based on FY to implement the HSRVcc methodology
interested in receiving them, we 2006 relative weights) and an estimated over 2 years, we would blend 1/2 of the
encourage them to order the data as FY 2007 CMI (based on the FY 2007 HSRVcc weights with 1/2 of the charge-
soon as possible by following the weights that we are proposing in this based weights. Such a transition would
directions provided below. We will proposed rule) and looked at the percent result in an impact of 50 percent of
process orders in the order they are change from FY 2006 to FY 2007. Table moving directly to the HSRVcc weights.
M shows the number of hospitals in
received. For information on how to If we were to establish a longer
each category that can expect to
order the Expanded Modified MedPAR, transition to the HSRVcc weights, we
experience increases or decreases in
go to the following Web site: http:// would blend charge-based with
CMI of more than 5 percent and also
www.cms.hhs.gov/LimitedDataSets/ and shows the number of providers expected hospital-specific cost weights calculated
click on MedPAR Limited Data Set to experience smaller changes in case- under the consolidated severity-
(LDS)—Hospital (National). This Web mix. adjusted DRGs. As discussed in the
page will describe the file and provide Overall, we estimate that 134 previous sentences, we are presenting
directions to further detailed providers may experience decreases in an example of a 2-year transition
instructions for how to order. Persons payment of greater than 5 percent, while because the payment impact of
placing orders must send the following: 1,003 providers may expect increases of consolidated severity-adjusted DRGs
Letter of Request, LDS Data Use greater than 5 percent. Approximately and the HSRVcc weights go in different
Agreement and Research Protocol (see 54 percent of rural hospitals may directions for some types of cases or
Web site for further instructions), LDS receive increases in their CMI of greater categories of hospitals. Thus, a 2-year
Form, and a check for $3,655 to: Centers than 5 percent. However, as discussed transition provides the shortest time
for Medicare & Medicaid Services, in the previous section, the eventual period for achieving the improvements
Public Use Files, Accounting Division, implementation of a consolidated to the IPPS we have analyzed. However,
P.O. Box 7520, Baltimore, MD 21207– severity-adjusted DRG system in FY we welcome public comments on this
0520. 2008 (if not earlier) would offset these issue.
TABLE M.—PERCENT CHANGE IN CASE-MIX INDEX BETWEEN FY 2006 AND FY 2007 BASED ON FY 2005 MEDPAR
DATA
Number of Number of Number of Number of Number of
providers providers providers providers providers
Number of with more with loss with 1% with gain with greater
hospitals than 5% between 1 loss to 1% between 1 than 5%
loss and 5% gain and 5% gain
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24029
TABLE M.—PERCENT CHANGE IN CASE-MIX INDEX BETWEEN FY 2006 AND FY 2007 BASED ON FY 2005 MEDPAR
DATA—Continued
Number of Number of Number of Number of Number of
providers providers providers providers providers
Number of with more with loss with 1% with gain with greater
hospitals than 5% between 1 loss to 1% between 1 than 5%
loss and 5% gain and 5% gain
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24030 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE M.—PERCENT CHANGE IN CASE-MIX INDEX BETWEEN FY 2006 AND FY 2007 BASED ON FY 2005 MEDPAR
DATA—Continued
Number of Number of Number of Number of Number of
providers providers providers providers providers
Number of with more with loss with 1% with gain with greater
hospitals than 5% between 1 loss to 1% between 1 than 5%
loss and 5% gain and 5% gain
We also recognize the change from the On July 1, 1999, we issued coverage that we would make to the MCE
current Medicare DRGs to a policy which specified that pancreas ‘‘NonCovered Procedure’’ edit if
consolidated severity-adjusted DRG transplants were only covered when Medicare coverage is established for
system would represent significant performed simultaneously with or after pancreas transplants alone. That
changes for hospitals. While we have a Medicare covered kidney transplant. A discussion can be found in the section
considered the possibility of blending noncoverage policy for pancreas II.D.6. of this preamble, which describes
the two DRG systems, we do not believe transplant remained in effect for proposed changes to the MCE.
there is a practical and simple patients who had not experienced end Because of the potential decision to
mechanism to transition from the CMS stage renal failure secondary to diabetes. cover pancreas transplants alone, the
DRGs to a consolidated severity- On July 29, 2005, we opened a national logic for the determination of patient
adjusted DRG system. Our payments coverage determination (NCD) to case assignment to DRG 513 would have
would be a blend of two different determine whether pancreas transplant to be modified to remove the
relative weights that would have to be alone, that is, without a kidney requirement that patients also have
determined using two different DRG transplant, is a reasonable and necessary kidney disease. Therefore, if the NDC is
systems. The systems and legal service for Medicare beneficiaries. On finalized, DRG 513 would consist of the
implications of such a transition could January 26, 2006, we published the following logic: List A (the diabetes
be significant. First, we believe that the proposed decision memorandum for codes) of the required principal or
use of two DRG systems would involve pancreas transplants on our Web site at secondary diagnosis codes would
significant administrative complexity http://www.cms.hhs.gov.mcd/ remain the same, as would the required
and expense for the Nation’s hospitals, viewdraftdecisionmemo.asp?id=166, operating room procedures (codes 52.80
fiscal intermediaries, and CMS. Second, stating that the evidence is adequate to (Pancreatic transplant NOS), and 52.82,
we would likely have to establish two conclude that pancreas transplant alone (Homotransplant of pancreas)). List B
sets of Medicare rates with one set is reasonable and necessary for would be removed from the logic; the
specific to each DRG system. In addition Medicare beneficiaries under limited following codes would no longer be
to complicating the ratesetting process circumstances. required as a principal or secondary
and making it unclear to hospitals how Medicare coverage of pancreas diagnosis:
Medicare’s IPPS rates for a year were transplants alone is proposed to be • 403.01, Hypertensive kidney
determined, we are uncertain how we limited to transplants in those facilities disease, malignant, with chronic kidney
would: that are Medicare-approved for kidney disease.
• Apply the budget neutrality transplantation. A listing of approved • 403.11, Hypertensive kidney
requirement under section transplant centers can be found at disease, benign, with chronic kidney
1886(d)(4)(C)(iii) of the Act for changes http://www.cms.hhs.gov/ disease.
to DRG classifications and weighting AprovedTransplantCenters/. In addition • 403.91, Hypertensive kidney
factors. to other criteria listed in the draft disease, unspecified, with chronic
• Determine the outlier threshold decision memorandum, patients must kidney disease.
under section 1886(d)(5)(A)(iv) and the have a diagnosis of Type I diabetes. • 404.02, Hypertensive heart and
amounts removed for outliers from the Because we have issued a proposed kidney disease, malignant, with chronic
IPPS standardized amounts under NCD and a final NCD is not expected to kidney disease.
section 1886(d)(3)(B) of the Act. be completed until late April 2006, • 404.03, Hypertensive heart and
While we believe there are significant which is after the publication date of kidney disease, malignant, with heart
administrative, technical, and legal this proposed rule, we are using this failure and chronic kidney disease.
difficulties associated with making a proposed rule to indicate the coding • 404.12, Hypertensive heart and
blended transition from one DRG system changes that we would make to DRG kidney disease, benign, with chronic
to another, we welcome public 513 (Pancreas Transplant) in FY 2007 if kidney disease.
comments on this issue as well. limited coverage of pancreas transplants • 404.13, Hypertensive heart and
D. Proposed Changes to Specific DRG alone is established. If the final NCD kidney disease, benign, with heart
Classifications indicates that a pancreas transplant failure and chronic kidney disease.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24031
• 585.1, Chronic kidney disease, In FY 2005, to better account for these the new technology add-on payment
Stage I. two types of procedures, we revised provision is designed to support the
• 585.2, Chronic kidney disease, procedure code 02.93 (Implantation or reclassification of the technology to
Stage II (mild). replacement of intracranial other clinically coherent DRGs with
• 585.3, Chronic kidney disease, neurostimulator lead(s)) for the lead comparable resource costs.
Stage III (moderate). placement and created three new With the conclusion of the new
• 585.4, Chronic kidney disease, procedures codes for the pulse technology add-on payment, Medtronic
Stage IV (severe). generator: 86.94 (Insertion or is concerned that Kinetra will be
• 585.5, Chronic kidney disease, replacement of single array inadequately paid in DRG 1
Stage V. neurostimulator pulse generator); 86.95 (Craniotomy Age >17 With CC) or DRG
• 585.6, End stage renal disease. (Insertion or replacement of dual array
• 585.9, Chronic kidney disease, 2 (Craniotomy Age >17 Without CC)
neurostimulator pulse generator); and under MDC 1. Medtronic recommended
unspecified. 86.96 (Insertion or replacement of other
• V42.0, Organ or tissue replaced by that CMS reassign the full-system
neurostimulator pulse generator). We Kinetra implants to DRG 543
transplant, kidney. published the new procedure codes and
• V43.89, Organ or tissue replaced by (Craniotomy with Implant of Chemo
revised procedure code titles in Tables Agent or Acute Complex CNS Principal
other means, other organ or tissue, 6B and 6F of the FY 2005 IPPS final rule
other. Diagnosis) under MDC 1. To
(69 FR 49627 and 49641). accommodate this recommendation,
We note that DRG 513 would remain In FY 2006, we made further
in the Pre-MDC hierarchy. procedure codes 02.93 and 86.95 would
refinements to the pulse generator codes have to be reassigned to DRG 543 and
2. MDC 1 (Diseases and Disorders of the to identify rechargeable pulse the title for DRG 543 would have to be
Nervous System) generators. We published the new revised to ‘‘Craniotomy with
procedure codes and revised procedure Implantation of Major Device or Acute
a. Implantation of Intracranial
code titles in Tables 6B and 6F of the Complex CNS Principal Diagnosis.’’
Neurostimulator System for Deep Brain
FY 2006 IPPS final rule (70 FR 47637 Medtronic argued that DRG 543 would
Stimulation (DBS)
and 47639). The current list of pulse be a ‘‘clinically-consistent DRG that
(If you choose to comment on issues generators codes are: more appropriately reflects the resource
in this section, please include the • 86.94 (Insertion or replacement of utilization associated with full-system
caption ‘‘DRGs: Neurostimulators’’ at single array neurostimulator pulse [deep brain stimulation] procedures.’’
the beginning of your comment.) generator, not specified as rechargeable); Medtronic also emphasized that its
Deep-brain stimulation (DBS) is • 86.95 (Insertion or replacement of proposal would only apply to full-
designed to deliver electrical dual array neurostimulator pulse system Kinetra implants when both the
stimulation to the subthalamic nucleus generator, not specified as rechargeable); leads and generators are implanted
or internal globus pallidus to ameliorate • 86.96 (Insertion or replacement of during a single inpatient stay or
symptoms caused by abnormal other neurostimulator pulse generator); procedure codes 02.93 and 86.95 both
neurotransmitter levels that lead to • 86.97 (Insertion or replacement of appear on the claim. Medtronic believes
abnormal cell-to-cell electrical impulses single array neurostimulator the current DRG assignment is
in Parkinson’s disease and essential rechargeable generator); and appropriate for partial system implants.
tremor. DBS implants for essential • 86.98 (Insertion or replacement of
tremor are unilateral, with dual array neurostimulator rechargeable Medtronic provided an analysis of FY
neurostimulation leads on one side of generator). 2004 MedPAR data. Procedure code
the brain. DBS implants for Parkinson’s Kinetra is an implantable dual array 86.95 was not created until FY 2005 so
disease are bilateral, requiring neurostimulator pulse generator that is Medtronic used procedure codes 02.93
implantation of neurostimulation leads approved for a new technology add-on and 86.09 (Other incision of skin and
in both the left and right sides of the payment through FY 2006. For more subcutaneous tissue) to identify the full
brain. information about the new technology system. It identified 193 cases assigned
The implantation of a full DBS system add-on payment, please refer to section to DRG 1 with average charges of
requires two types of procedures. First, II.G.3.a. of this preamble. approximately $69,155, and 532 cases
surgeons implant leads containing Medtronic, the manufacturer of assigned to DRG 2 with average charges
electrodes into the targeted sections of Kinetra, argues that the new of approximately $56,113.
the brain where neurostimulation technology add-on payment provision is We have reviewed the latest data for
therapy is to be delivered. Second, a designed to recognize the higher costs of the full-system DBS implants assigned
neurostimulator pulse generator is new medical innovations for the initial to DRG 1 or DRG 2 in the FY 2005
implanted in the pectoral region and period the technology is available on the MedPAR file. We identified cases with
extensions from the neurostimulator market, and until the associated costs procedure codes 02.93 and 86.95 for
pulse generator are then tunneled under and charges related to the technology full-system dual array cases. We also
the skin along the neck and connected are available in the MedPAR database identified cases with reported codes
with the proximal ends of the leads and can be used to recalibrate the DRG 02.93 and 86.96 for those full-system
implanted in the brain. Hospitals stage weights. Medtronic also argues that, cases where the type of pulse generator
the two procedures required for a full- once a technology is no longer eligible was not specified. The following table
system DBS implant. for new technology add-on payments, displays our results:
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24032 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
DRG 2—Cases with 02.93 and 86.95 (Kinetra) .................................................................. 146 2.40 59,414
DRG 2—Cases with 02.93 and 86.96 (Unspecified) ............................................................ 249 2.12 47,047
DRG 543—All cases .............................................................................................................. 5,192 11.71 71,138
The data show that approximately technology that represents increased when furnished in accordance with the
one-quarter of the full-system dual array complexity but not necessarily greater FDA-approved protocols governing
neurostimulator pulse generator cases severity of illness. The data above Category B Investigational Device
are assigned to DRG 1 and indicate that approximately three- Exemption (IDE) clinical trials. PTA of
approximately three-quarters of these quarters of the patients who receive a the carotid artery, when provided solely
cases are assigned to DRG 2. In both full-system dual array neurostimulator for the purpose of carotid artery dilation
DRGs, the average length of stay was pulse generator do not have a CC. Thus, concurrent with carotid stent
shorter for the full-system array it appears that these patients would be placement, is considered to be a
neurostimulator pulse generator cases more likely to be assigned to a lower reasonable and necessary service only
than for all other cases. However, the severity of illness class based solely on when provided in the context of such
average charges for the full-system dual diagnosis. However, the implant of a clinical trials and, therefore, is
array neurostimulator pulse generator full-system dual array neurostimulator considered a covered service for the
cases are approximately $18,000 and pulse generator may increase purposes of these trials. Performance of
$27,000 higher than the average charges complexity and resource use even PTA in the carotid artery when used to
for DRGs 1 and 2, respectively. The though the patient is not more severely treat obstructive lesions outside of
average charges for these cases in DRG ill. As we also explain in section II.C. of approved protocols governing Category
1 are comparable to those for DRG 543. this proposed rule, we believe that the B IDE clinical trials remained
However, the more commonly occurring consolidated severity-adjusted DRG noncovered until the release of the
cases in DRG 2 have average charges system we are proposing would need to October 12, 2004 NCD for PTA of the
that are less than those in DRG 543 by be further refined to assign cases based carotid artery in post-approval studies.
nearly $12,000. We reviewed all of the on complexity as well as severity to This decision extended coverage of PTA
procedures that will result in a case account for technologies like the full- in the carotid artery concurrent with
being assigned to DRGs 1 and 2. Unlike system dual array neurostimulator pulse placement of an FDA-approved carotid
the full-system DBS implants, we generator implants that increase costs. stent for an FDA-approved indication
believe for most of the cases assigned to We plan to further develop the when furnished in accordance with the
these DRGs, there will be no device cost consolidated severity-adjusted DRGs FDA-approved protocols governing
to the hospital. For this reason, we between now and its implementation to post-approval studies. On March 17,
believe the higher average charges and address this issue. 2005, CMS released the NCD extending
lower length of stay for cases involving coverage to patients at high risk for
b. Carotid Artery Stents
full-system dual array neurostimulator carotid endarterectomy (CEA) who also
pulse generators are likely accounted for (If you choose to comment on issues have symptomatic carotid artery
by the cost of the device. While it is in this section, please include the stenosis ≥ 70 percent. Procedures must
possible that the cost of the device itself caption ‘‘DRGs: Carotid Artery Stents’’ be performed in CMS-approved
will make the full-system DBS implants at the beginning of your comment.) facilities and with FDA-approved
more expensive than other cases in the Stroke is the third leading cause of carotid artery stenting with distal
DRG, the hospital’s charge markup may death in the United States and the embolic protection. (Section 20.7 of the
also explain the higher charges but leading cause of serious, long-term NCD manual, which may be viewed at
lower average length of stay. As disability. Approximately 70 percent of the Web site: http://www.cms.hhs.gov/
indicated in section II.G.3.a.of this all strokes occur in people age 65 and manuals/downloads/
proposed rule, the national average CCR older. The carotid artery, located in the ncd103c1_Part1.pdf.)
for medical equipment and supplies is neck, is the principal artery supplying We established codes for carotid
approximately 34 percent. Thus, the the head and neck with blood. artery stenting procedures for use with
actual cost to the hospital of the case Accumulation of plaque in the carotid discharges occurring on or after
including the full-system dual array artery can lead to stroke either by October 1, 2004, for inpatients who are
neurostimulator pulse generator may be decreasing the blood flow to the brain enrolled in an FDA-approved clinical
much lower than the charges would or by having plaque break free and lodge trial and are using on-label FDA-
suggest. in the brain or in other arteries to the approved stents and embolic protection
With respect to whether the cost of head. The percutaneous transluminal devices. These codes are as follows:
the technology itself, absent a charge angioplasty (PTA) procedure involves • 00.61 (Percutaneous angioplasty or
markup, makes the case more inflating a balloon-like device in the atherectomy of precerebral (extracranial
expensive, we intend to address this narrowed section of the carotid artery to vessel(s)); and
issue as we make further refinements to reopen the vessel. A carotid stent is then • 00.63 (Percutaneous insertion of
the severity DRG system we are deployed in the artery to prevent the carotid artery stent(s)).
proposing to implement in FY 2008 (if vessel from closing or restenosing. A We assigned procedure code 00.61 to
not earlier), as discussed in section II.C. distal filter device (embolic protection four MDCs and seven DRGs. The most
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of this preamble. As we indicate in device) may also be present, which is likely scenario is that in which cases are
section II.C. of this proposed rule, the intended to prevent pieces of plaque assigned to MDC 1 (Diseases and
consolidated severity-adjusted DRG from entering the bloodstream. Disorders of the Nervous System) in
system that we are proposing does not Effective July 1, 2001, Medicare DRGs 533 (Extracranial Procedures with
currently assign a case to a higher covers PTA of the carotid artery CC) and 534 (Extracranial Procedures
weighted DRG based on use of a concurrent with carotid stent placement without CC). Other DRG assignments
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24033
can be found in Table 6B of the or atherectomy of other noncoronary did not find sufficient evidence to
Addendum to the FY 2005 IPPS final vessel(s)) in combination with warrant a DRG change at that time.
rule (69 FR 49624). procedure code 39.90 (Insertion of Manufacturer representatives have
As part of our annual DRG review, for nondrug-eluting peripheral vessel suggested that we assign all carotid
the FY 2006 final rule (70 FR 47300), we stent(s)) in DRGs 533 and 534 as the
stenting cases to DRG 533 only,
used proxy codes to evaluate the costs proxy codes for carotid artery stenting.
bypassing DRG 534. We have reviewed
and DRG assignments for carotid artery For this evaluation, we used principal
stenting because codes 00.61 and 00.63 diagnosis code 433.10 (Occlusion and the FY 2005 MedPAR data on all cases
were only approved for use beginning stenosis of carotid artery, without in DRGs 533 and 534 and on those cases
October 1, 2004, and MedPAR data for mention of cerebral infarction) to reflect containing code 00.61 in combination
this period were not yet available. We the clinical trial criteria. Based on the with 00.63. The following table displays
used procedure code 39.50 (Angioplasty results of our review, for FY 2006, we our results:
We found that 5.5 and 5.1 percent of a case to a higher weighted DRG based pacemakers, the advice is new for
the cases in DRGs 533 and 534, on use of a technology that represents defibrillators. This coding advice was
respectively, involved placement of a increased complexity but not discussed at the ICD–9–CM
carotid artery stent. In both DRGs, the necessarily greater severity of illness. Coordination and Maintenance
average length of stay was shorter for The use of a carotid stent or stents may Committee meeting held on September
the carotid stenting cases than for all increase complexity and resource use 29 and 30, 2005. Participants at the
other cases. However, the average even though the patient is not more Committee meeting proposed
charges for the carotid stent cases were severely ill. We believe that the modifications for the code category 37.7
higher by $6,968 in DRG 533 and $7,804 consolidated severity-adjusted DRG (insertion, revision, replacement, and
in DRG 534. We reviewed all of the system we are proposing would need to removal of pacemaker leads; insertion of
procedures that would result in a case be further refined to assign cases based temporary pacemaker system; and
being assigned to DRGs 533 and 534. on complexity as well as severity to revision of cardiac device pocket).
Unlike the carotid artery stent account for technologies such as carotid These modifications involved
placements, we believe that, for most of stents that increase costs. For this expanding the category so that the codes
the cases assigned to these DRGs, there reason, we believe that this issue of for leads would no longer be restricted
will be no device cost to the hospital. assignment of carotid stent cases may be to pacemakers. This change would
For this reason, we believe the higher better addressed in the consolidated guide coders to use code 37.74 for the
average charges and lower length of stay severity-adjusted DRG system that we insertion of epicardial leads for both
for the cases involving carotid artery are proposing in FY 2008 (if not earlier) defibrillators and pacemakers. This
stents are likely accounted for by the than through a change to the current change was adopted for the ICD–9–CM
cost of the device. While it is possible DRG assignment for these cases. and will become effective on October 1,
that the cost of the device itself will 3. MDC 5 (Diseases and Disorders of the 2006.
make the stent cases more expensive Circulatory System) The commenter pointed out that this
than other cases in the DRG, the coding advice would restrict some
hospital’s charge markup may also a. Insertion of Epicardial Leads for defibrillator cases from being assigned
explain the higher charges but lower Defibrillator Devices to the defibrillator DRGs. Specifically,
average length of stay. As indicated (If you choose to comment on issues the commenter expressed concerns
elsewhere in this proposed rule, the in this section, please include the about the DRG logic for the following
national average CCR for medical caption ‘‘DRGs: Epicardial Leads’’ at the DRGs:
equipment and supplies is beginning of your comment.) • DRG 515 (Cardiac Defibrillator
approximately 34 percent. Thus, the We received a comment indicating Implant without Cardiac Catheter.
actual cost to the hospital of the case that a change in coding advice for the • DRG 535 (Cardiac Defibrillator
including the carotid stent may be much insertion of epicardial leads for CRT–D Implant with Cardiac Catheter with
lower than the charges would suggest. defibrillator devices affects DRG AMI/Heart Failure/Shock).
With respect to whether the cost of assignment. The commenter noted that • DRG 536 (Cardiac Defibrillator
the technology itself, absent a charge the Third Quarter 2005 issue of the Implant with Cardiac Catheter without
markup, makes the case more American Hospital Association’s AMI/Heart Failure/Shock).
expensive, we intend to address this publication Coding Clinic for ICD–9–CM Cases are assigned to one of these
issue as we make further refinements to instructs coders to assign code 37.74 three DRGs when a total defibrillator
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the severity-adjusted DRG system we (Insertion or replacement of epicardial system, including both the device and
describe above. As we indicate in lead [electrode] into atrium) for one or more leads, is implanted. The
section II.C. of the preamble of this pacemaker or defibrillator leads inserted implant could be represented by the
proposed rule, the consolidated through use of a thoracotomy into the ICD–9-CM codes for the total system,
severity-adjusted DRG system that we epicardium. While the use of code 37.74 that is, code 00.51 (Implantation of
are proposing does not currently assign is standard coding practice for cardiac resynchronization defibrillator,
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24034 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
total system [CRT–D]) or code 37.94 b. Application of Major Cardiovascular cardiovascular conditions (MCVs).’’ The
(Implantation or replacement of Diagnoses (MCVs) List to Defibrillator MCVs could be present as either a
automatic cardioverter/defibrillator, DRGs principal diagnosis or a secondary
total system [AICD]). Cases can also be (If you choose to comment on issues diagnosis and lead to greater resource
assigned to DRGs 515, 535, and 536 in this section, please include the consumption. The complete list of
when a combination of a device and a caption ‘‘DRGs: MCVs and MCVs was published in the FY 2006
lead code is reported. The following Defibrillators’’ at the beginning of your IPPS final rule (70 FR 47477 and 47478).
combinations of defibrillator device and In the FY 2006 IPPS final rule, we
comment.)
lead codes are present in the current also adopted new DRGs 547 through
In the FY 2006 IPPS final rule (70 FR
DRG logic: 558, effective October 1, 2006 (70 FR
47289 and 47474 through 47479), we
47475 and 47476). However, we
• 00.52 (Implantation or replacement addressed a comment we had received
emphasized that the refinements to the
of transvenous lead [electrode] into left in response to the FY 2006 proposed
DRGs were being taken as an interim
ventricular coronary venous system) rule which noted that section 507(c) of
step to better recognize severity in the
and 00.54 (Implantation or replacement Pub. L. 108–173 required MedPAC to
DRG system for FY 2006 until we could
of cardiac resynchronization conduct a study to determine how the
complete a more comprehensive
defibrillator, pulse generator device DRG system should be updated to better analysis of the APR DRG system and the
only [CRT–D]). reflect the cost of delivering care in a CC list as part of a complete analysis of
hospital setting. The commenter noted the MedPAC recommendations that we
• 37.95 (Implantation of automatic that MedPAC reported that the ‘‘cardiac
cardioverter/defibrillator lead(s) only) planned to perform for FY 2007 (and
surgery DRGs have high relative which is addressed in section II.C. of the
and 00.54 (Implantation or replacement profitability ratios.’’ While the
of cardiac resynchronization preamble of this proposed rule).
commenter acknowledged that it may Since publication of the FY 2006 IPPS
defibrillator, pulse generator device take time to conduct and complete a
only [CRT–D]). final rule, we have received a question
thorough evaluation of the MedPAC from a commenter as to why we did not
• 37.95 (Implantation of automatic payment recommendations for all DRGs, apply the MCV list to the following
cardioverter/defibrillator lead(s) only) the commenter strongly encouraged defibrillator DRGs: 515, 535, and 536.
and 37.96 (Implantation of automatic CMS to revise the cardiac DRGs through The commenter noted that the
cardioverter/defibrillator pulse patient severity refinement as part of the pacemaker DRGs were revised using the
generator only). IPPS final rule effective for FY 2006. MCV list, but the defibrillator DRGs
In response to this comment, we were not.
• 37.97 (Replacement of automatic
performed an extensive review of the As noted above, for FY 2006, we
cardioverter/defibrillator lead(s) only)
cardiovascular DRGs in MDC 5, created new DRGs 546 through 558 to
and 00.54 (Implantation or replacement
particularly those DRGs that were identify cases with more costly and
of cardiac resynchronization
commonly billed by specialty hospitals. severely ill patients as an interim step
defibrillator, pulse generator device We observed that there was some
only [CRT–D]). to evaluating severity DRGs. We
overlap between the lists of analyzed for the first time past year data
• 37.97 (Replacement of automatic cardiovascular complications and on cases within MDC 5 and presented
cardioverter/defibrillator lead(s) only) complex diagnoses and that these lists data that showed significant difference
and 37.98 (Replacement of automatic were already used to segregate patients for patients in certain DRGs based on
cardioverter/defibrillator pulse into DRGs that use greater resources. the presence of absence of an MCV. This
generator only). Because the hospital industry already split did not work for the defibrillator
A DRG logic issue has arisen was familiar with the major DRGs, as we could not identify groups
concerning the instruction to use code complication and complex diagnosis with significantly different resource use.
37.74 to capture epicardial leads lists used within the cardiovascular For instance, splitting DRG 515 based
inserted with CRT–D defibrillators. The DRGs, we began our analysis with these on the presence of an MCV would lead
new combination of a defibrillator two overlapping lists. to two groups with differences in
device with an epicardial lead (code The two lists were originally charges of only $3,430 ($89,341 for
developed for the current DRG system those with an MCV and $85,911 for
37.74) is not included in DRGs 515, 535,
because they contained conditions that those without an MCV). In the data we
and 536. The commenter recommended
could have an impact on the resources displayed in the FY 2006 IPPS final
that the following combinations be
needed to treat a patient with rule, the differences for DRGs selected
added to DRGs 515, 535, and 536 so that
cardiovascular complications. Many of for an MCV split ranged from $10,319 to
all types of defibrillator device and lead
the conditions were cardiovascular $21,035. Splitting DRG 515 based on an
combinations would be included: code
diagnoses and, therefore, would be MCV would produce a difference in
37.74 and code 00.54; code 37.74 and
classified to MDC 5. However, we charges of only 10.1 percent as
code 37.96; and code 37.74 and code
determined that some of the diagnoses compared to differences of 28.7 to 47.7
37.98. percent for DRGs 547 through 558.
were not cardiovascular, but would still
We agree that these three have an impact on a patient with Therefore, the data did not support
combinations should be added to the cardiovascular complications. The including DRG 515 among those split
list of combination codes included in conditions that were not cardiovascular based on the presence or absence of an
DRGs 515, 535, and 536. This would diagnoses were not assigned to MDC 5 MCV. Similar results were found when
result in all combinations of if they were the principal diagnosis. DRG 536 was split by an MCV. There
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defibrillator devices and leads being We reviewed the conditions on the was only an 8.1 percent difference in
assigned to one of the defibrillator two overlapping lists and identified charges between the two groups. We
DRGs. Therefore, we are proposing to conditions that we believed would lead also identified other problems with
add these three combinations to the list to a more complicated patient stay splitting DRG 535 based on the presence
of procedure combinations under DRGs requiring greater resource use. We or absence of an MCV. Some of the
515, 535, and 536. referred to these conditions as ‘‘major codes a claim must include for the case
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24035
to be grouped to DRG 535 under our • 00.73, Revision of hip replacement, intended to pay hospitals using DRG
current system are also codes on the acetabular liner and/or femoral head 471 for procedures performed on one
MCV list. Therefore, applying the MCV only. joint. The commenters indicated that
list to DRG 535 would result in all cases • 00.80, Revision of knee the DRG assignments for these codes
being assigned to the DRG with an MCV replacement, total (all components). would also make future data analysis
and none to the DRG without an MCV. • 00.81, Revision of knee misleading. The commenters
For these reasons, we did not subdivide replacement, tibial component. recommended removing codes from
DRGs 515, 535, and 536 based on the • 00.82, Revision of knee DRG 471 that do not specifically
presence or absence of an MCV. replacement, femoral component. identify bilateral or multiple joint
We have decided not to propose • 00.83, Revision of knee procedures so that DRG 471 will only
additional refinements of the DRGs replacement, patellar component. include cases involving the more
• 00.84, Revision of knee
based on MCVs for FY 2007 because of resource intensive cases of bilateral or
replacement, tibial insert (liner).
our efforts to propose a broader multiple total joint replacements and
• 81.53, Revision of hip replacement,
refinement of the DRG system that not otherwise specified. revisions.
would focus on consolidated severity- • 81.55, Revision of knee We agree that the new and revised
adjusted DRGs, as discussed in detail in replacement, not otherwise specified. joint procedure codes should not be
section II.C. of this proposed rule. In the FY 2006 IPPS final rule (70 FR assigned to DRG 471 unless they
However, as discussed further in section 47305), we indicated that the American include bilateral and multiple joints.
II.C. of this preamble, we are soliciting Association of Orthopaedic Surgeons Therefore, we are proposing to remove
comments on whether it would be had requested that, once we receive the following codes from DRG 471 that
appropriate in FY 2007 to apply a claims data using the two DRG do not capture bilateral and multiple
clinical severity concept to an expanded procedure code assignments, we closely joint revisions or replacements:
set of DRGs, similar to the approach we examine data from the use of the codes • 00.71, Revision of hip replacement,
used in FY 2006 to refine cardiac DRGs under the two DRGs to determine if acetabular component.
based on the presence or absence of an future additional DRG modifications are • 00.72, Revision of hip replacement,
MCV. needed. femoral component.
After publication of the FY 2006 IPPS • 00.73, Revision of hip replacement,
4. MDC 8 (Diseases and Disorders of the acetabular liner and/or femoral head
Musculoskeletal System and Connective final rule, a number of hospitals and
coding personnel advised us that the only.
Tissue) • 00.81, Revision of knee
DRG logic for DRG 471 (Bilateral or
a. Hip and Knee Replacements Multiple Major Joint Procedures of replacement, tibial component.
• 00.82, Revision of knee
(If you choose to comment on issues Lower Extremity), which utilizes the
replacement, femoral component.
in this section, please include the new and revised hip and knee
• 00.83, Revision of knee
caption ‘‘DRGs: Hip and Knee procedure codes under DRGs 544 and
replacement, patellar component.
Replacements’’ at the beginning of your 545, also includes codes that describe • 00.84, Revision of total knee
comment.) procedures that are not bilateral or that replacement, tibial insert (liner).
In the FY 2006 final rule (70 FR do not involve multiple major joints. • 81.53, Revision of hip replacement,
47303), we deleted DRG 209 (Major DRG 471 was developed to include not otherwise specified.
Joint and Limb Reattachment cases where major joint procedures such • 81.55, Revision of knee
Procedures of Lower Extremity) and as revisions or replacements were replacement, not otherwise specified.
created new DRGs 544 (Major Joint performed either bilaterally or on two The proposed revised DRG 471 would
Replacement or Reattachment of Lower joints of one lower extremity. We then contain only the following codes:
Extremity) and 545 (Revision of Hip or changed the logic for DRG 471 last year • 00.70, Revision of hip replacement,
Knee Replacement) to help resolve for the first time when we added the both acetabular and femoral
payment issues for hospitals that new and revised codes. The commenters components.
perform revisions of joint replacements indicated that, by adding the more • 00.80, Revision of knee
because we found revisions of joint detailed codes that do not include total replacement, total (all components).
replacements to be significantly more revisions or replacements to the list of • 81.51, Total hip replacement.
resource intensive than original hip and major joint procedures to DRG 471, we • 81.52, Partial hip replacement.
knee replacements. DRG 544 includes are assigning cases to DRG 471 that do • 81.54, Total knee replacement.
the following code assignments: not have bilateral or multiple joint • 81.56, Total ankle replacement.
• 81.51, Total hip replacement. procedures. For example, when a As a result of the proposed removal of
• 81.52, Partial hip replacement. hospital reports a code for revision of the identified codes from DRG 471, we
• 81.54, Total knee replacement. the tibial component (code 00.81) and are proposing that one or more of the
• 81.56, Total ankle replacement. patellar component of the right knee following hip or knee revision codes
• 84.26, Foot reattachment. (code 00.83), the current DRG logic would be assigned to DRG 545: 00.71,
• 84.27, Lower leg or ankle assigns the case to DRG 471. The 00.72, 00.73, 00.81, 00.82, 00.83, 00.84,
reattachment. commenters indicated that this code 81.53, and 81.55. This list includes
• 84.28, Thigh reattachment. assignment is incorrect because only partial revisions of the knee and hip as
DRG 545 includes the following one joint has undergone surgery, but well as unspecified joint procedures
procedure code assignments: two components were used. One such as code 81.55 where it is not clear
• 00.70, Revision of hip replacement, commenter indicated that ICD–9–CM if the revision is total or partial.
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both acetabular and femoral does not identify left/right laterality. We plan to perform extensive data
components. Therefore, it is difficult to use the analysis on the new and revised joint
• 00.71, Revision of hip replacement, current coding structure to determine if procedure codes as we receive billing
acetabular component. procedures are performed on the same data to determine if future refinements
• 00.72, Revision of hip replacement, leg or on both legs. The commenters of these DRGs are needed. In addition,
femoral component. raised concern about whether CMS as indicated in section II.C. of this
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24036 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
preamble, we are proposing to adopt a • 737.33, Scoliosis due to radiation. 2005, and we do not yet have data to
consolidated severity-adjusted DRG • 737.34, Thoracogenic scoliosis. analyze its impact. Given the number of
system for the IPPS. We encourage • 737.39, Other kyphoscoliosis and innovations occurring in spinal surgery
commenters to evaluate how the new scoliosis. over the last several years (for example,
and revised joint procedures are • 737.8, Other curvatures of spine. artificial spinal disc prostheses,
addressed in the consolidated severity- • 737.9, Unspecified curvature of kyphoplasty, and vertebroplasty), we
adjusted DRG system. If changes to spine. agree that additional analysis of the
these procedures are warranted based • 754.2, Congenital scoliosis. spine DRGs would be warranted if we
on public comments and our continuing • 756.51, Osteogenesis imperfecta. were to continue with the current DRG
analysis, we will evaluate them as we The secondary diagnoses that will system and not adopt consolidated
further develop our plans for adopting lead to DRG 546 assignment are: severity-adjusted DRGs. However, as
• 737.40, Curvature of spine, discussed above, we are proposing to
the consolidated severity-adjusted
unspecified. develop a severity-adjusted DRG system.
DRGs. • 737.41, Curvature of spine For this reason, we are not further
b. Spinal Fusion associated with other conditions, researching this issue for FY 2007.
(If you choose to comment on issues kyphosis. However, we encourage commenters to
• 737.42, Curvature of spine
in this section, please include the examine the proposed consolidated
associated with other conditions, severity-adjusted DRG system described
caption ‘‘DRGs: Spinal Fusion’’ at the
lordosis. in section II.C. of the preamble of this
beginning of your comment.)
• 737.43, Curvature of spine
In the FY 2006 IPPS final rule (70 FR proposed rule to determine whether
associated with other conditions,
47307), we created new DRG 546 there is a better recognition of severity
scoliosis.
(Spinal Fusions Except Cervical with of illness and resource use in that
After publication of the FY 2006 IPPS
Curvature of the Spine or Malignancy). system.
final rule, we received a comment
DRG 546 is composed of all noncervical stating that creating new DRG 546 was c. ChariteTM Spinal Disc Replacement
spinal fusions previously assigned to insufficient to address clinical severity Device
DRGs 497 (Spinal Fusion Except and resource differences among spinal
Cervical with CC) and 498 (Spinal (If you choose to comment on issues
fusion cases that involve fusing multiple in this section, please include the
Fusion Except Cervical without CC) that levels of the spine. Specifically, the
have a principal or secondary diagnosis caption ‘‘DRGs: CHARITETM’’ at the
commenter suggested that the spinal beginning of your comment.)
of curvature of the spine or a principal fusion DRGs be further modified to
diagnosis of a malignancy. The CHARITETM is a prosthetic
incorporate Bone Morphogenic Protein intervertebral disc. On October 26, 2004,
principal diagnosis codes that lead to (BMP), code 84.52 (Insertion of
DRG 546 assignment are the following: the FDA approved the CHARITETM
recombinant bone morphogenetic Artificial Disc for single level spinal
• 170.2, Malignant neoplasm of
protein). The commenter also suggested arthroplasty in skeletally mature
vertebral column, excluding sacrum and
that CMS apply a clinical severity patients with degenerative disc disease
coccyx.
concept to all back and spine surgical between L4 and S1. On October 1, 2004,
• 198.5, Secondary malignant
cases similar to the approach that we we created new procedure codes for the
neoplasm of bone and bone marrow.
• 213.2, Benign neoplasm of bone and used for the MCVs to refine the cardiac insertion of spinal disc prostheses
articular cartilage; vertebral column, DRGs in the final rule for FY 2006. The (codes 84.60 through 84.69). We
excluding sacrum and coccyx. commenter recommended recognizing provided the DRG assignments for these
• 238.0, Neoplasm of uncertain additional conditions that reflect higher new codes in Table 6B of the FY 2005
behavior of other and unspecified sites resource needs, regardless of whether IPPS proposed rule (69 FR 28673). We
and tissues; Bone and articular cartilage. they are principal or secondary received a number of comments on the
• 239.2, Neoplasms of unspecified diagnoses. The commenter also proposed rule recommending that we
nature; bone, soft tissue, and skin. suggested that the spine DRGs be further change the assignments for these codes
• 732.0, Juvenile osteochondrosis of subdivided based on the use of specific from DRG 499 (Back and Neck
spine. spinal devices such as artificial discs. Procedures Except Spinal Fusion With
• 733.13, Pathologic fracture of These changes would entail the creation CC) and DRG 500 (Back and Neck
vertebrae. of 10 new spine DRGs in addition to Procedures Except Spinal Fusion
• 737.0, Adolescent postural other changes requested. Without CC) to the DRGs for spinal
kyphosis. We agree that it is important to fusion, DRG 497 (Spinal Fusion Except
• 737.10, Kyphosis (acquired) recognize severity when classifying Cervical With CC) and DRG 498 (Spinal
(postural). patients into specific DRGs. In response Fusion Except Cervical Without CC) for
• 737.11, Kyphosis due to radiation. to recommendations made by MedPAC procedures on the lumbar spine and to
• 737.12, Kyphosis, last year that are discussed in section DRGs 519 and 520 for procedures on the
postlaminectomy. II.C. of this proposed rule, we are cervical spine. In the FY 2005 IPPS final
• 737.19, Kyphosis (acquired), other. conducting a comprehensive analysis of rule (69 FR 48938), we indicated that
• 737.20, Lordosis (acquired) the entire DRG system to determine DRGs 497 and 498 are limited to spinal
(postural). whether to undertake significant reform fusion procedures. Because the surgery
• 737.21, Lordosis, postlaminectomy. to better recognize severity of illness. At involving the CHARITETM is not a
• 737.22, Other postsurgical lordosis. this time, we believe it is premature to spinal fusion, we decided not to include
• 737.29, Lordosis (acquired), other. develop a severity adjustment for spine this procedure in these DRGs. However,
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• 737.30, Scoliosis [and surgeries while we are considering a we stated that we would continue to
kyphoscoliosis], idiopathic. more systematic approach to capturing analyze this issue and solicited further
• 737.31, Resolving infantile severity of illness across all DRGs. We public comments on the DRG
idiopathic scoliosis. also believe it would be premature to assignment for spinal disc prostheses.
• 737.32, Progressive infantile propose revisions to DRG 546 because In the FY 2006 final rule (70 FR
idiopathic scoliosis. this DRG was created on October 1, 47353), we noted that, if a product
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24037
meets all of the criteria for Medicare to that lumbar artificial disc replacement not found that they can be identified
pay for the product as a new technology with the CHARITETM Lumber Artificial adequately to justify removing them
under section 1886(d)(5)(K) of the Act, Disc is reasonable and necessary. This from all of the other DRGs in which they
there is a clear preference expressed in proposed decision memorandum can be appear. For this reason, we did not
the statute for us to assign the found at: http://www.cms.hhs.gov/mcd/ create a new DRG for severe sepsis for
technology to a DRG based on similar viewnca.asp?where=index& FY 2005 or FY 2006. We indicated that
clinical or anatomical characteristics or nca_id=170&basket=nca:00292N:170: we would continue to work with
costs. However, for FY 2006, we did not Lumbar+Artificial+Disc+Replacement: National Center for Health Statistics
find that CHARITETM met the Open:New:5. After considering the (NCHS) to improve the codes so that our
substantial clinical improvement public comments and any additional data on these patients improve. We also
criterion and, thus, did not qualify as a evidence, we will make a final indicated that we would continue to
new technology. Consequently, we did determination and issue a final NCD. examine data on these patients as we
not address the DRG classification The proposed NCD states that lumber consider future modifications.
request made under the authority of this artificial disc replacement with the For this FY 2007 proposed rule, we
provision of the Act. CHARITETM Lumber Artificial Disc is again received a request to consider
However, we did evaluate whether to generally not indicated in patients over creating a separate DRG for patients
reassign CHARITETM to different DRGs 65 years old. Further, it states that there diagnosed with severe sepsis. The
using the Secretary’s authority under is insufficient evidence among either information and data available to us
section 1886(d)(4) of the Act (70 FR the aged or disabled Medicare from hospital bills with respect to
47308). We indicated that we did not population to make a reasonable and identifying patients with severe sepsis
have Medicare charge information to necessary determination for coverage. have not changed since last year.
evaluate DRG changes for cases With an NCD pending to make spinal However, the NCHS discussed
involving an implant of a prosthetic arthroplasty with CHARITETM modifications to the current ICD–9–CM
intervertebral disc like CHARITETM and noncovered, we do not believe it is diagnosis codes for systemic
did not make a change in its DRG appropriate at this time to reassign inflammatory response syndrome
assignments. We stated that we would procedure code 84.65 from DRGs 499 (SIRS), codes 995.91 through 995.94
consider whether changes to the DRG and 500 to DRGs 497 and 498. (which include severe sepsis) at the
assignments for CHARITETM were September 29–30, 2005 ICD–9–CM
5. MDC 18 (Infectious and Parasitic
warranted for FY 2007, once we had Coordination and Maintenance
Diseases (Systemic or Unspecified
information from Medicare’s data Committee meeting. During the meeting,
Sites)): Severe Sepsis
system that would assist us in it became clear that there is still
evaluating the costs of these patients. (If you choose to comment on issues confusion surrounding the use of these
For the FY 2007 IPPS update, we in this section, please include the codes. As a result of the meeting and the
received a comment regarding the DRG caption ‘‘DRGs: Severe Sepsis’’ at the comments received, the Committee
assignments for the CHARITETM beginning of your comment.) made modifications to the set of SIRS
Artificial Disc, code 84.65 (Insertion of In FYs 2005 and 2006, we considered codes. These modifications are reflected
total spinal disc prosthesis, requests for the creation of a separate in Table 6E, Revised Diagnosis Code
lumbosacral). The commenter had DRG for the diagnosis of severe sepsis. Titles, of the Addendum to this
previously submitted an application for Severe sepsis is described by ICD–9–CM proposed rule.
the CHARITETM Artificial Disc for new code 995.92 (Systemic inflammatory We believe that implementation of the
technology add-on payments for FY response syndrome due to infection modified SIRS diagnosis codes and the
2006 and had requested a reassignment with organ dysfunction). Patients updated coding guidelines over the next
of cases involving CHARITETM admitted with sepsis as a principal year could begin the process of
implantation to DRGs 497 and 498. The diagnosis currently are assigned to DRG improving data for this group of
commenter asked that we examine 416 (Septicemia Age > 17) and DRG 417 patients. The desired outcome is to be
claims data for FY 2005 and reassign (Septicemia Age 0–17) in MDC 18 able to better evaluate Medicare
procedure code 84.65 from DRGs 499 (Infectious and Parasitic Diseases beneficiaries with severe sepsis with
and 500 into DRGs 497 and 498. The (Systemic or Unspecified Sites)). The regard to their clinical coherence,
commenter again stated the view that commenter requested that all cases in resource utilization, and charges.
cases with the CHARITETM Artificial which severe sepsis is present on Therefore, at this time, we are not
Disc reflect comparable resource use admission, as well as those cases in proposing to create a new DRG for
and similar clinical indications as do which it develops after admission severe sepsis for FY 2007. We also note
those in DRGs 497 and 498. If CMS were (which are currently classified that we are proposing to adopt a
to reject reassignment of the elsewhere), be included in this new consolidated severity-adjusted DRG
CHARITETM Artificial Disc to DRGs 497 DRG. In both FY 2005 and FY 2006 (69 system, as discussed in section II.C. of
and 498, the commenter suggested FR 48975 and 70 FR 47309), we did not this preamble. The underlying clinical
creating two separate DRGs for lumbar believe the current clinical definition of principle of the proposed consolidated
disc replacements. severe sepsis was specific enough to severity-adjusted DRG system is that the
On February 16, 2006, we posted a identify a meaningful cohort of patients severity of illness of a patient is highly
proposed NCD memorandum regarding in terms of clinical coherence and dependent on the patient’s underlying
lumber artificial disc replacement with resource utilization to warrant a problem and that patients with high
a focus of the CHARITETM Lumber separate DRG. Sepsis is found across severity of illness are usually
Artificial Disc for public comment on hundreds of medical and surgical DRGs, characterized by multiple serious
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the CMS Web site. This is part of the and the term ‘‘organ dysfunction’’ diseases or illnesses. The assessment of
process for issuing an NCD. In this implicates numerous currently existing the severity of illness of a patient is
memorandum, we proposed to issue an diagnosis codes. While we recognize specific to the base DRG to which a
NCD. We are seeking public comment that Medicare beneficiaries with severe patient is assigned. In other words, the
on our proposed determination that the sepsis are quite ill and require extensive determination of the severity of illness
evidence is not adequate to conclude hospital resources, in the past we have is disease-specific. High severity of
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24038 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
illness is primarily determined by the b. Diagnoses Allowed for Females Only • V26.39, Other genetic testing of
interaction of multiple diseases. Patients Edit male.
with multiple comorbid conditions The following codes are now invalid d. Manifestations Not Allowed as
involving multiple organ systems are codes, as shown in Table 6C of the Principal Diagnosis Edit
assigned to the higher severity of illness Addendum to this proposed rule.
subclasses. Thus, patients with severe We are proposing to add the following
Therefore, we are proposing to remove
sepsis and organ dysfunction are likely codes to the ‘‘Manifestations Not
them from the ‘‘Diagnosis Allowed for
to be classified as severity of illness Allowed as Principal Diagnosis’’ edit in
Females Only’’ edit in the MCE.
subclass 3 or 4 under the proposed DRG the MCE:
• 616.8, Other specified inflammatory
system, depending on the other • 362.03, Nonproliferative diabetic
diseases of cervix, vagina, and vulva.
retinopathy, NOS.
comorbid conditions or underlying • 629.8, Other specified disorders of • 362.04, Mild nonproliferative
problems the patient may have at that female genital organs.
time. It is possible that the consolidated diabetic retinopathy.
Codes 616.8 and 629.8 have been • 362.05, Moderate nonproliferative
severity-adjusted DRG system that we expanded to the fifth-digit level. diabetic retinopathy.
are planning to adopt would better Therefore, we are proposing to place the • 362.06, Severe nonproliferative
recognize the extensive resources that following expanded codes in the diabetic retinopathy.
hospitals use to treat patients with ‘‘Diagnoses Allowed for Females Only’’ • 362.07, Diabetic macular edema.
severe sepsis. We encourage edit. In addition, we are proposing to
commenters to examine the • 616.81, Mucositis (ulcerative) of remove code 525.10 (Acquired absence
consolidated severity-adjusted DRGs cervix, vagina, and vulva. of teeth, unspecified) from this edit in
described in section II.C. of this • 616.89, Other inflammatory disease the MCE.
proposed rule to determine whether of cervix, vagina, and vulva.
there is a better recognition of severity • 629.81, Habitual aborter without e. Nonspecific Principal Diagnosis Edit
of illness and resource use in that current pregnancy. We are proposing to add the following
proposed system. • 629.89, Other specified disorders of codes to the ‘‘Nonspecific Principal
female genital organs. Diagnosis’’ edit in the MCE:
6. Medicare Code Editor (MCE) Changes The following two codes have revised • 255.10, Hyperaldosteronism,
descriptions (as shown in Table 6E of unspecified.
(If you choose to comment on issues
the Addendum to this proposed rule) • 323.9, Unspecified causes of
in this section, please include the
which specify gender. Therefore, we are encephalitis, myelitis, and
caption ‘‘Medicare Code Editor’’ at the
proposing to add them to ‘‘Diagnoses encephalomyelitis.
beginning of your comment.)
Allowed for Females Only’’ edit. • 770.10, Fetal and newborn
As explained under section II.B.1. of • V26.31, Testing of female for aspiration, unspecified.
this preamble, the Medicare Code Editor genetic disease carrier status. • 780.31, Febrile convulsions
(MCE) is a software program that detects • V26.32, Other genetic testing of (simple), unspecified.
and reports errors in the coding of female. Codes 255.10, 323.9, and 780.31
Medicare claims data. Patient diagnoses, appear on Table 6E, Revised Diagnosis
c. Diagnoses Allowed for Males Only
procedure(s), discharge status, and Codes, and are being included in this
Edit
demographic information go into the edit because of their revised
Medicare claims processing systems and Code 608.2 (Torsion of testis) is now descriptions. Code 770.10 was
are subjected to a series of automated an invalid code (as shown in Table 6C inadvertently left off this list for FY
screens. The MCE screens are designed of the Addendum to this proposed rule). 2006 when the code was created.
to identify cases that require further Therefore, we are proposing to remove
it from the ‘‘Diagnoses Allowed for f. Unacceptable Principal Diagnosis Edit
review before classification into a DRG.
Males Only’’ edit. This code has been Most V-codes describe an individual’s
For FY 2007, we are proposing to
expanded to the fifth-digit level. health status, but these codes are not
make the following changes to the MCE
Therefore, we are proposing to place the usually a current illness or injury.
edits:
following expanded codes in the Therefore, most V-codes are included in
a. Newborn Diagnoses Edit ‘‘Diagnoses Allowed for Males Only’’ the ‘‘Unacceptable Principal Diagnosis’’
edit: edit. The following codes became
We are proposing to add code 780.92 • 608.20, Torsion of testis, invalid (as shown in Table 6C of the
(Excessive crying of infant (baby)) to the unspecified. Addendum to this proposed rule) for FY
‘‘Newborn Diagnoses’’ edit in the MCE. • 608.21, Extravaginal torsion of 2007, and we are proposing to remove
This edit is structured for patients with spermatic cord. them from this edit:
an age of ‘‘0’’. In the Tabular portion of • 608.22 Intravaginal torsion of • V18.5, Family history, digestive
the ICD–9–CM diagnosis codes, the spermatic cord. disorders.
‘‘excludes’’ note at code 780.92 states • 608.23, Torsion of appendix testis. • V58.3, Attention to surgical
that this code ‘‘excludes excessive • 608.24, Torsion of appendix dressings and sutures.
crying of child, adolescent or adult’’ and epididymis. • V72.1, Examination of ears and
sends the coder to code 780.95 (Other The following codes have been hearing.
excessive crying. (The new title of this created effective for FY 2007 and are The following V-codes represent
code, shown on Table 6E of the gender specific. Therefore, we are either fifth-digit extensions of the above
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Addendum to this proposed rule is proposing to add them to the ‘‘Diagnosis codes, or new codes that were created
‘‘Excessive crying of child, adolescent, Allowed for Males Only’’ edit. effective October 1, 2006 (Table 6A of
or adult).) To make a conforming • V26.34, Testing of male for genetic the Addendum to this proposed rule).
change, we also are proposing that code disease carrier status. Therefore, we are proposing to add the
780.92 be removed from the ‘‘Pediatric • V26.35, Encounter for testing of following codes to the ‘‘Unacceptable
Diagnoses—Age 0 Through 17’’ edit. male partner of habitual aborter. Principal Diagnosis’’ edit:
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24039
• V18.51, Family history, colonic • 250.11, Diabetes with ketoacidosis, • 404.03, Hypertensive heart and
polyps. type I [juvenile type], not stated as kidney disease, malignant, with heart
• V18.59, Family history, other uncontrolled. failure and chronic kidney disease.
digestive disorders. • 250.13, Diabetes with ketoacidosis, • 404.12, Hypertensive heart and
• V26.34, Testing of male for genetic type I [juvenile type], uncontrolled. kidney disease, benign, with chronic
disease carrier status. • 250.21, Diabetes with kidney disease.
• V26.35, Encounter for testing of hyperosmolarity, type I [juvenile type], • 404.13, Hypertensive heart and
male partner of habitual aborter. not stated as uncontrolled. kidney disease, benign, with heart
• V26.39, Other genetic testing of • 250.23, Diabetes with failure and chronic kidney disease.
male. hyperosmolarity, type I [juvenile type], • 404.92, Hypertensive heart and
• V45.86, Bariatric surgery status. uncontrolled. kidney disease, unspecified, with
• V58.30, Encounter for change or
• 250.31, Diabetes with other coma, chronic kidney disease.
removal of nonsurgical wound dressing. • 404.93, Hypertensive heart and
• V58.31, Encounter for change or type I [juvenile type], not stated as
uncontrolled. kidney disease, unspecified, with heart
removal of surgical wound dressing. failure and chronic kidney disease.
• V58.32, Encounter for removal of • 250.33, Diabetes with other coma,
type I [juvenile type], uncontrolled. • 585.1, Chronic kidney disease,
sutures. Stage I.
• V72.11, Encounter for hearing • 250.41, Diabetes with renal
manifestations, type I [juvenile type], • 585.2, Chronic kidney disease,
examination following failed hearing
not stated as uncontrolled. Stage II (mild).
screening. • 585.3, Chronic kidney disease,
• V72.19, Other examination of ears • 250.43, Diabetes with renal
manifestations, type I [juvenile type], Stage III (moderate).
and hearing.
• V82.71, Screening for genetic uncontrolled. • 585.4, Chronic kidney disease,
disease carrier status. • 250.51, Diabetes with ophthalmic Stage IV (severe).
• V82.79, Other genetic screening. manifestations, type I [juvenile type], • 585.5, Chronic kidney disease,
• V85.51, Body mass index, pediatric, not stated as uncontrolled. Stage V.
less than 5th percentile for age. • 250.53, Diabetes with ophthalmic • 585.6, End stage renal disease.
• V85.52, Body mass index, pediatric, • 585.9, Chronic kidney disease,
manifestations, type I [juvenile type],
5th percentile to less than 85th unspecified.
uncontrolled.
• V42.0, Organ or tissue replaced by
percentile for age. • 250.61, Diabetes with neurological
• V85.53, Body mass index, pediatric, transplant, kidney.
manifestations, type I [juvenile type],
85th percentile to less than 95th • V43.89, Organ or tissue replaced by
not stated as uncontrolled.
percentile for age. other means, other organ or tissue,
• 250.63, Diabetes with neurological
• V85.54, Body mass index, pediatric, other.
manifestations, type I [juvenile type],
greater than or equal to 95th percentile uncontrolled. i. Bilateral Procedure Edit
for age. • 250.71, Diabetes with peripheral
• V86.0, Estrogen receptor positive We are proposing to remove the
circulatory disorders, type I [juvenile following codes from the ‘‘Bilateral
status [ER+]. type], not stated as uncontrolled.
• V86.1, Estrogen receptor negative Procedure’’ edit, as these are adjunct
• 250.73, Diabetes with peripheral codes. They are not O.R. codes
status [ER¥]. circulatory disorders, type I [juvenile recognized by the GROUPER as
g. Nonspecific O.R. Procedures Edit type], uncontrolled. procedures, and the edit was created in
We are proposing to remove code • 250.81, Diabetes with other error last year.
00.29 (Intravascular imaging specified manifestations, type I [juvenile • 00.74, Hip replacement bearing
unspecified vessel(s)) from the type], not stated as uncontrolled. surface, metal on polyethylene.
‘‘Nonspecific O.R. Procedure’’ edit in • 250.83, Diabetes with other • 00.75, Hip replacement bearing
the MCE. This code was erroneously specified manifestations, type I [juvenile surface, metal-on-metal.
placed in this edit; it is not considered type], uncontrolled. • 00.76, Hip replacement bearing
an O.R. procedure. • 250.91, Diabetes with unspecified surface, ceramic-on-ceramic.
complication, type I [juvenile type], not
h. Noncovered Procedures Edit stated as uncontrolled. 7. Surgical Hierarchies
Under the proposed changes to DRG • 250.93, Diabetes with unspecified (If you choose to comment on issues
513 (Pancreas Transplant) under the complication, type I [juvenile type], in this section, please include the
Pre-MDCs described in section II.D.1. of uncontrolled. caption ‘‘DRGs: Surgical Hierarchies’’ at
this preamble, a patient must have a In addition, we are proposing to the beginning of your comments.)
history of medically uncontrollable, remove Diagnosis List 2 from the Some inpatient stays entail multiple
insulin-dependent diabetes mellitus, ‘‘Noncovered Procedures’’ edit, which is surgical procedures, each one of which,
that is, Type I diabetes mellitus. comprised of the following codes: occurring by itself, could result in
Therefore, to conform the ‘‘Noncovered • 403.01, Hypertensive kidney assignment of the case to a different
Procedures’’ Edit in the MCE to these disease, malignant, with chronic kidney DRG within the MDC to which the
proposed changes, we are proposing to disease. principal diagnosis is assigned.
revise Diagnosis List 1 in this edit to • 403.11, Hypertensive kidney Therefore, it is necessary to have a
include only the following codes: disease, benign, with chronic kidney decision rule within the GROUPER by
• 250.01, Diabetes mellitus without disease. which these cases are assigned to a
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mention of complication, type I • 403.91, Hypertensive kidney single DRG. The surgical hierarchy, an
[juvenile type], not stated as disease, unspecified, with chronic ordering of surgical classes from most
uncontrolled. kidney disease. resource-intensive to least resource-
• 250.03, Diabetes mellitus without • 404.02, Hypertensive heart and intensive, performs that function.
mention of complication, type I kidney disease, malignant, with chronic Application of this hierarchy ensures
[juvenile type], uncontrolled. kidney disease. that cases involving multiple surgical
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24040 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
procedures are assigned to the DRG of the fact that the average charge for the Musculoskeletal System and Connective
associated with the most resource- DRG or DRGs in that surgical class may Tissue Disorders) above DRG 216
intensive surgical class. be higher than that for other surgical (Biopsies of Musculoskeletal System
Because the relative resource intensity classes in the MDC. The ‘‘other O.R. and Connective Tissue).
of surgical classes can shift as a function procedures’’ class is a group of In MDC 10, we are proposing to
of DRG reclassification and procedures that are only infrequently reorder DRG 285 (Amputation of Lower
recalibrations, we reviewed the surgical related to the diagnoses in the MDC, but Limb for Endocrine, Nutritional and
hierarchy of each MDC, as we have for are still occasionally performed on Metabolic Diseases and Disorders) above
previous reclassifications and patients in the MDC with these DRG 288 (O.R. Procedures for Obesity).
recalibrations, to determine if the diagnoses. Therefore, assignment to In MDC 13, we are proposing to
ordering of classes coincides with the these surgical classes should only occur reorder DRG 363 (D&C, Conization and
intensity of resource utilization. if no other surgical class more closely Radio-Implant, for Malignancy) and
A surgical class can be composed of related to the diagnoses in the MDC is DRG 364 (D&C, Conization and Radio-
one or more DRGs. For example, in appropriate. Implant, Except for Malignancy) above
MDC 11, the surgical class ‘‘kidney A second example occurs when the DRG 360 (Vagina, Cervix, and Vulva
transplant’’ consists of a single DRG difference between the average charges Procedures).
(DRG 302) and the class ‘‘kidney, ureter for two surgical classes is very small.
and major bladder procedures’’ consists 8. Refinement of Complications and
We have found that small differences
of three DRGs (DRGs 303, 304, and 305). Comorbidities (CC) List
generally do not warrant reordering of
Consequently, in many cases, the the hierarchy because, as a result of (If you choose to comment on issues
surgical hierarchy has an impact on reassigning cases on the basis of the in this section, please include the
more than one DRG. The methodology hierarchy change, the average charges caption ‘‘CC List’’ at the beginning of
for determining the most resource- are likely to shift such that the higher- your comment.)
intensive surgical class involves ordered surgical class has a lower a. Background
weighting the average resources for each average charge than the class ordered
DRG by frequency to determine the below it. As indicated earlier in this preamble,
weighted average resources for each Based on the changes under the under the IPPS DRG classification
surgical class. For example, assume HSVRcc weighting methodology that we system, we have developed a standard
surgical class A includes DRGs 1 and 2 are proposing for FY 2007, as discussed list of diagnoses that are considered
and surgical class B includes DRGs 3, 4, in section II.C.2. of this preamble, we complications or comorbidities (CCs).
and 5. Assume also that the average are proposing to revise the surgical Historically, we developed this list
charge of DRG 1 is higher than that of hierarchy for Pre-MDCs, MDC 1 using physician panels that classified
DRG 3, but the average charges of DRGs (Diseases and Disorders of the Nervous each diagnosis code based on whether
4 and 5 are higher than the average System), MDC 2 (Diseases and Disorders the diagnosis, when present as a
charge of DRG 2. To determine whether of the Eye), MDC 3 (Diseases and secondary condition, would be
surgical class A should be higher or Disorders of the Ear, Nose, Mouth and considered a substantial complication or
lower than surgical class B in the Throat), MDC 8 (Diseases and Disorders comorbidity. A substantial complication
surgical hierarchy, we would weight the of the Musculoskeletal System and or comorbidity was defined as a
average charge of each DRG in the class Connective Tissue), MDC 10 (Endocrine, condition that, because of its presence
by frequency (that is, by the number of Nutritional and Metabolic Diseases and with a specific principal diagnosis,
cases in the DRG) to determine average Disorders), and MDC 13 (Diseases and would cause an increase in the length of
resource consumption for the surgical Disorders of the Female Reproductive stay by at least 1 day in at least 75
class. The surgical classes would then System) as follows. In our analysis, we percent of the patients.
be ordered from the class with the looked at the number of cases and the b. Comprehensive Review of the CC List
highest average resource utilization to arithmetic mean.
that with the lowest, with the exception In Pre-MDCs, we are proposing to In previous years, we have made
of ‘‘other O.R. procedures’’ as discussed reorder DRG 481 (Bone Marrow changes to the standard list of CCs,
below. Transplant) above DRG 513 (Pancreas either by adding new CCs or deleting
This methodology may occasionally Transplant). CCs already on the list, but we have
result in assignment of a case involving In MDC 1, we are proposing to reorder never conducted a comprehensive
multiple procedures to the lower- DRGs 531–532 (Spinal Procedures, with review of the list. Given the long period
weighted DRG (in the highest, most CC and without CC, respectively) above of time that had elapsed since the
resource-intensive surgical class) of the DRGs 529–530 (Ventricular Shunt original CC list was developed, the
available alternatives. However, given Procedures, with CC and without CC, incremental nature of changes to it, and
that the logic underlying the surgical respectively). changes in the way inpatient care is
hierarchy provides that the GROUPER In MDC 2, we are proposing to reorder delivered, and in partial response to
search for the procedure in the most DRG 42 (Intraocular Procedures Except recommendations in MedPAC’s March
resource-intensive surgical class, in Retina, Iris and Lens) above DRG 36 2005 Report to Congress on Physician-
cases involving multiple procedures, (Retinal Procedures). Owned Specialty Hospitals, for the FY
this result is sometimes unavoidable. In MDC 3, we are proposing to reorder 2006 IPPS final rule, we reviewed the
We note that, notwithstanding the DRGs 168–169 (Mouth Procedures, with 121-paired DRGs that were split on the
foregoing discussion, there are a few CC and without CC, respectively) above presence or absence of a CC among the
instances when a surgical class with a DRG 57 (T&A Procedures, Except 3,285 diagnosis codes on the CC list. We
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lower average charge is ordered above a Tonsillectomy and/or Adenoidectomy presented the results of that review and
surgical class with a higher average Only, Age > 17) and DRG 58 (T&A summarized public comments that we
charge. For example, the ‘‘other O.R. Procedures, Except Tonsillectomy and/ received in the FY 2006 proposed rule
procedures’’ surgical class is uniformly or Adenoidectomy Only, Age 0–17). on the review results in the FY 2006
ordered last in the surgical hierarchy of In MDC 8, we are proposing to reorder IPPS final rule (70 FR 47313 through
each MDC in which it occurs, regardless DRG 213 (Amputation for 47315). Further analysis of the CC list
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24041
and refinement to recognize the effects • Closely related conditions should CCs that are deleted from the list are
of differences in severity of illness not be considered CCs for one another. in Table 6H—Deletions from the CC
among patients is discussed in section The creation of the CC Exclusions List Exclusions List. Beginning with
II.C. of this preamble as part of our was a major project involving hundreds discharges on or after October 1, 2006,
efforts to develop a consolidated of codes. We have continued to review the indented diagnoses will be
severity-adjusted DRG system for use in the remaining CCs to identify additional recognized by the GROUPER as valid
the IPPS. However, as further discussed exclusions and to remove diagnoses CCs for the asterisked principal
in section II.C. of the preamble to this from the master list that have been diagnosis.
proposed rule, we are soliciting shown not to meet the definition of a Copies of the original CC Exclusions
comments on whether it would be CC.9 List applicable to FY 1988 can be
appropriate in FY 2007 to apply to an We are proposing to make limited obtained from the National Technical
expanded set of DRGs a clinical severity revisions to the CC Exclusions List to Information Service (NTIS) of the
concept similar to the approach we used take into account the changes that will Department of Commerce. It is available
in FY 2006 to refine cardiac DRGs based be made in the ICD–9–CM diagnosis in hard copy for $152.50 plus shipping
on the presence or absence of an MCV. coding system effective October 1, 2006. and handling. A request for the FY 1988
(See section II.D.10. of this preamble for CC Exclusions List (which should
c. CC Exclusions List Proposed for FY a discussion of ICD–9–CM changes.) We include the identification accession
2007 are proposing these changes in number (PB) 88–133970) should be
In the September 1, 1987 final notice accordance with the principles made to the following address: National
(52 FR 33143) concerning changes to the established when we created the CC Technical Information Service, United
DRG classification system, we modified Exclusions List in 1987. States Department of Commerce, 5285
the GROUPER logic so that certain Tables 6G and 6H in the Addendum Port Royal Road, Springfield, VA 22161;
diagnoses included on the standard list to this proposed rule contain the or by calling (800) 553–6847.
of CCs would not be considered valid revisions to the CC Exclusions List that Users should be aware of the fact that
CCs in combination with a particular would be effective for discharges all revisions to the CC Exclusions List
principal diagnosis. We created the CC occurring on or after October 1, 2006. (FYs 1989, 1990, 1991, 1992, 1993,
Exclusions List for the following Each table shows the principal 1994, 1995, 1996, 1997, 1998, 1999,
reasons: (1) To preclude coding of CCs diagnoses with changes to the excluded 2001, 2002, 2003, 2004, 2005, and 2006)
for closely related conditions; (2) to CCs. Each of these principal diagnoses and those in Tables 6G and 6H of this
preclude duplicative or inconsistent is shown with an asterisk, and the proposed rule for FY 2007 must be
coding from being treated as CCs; and additions or deletions to the CC incorporated into the list purchased
(3) to ensure that cases are appropriately Exclusions List are provided in an from NTIS in order to obtain the CC
classified between the complicated and indented column immediately following Exclusions List applicable for
uncomplicated DRGs in a pair. As we the affected principal diagnosis. discharges occurring on or after October
indicated above, we developed a list of CCs that are added to the list are in 1, 2006.
diagnoses, using physician panels, to Table 6G—Additions to the CC (Note: There was no CC Exclusions
include those diagnoses that, when Exclusions List. Beginning with List in FY 2000 because we did not
present as a secondary condition, would discharges on or after October 1, 2006, make changes to the ICD–9–CM codes
be considered a substantial the indented diagnoses will not be for FY 2000.)
complication or comorbidity. In recognized by the GROUPER as valid Alternatively, the complete
previous years, we have made changes CCs for the asterisked principal documentation of the GROUPER logic,
to the list of CCs, either by adding new diagnosis. including the current CC Exclusions
CCs or deleting CCs already on the list. List, is available from 3M/Health
9 See the FY 1989 final rule (53 FR 38485,
At this time, we are not proposing to Information Systems (HIS), which,
September 30, 1988), for the revision made for the
delete any of the diagnosis codes on the discharges occurring in FY 1989; the FY 1990 final
under contract with CMS, is responsible
CC list for FY 2007. rule (54 FR 36552, September 1, 1989), for the FY for updating and maintaining the
In the May 19, 1987 proposed notice 1990 revision; the FY 1991 final rule (55 FR 36126, GROUPER program. The current DRG
September 4, 1990), for the FY 1991 revision; the Definitions Manual, Version 23.0, is
(52 FR 18877) and the September 1, FY 1992 final rule (56 FR 43209, August 30, 1991)
1987 final notice (52 FR 33154), we for the FY 1992 revision; the FY 1993 final rule (57 available for $225.00, which includes
explained that the excluded secondary FR 39753),September 1, 1992), for the FY 1993 $15.00 for shipping and handling.
diagnoses were established using the revision; the FY 1994 final rule (58 FR 46278, Version 24.0 of this manual, which will
September 1, 1993), for the FY 1994 revisions; the
following five principles: FY 1995 final rule (59 FR 45334, September 1,
include the final FY 2007 DRG changes,
• Chronic and acute manifestations of 1994), for the FY 1995 revisions; the FY 1996 final will be available in hard copy for
the same condition should not be rule (60 FR 45782, September 1, 1995), for the FY $250.00. Version 24.0 of the manual is
considered CCs for one another. 1996 revisions; the FY 1997 final rule (61 FR 46171, also available on a CD for $200.00; a
August 30, 1996), for the FY 1997 revisions; the FY
• Specific and nonspecific (that is, 1998 final rule (62 FR 45966, August 29, 1997) for combination hard copy and CD is
not otherwise specified (NOS)) the FY 1998 revisions; the FY 1999 final rule (63 available for $400.00. These manuals
diagnosis codes for the same condition FR 40954, July 31, 1998), for the FY 1999 revisions; may be obtained by writing 3M/HIS at
should not be considered CCs for one the FY 2001 final rule (65 FR 47064, August 1, the following address: 100 Barnes Road,
2000), for the FY 2001 revisions; the FY 2002 final
another. rule (66 FR 39851, August 1, 2001), for the FY 2002 Wallingford, CT 06492; or by calling
• Codes for the same condition that revisions; the FY 2003 final rule (67 FR 49998, (203) 949–0303. Please specify the
cannot coexist, such as partial/total, August 1, 2002), for the FY 2003 revisions; the FY revision or revisions requested.
unilateral/bilateral, obstructed/ 2004 final rule (68 FR 45364, August 1, 2003), for
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the FY 2004 revisions; the FY 2005 final rule (69 9. Review of Procedure Codes in DRGs
unobstructed, and benign/malignant, FR 49848, August 11, 2004), for the FY 2005
should not be considered CCs for one revisions; and the FY 2006 final rule (70 FR 47640,
468, 476, and 477
another. August 12, 2005), for the FY 2006 revisions. In the Each year, we review cases assigned
• Codes for the same condition in FY 2000 final rule (64 FR 41490, July 30, 1999, we to DRG 468 (Extensive O.R. Procedure
did not modify the CC Exclusions List because we
anatomically proximal sites should not did not make any changes to the ICD–9–CM codes Unrelated to Principal Diagnosis), DRG
be considered CCs for one another. for FY 2000. 476 (Prostatic O.R. Procedure Unrelated
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24042 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
to Principal Diagnosis), and DRG 477 For FY 2007, we are not proposing to c. Adding Diagnosis or Procedure Codes
(Nonextensive O.R. Procedure Unrelated change the procedures assigned among to MDCs
to Principal Diagnosis) to determine these DRGs. Based on our review this year, we are
whether it would be appropriate to not proposing to add any diagnosis
a. Moving Procedure Codes From DRG
change the procedures assigned among codes to MDCs for FY 2007.
468 or DRG 477 to MDCs
these DRGs.
DRGs 468, 476, and 477 are reserved We annually conduct a review of 10. Changes to the ICD–9–CM Coding
for those cases in which none of the procedures producing assignment to System
O.R. procedures performed are related DRG 468 or DRG 477 on the basis of As described in section II.B.1. of this
to the principal diagnosis. These DRGs volume, by procedure, to see if it would preamble, the ICD–9–CM is a coding
are intended to capture atypical cases, be appropriate to move procedure codes system used for the reporting of
that is, those cases not occurring with out of these DRGs into one of the diagnoses and procedures performed on
sufficient frequency to represent a surgical DRGs for the MDC into which a patient. In September 1985, the ICD–
distinct, recognizable clinical group. the principal diagnosis falls. The data 9–CM Coordination and Maintenance
DRG 476 is assigned to those discharges are arrayed two ways for comparison Committee was formed. This is a
in which one or more of the following purposes. We look at a frequency count Federal interdepartmental committee,
prostatic procedures are performed and of each major operative procedure code. co-chaired by the National Center for
are unrelated to the principal diagnosis: We also compare procedures across Health Statistics (NCHS), the Centers for
• 60.0, Incision of prostate. MDCs by volume of procedure codes Disease Control and Prevention, and
• 60.12, Open biopsy of prostate. within each MDC. CMS, charged with maintaining and
• 60.15, Biopsy of periprostatic We identify those procedures updating the ICD–9–CM system. The
tissue. occurring in conjunction with certain Committee is jointly responsible for
• 60.18, Other diagnostic procedures principal diagnoses with sufficient approving coding changes, and
on prostate and periprostatic tissue. frequency to justify adding them to one developing errata, addenda, and other
• 60.21, Transurethral prostatectomy. of the surgical DRGs for the MDC in modifications to the ICD–9–CM to
• 60.29, Other transurethral which the diagnosis falls. Based on this reflect newly developed procedures and
prostatectomy. year’s review, we are not proposing to technologies and newly identified
• 60.61, Local excision of lesion of remove any procedures in DRGs 468 or diseases. The Committee is also
prostate. 477 to one of the surgical DRGs for FY responsible for promoting the use of
• 60.69, Prostatectomy, not elsewhere 2007. Federal and non-Federal educational
classified. programs and other communication
• 60.81, Incision of periprostatic b. Reassignment of Procedures Among
DRGs 468, 476, and 477 techniques with a view toward
tissue.
standardizing coding applications and
• 60.82, Excision of periprostatic We also annually review the list of upgrading the quality of the
tissue. ICD–9–CM procedures that, when in classification system.
• 60.93, Repair of prostate. combination with their principal The Official Version of the ICD–9–CM
• 60.94, Control of (postoperative) diagnosis code, result in assignment to contains the list of valid diagnosis and
hemorrhage of prostate. DRGs 468, 476, and 477, to ascertain if procedure codes. (The Official Version
• 60.95, Transurethral balloon any of those procedures should be of the ICD–9–CM is available from the
dilation of the prostatic urethra. reassigned from one of these three DRGs Government Printing Office on CD–
• 60.96, Transurethral destruction of to another of the three DRGs based on ROM for $25.00 by calling (202) 512–
prostate tissue by microwave average charges and the length of stay. 1800.) The Official Version of the ICD–
thermotherapy. We look at the data for trends such as 9–CM is no longer available in printed
• 60.97, Other transurethral
shifts in treatment practice or reporting manual form from the Federal
destruction of prostate tissue by other
practice that would make the resulting Government; it is only available on CD–
thermotherapy.
DRG assignment illogical. If we find ROM. Users who need a paper version
• 60.99, Other operations on prostate.
these shifts, we would propose to move are referred to one of the many products
All remaining O.R. procedures are
cases to keep the DRGs clinically similar available from publishing houses.
assigned to DRGs 468 and 477, with
or to provide payment for the cases in The NCHS has lead responsibility for
DRG 477 assigned to those discharges in
a similar manner. Generally, we move the ICD–9–CM diagnosis codes included
which the only procedures performed
only those procedures for which we in the Tabular List and Alphabetic
are nonextensive procedures that are
have an adequate number of discharges Index for Diseases, while CMS has lead
unrelated to the principal diagnosis.10
to analyze the data. responsibility for the ICD–9–CM
10 The original list of the ICD–9–CM procedure We are not proposing to move any procedure codes included in the
codes for the procedures we consider nonextensive procedure codes from DRG 476 to DRGs Tabular List and Alphabetic Index for
procedures, if performed with an unrelated 468 or 477, or from DRG 477 to DRGs Procedures.
principal diagnosis, was published in Table 6C in 468 or 476 for FY 2007. The Committee encourages
section IV. of the Addendum to the FY 1989 final
rule (53 FR 38591). As part of the FY 1991 final rule
participation in the above process by
(55 FR 36135), the FY 1992 final rule (56 FR 43212), did not move any procedures from DRG 477. health-related organizations. In this
the FY 1993 final rule (57 FR 23625), the FY 1994 However, we did move procedure codes from DRG regard, the Committee holds public
final rule (58 FR 46279), the FY 1995 final rule (59 468 and placed them in more clinically coherent meetings for discussion of educational
FR 45336), the FY 1996 final rule (60 FR 45783), DRGs. In the FY 2004 final rule (68 FR 45365), we
issues and proposed coding changes.
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the FY 1997 final rule (61 FR 46173), and the FY moved several procedures from DRG 468 to DRGs
1998 final rule (62 FR 45981), we moved several 476 and 477 because the procedures are These meetings provide an opportunity
other procedures from DRG 468 to DRG 477, and nonextensive. In the FY 2005 final rule (69 FR for representatives of recognized
some procedures from DRG 477 to DRG 468. No 48950), we moved one procedure from DRG 468 to organizations in the coding field, such
procedures were moved in FY 1999, as noted in the 477. In addition, we added several existing
final rule (63 FR 40962); in FY 2000 (64 FR 41496); procedures to DRGs 476 and 477. In the FY 2006
as the American Health Information
in FY 2001 (65 FR 47064); or in FY 2002 (66 FR (70 FR 47317), we moved one procedure from DRG Management Association (AHIMA), the
39852). In the FY 2003 final rule (67 FR 49999) we 468 and assigned it to DRG 477. American Hospital Association (AHA),
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24043
and various physician specialty groups, Division of Acute Care, C4–08–06, 7500 technology under the IPPS. Section
as well as individual physicians, health Security Boulevard, Baltimore, MD 503(a) amended section 1886(d)(5)(K) of
information management professionals, 21244–1850. Comments may be sent by the Act by adding a clause (vii) which
and other members of the public, to E-mail to: states that the ‘‘Secretary shall provide
contribute ideas on coding matters. Patricia.Brooks1@cms.hhs.gov. for the addition of new diagnosis and
After considering the opinions The ICD–9–CM code changes that procedure codes in April 1 of each year,
expressed at the public meetings and in have been approved will become but the addition of such codes shall not
writing, the Committee formulates effective October 1, 2006. The new ICD– require the Secretary to adjust the
recommendations, which then must be 9–CM codes are listed, along with their payment (or diagnosis-related group
approved by the agencies. DRG classifications, in Tables 6A and classification) * * * until the fiscal year
The Committee presented proposals 6B (New Diagnosis Codes and New that begins after such date.’’ This
for coding changes for implementation Procedure Codes, respectively) in the requirement improves the recognition of
in FY 2007 at a public meeting held on Addendum to this proposed rule. As we new technologies under the IPPS system
September 29–30, 2005, and finalized stated above, the code numbers and by providing information on these new
the coding changes after consideration their titles were presented for public technologies at an earlier date. Data will
of comments received at the meetings comment at the ICD–9–CM be available 6 months earlier than
and in writing by December 2, 2005. Coordination and Maintenance would be possible with updates
Those coding changes are announced in Committee meetings. Both oral and occurring only once a year on October
Tables 6A through 6F in the Addendum written comments were considered 1.
to this proposed rule. The Committee before the codes were approved. In this While section 1886(d)(5)(K)(vii) of the
held its 2006 meeting on March 23–24, proposed rule, we are only soliciting Act states that the addition of new
2006. Proposed new codes for which comments on the proposed diagnosis and procedure codes on April
there was a consensus of public support classification of these new codes. 1 of each year shall not require the
and for which complete tabular and For codes that have been replaced by Secretary to adjust the payment, or DRG
indexing changes can be made by May new or expanded codes, the classification under section 1886(d) of
2006 will be included in the October 1, corresponding new or expanded the Act until the fiscal year that begins
2006 update to ICD–9–CM. Code diagnosis codes are included in Table after such date, we have to update the
revisions that were discussed at the 6A. New procedure codes are shown in DRG software and other systems in
March 23–24, 2006 Committee meeting Table 6B. Diagnosis codes that have order to recognize and accept the new
could not be finalized in time to include been replaced by expanded codes or codes. We also publicize the code
them in this FY 2007 IPPS proposed other codes or have been deleted are in changes and the need for a mid-year
rule. These additional codes will be Table 6C (Invalid Diagnosis Codes). systems update by providers to capture
included in Tables 6A through 6F of the These invalid diagnosis codes will not the new codes. Hospitals also have to
final rule and will be marked with an be recognized by the GROUPER obtain the new code books and encoder
asterisk (*). beginning with discharges occurring on updates, and make other system changes
Copies of the minutes of the or after October 1, 2006. Table 6D in order to capture and report the new
procedure codes discussions at the contains invalid procedure codes. These codes.
Committee’s September 29–30, 2005 invalid procedure codes will not be The ICD–9–CM Coordination and
meeting can be obtained from the CMS recognized by the GROUPER beginning Maintenance Committee holds its
Web site: http://new.cms.hhs.gov/ with discharges occurring on or after meetings in the Spring and Fall in order
ICD9ProviderDiagnosticCodes/ October 1, 2006. Revisions to diagnosis to update the codes and the applicable
03_meetings.asp. The minutes of the code titles are in Table 6E (Revised payment and reporting systems by
diagnosis codes discussions at the Diagnosis Code Titles), which also October 1 of each year. Items are placed
September 29–30, 2005 meeting are includes the DRG assignments for these on the agenda for the ICD–9–CM
found at: http://www.cdc.gov/nchs/ revised codes. Table 6F includes revised Coordination and Maintenance
icd9.htm. Paper copies of these minutes procedure code titles for FY 2007. Committee meeting if the request is
are no longer available and the mailing In the September 7, 2001 final rule received at least 2 months prior to the
list has been discontinued. These Web implementing the IPPS new technology meeting. This requirement allows time
sites also provide detailed information add-on payments (66 FR 46906), we for staff to review and research the
about the Committee, including indicated we would attempt to include coding issues and prepare material for
information on requesting a new code, proposals for procedure codes that discussion at the meeting. It also allows
attending a Committee meeting, and would describe new technology time for the topic to be publicized in
timeline requirements and meeting discussed and approved at the April meeting announcements in the Federal
dates. meeting as part of the code revisions Register as well as on the CMS Web site.
We encourage commenters to address effective the following October. As The public decides whether or not to
suggestions on coding issues involving stated previously, ICD–9–CM codes attend the meeting based on the topics
diagnosis codes to: Donna Pickett, Co- discussed at the March 23–24, 2006 listed on the agenda. Final decisions on
Chairperson, ICD–9–CM Coordination Committee meeting that received code title revisions are currently made
and Maintenance Committee, NCHS, consensus and that can be finalized by by March 1 so that these titles can be
Room 2402, 3311 Toledo Road, May 2006, will be included in Tables included in the IPPS proposed rule. A
Hyattsville, MD 20782. Comments may 6A through 6F of the Addendum to the complete addendum describing details
be sent by E-mail to: dfp4@cdc.gov. final rule. of all changes to ICD–9–CM, both
Questions and comments concerning Section 503(a) of Pub. L. 108–173 tabular and index, are publicized on
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the procedure codes should be included a requirement for updating CMS and NCHS Web pages in May of
addressed to: Patricia E. Brooks, Co- ICD–9–CM codes twice a year instead of each year. Publishers of coding books
Chairperson, ICD–9–CM Coordination a single update on October 1 of each and software use this information to
and Maintenance Committee, CMS, year. This requirement was included as modify their products that are used by
Center for Medicare Management, part of the amendments to the Act health care providers. This 5-month
Hospital and Ambulatory Policy Group, relating to recognition of new time period has proved to be necessary
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24044 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
for hospitals and other providers to new ICD–9–CM codes for new effective date of certain ICD–9–CM
update their systems. technologies seeking higher payments. codes.
A discussion of this timeline and the Current addendum and code title
need for changes are included in the information is published on the CMS E. Proposed Recalibration of DRG
December 4–5, 2005 ICD–9–CM Web page at: http://www.cms.hhs.gov/ Weights
Coordination and Maintenance icd9ProviderDiagnosticCodes. (If you choose to comment on issues
Committee minutes. The public agreed Information on ICD–9–CM diagnosis in this section, please include the
that there was a need to hold the fall codes, along with the Official ICD–9– caption ‘‘DRG Weights’’ at the beginning
meetings earlier, in September or CM Coding Guidelines, can be found on of your comment.)
October, in order to meet the new the Web page at: http://www.cdc.gov/ We are proposing to change the DRG
implementation dates. The public nchs/icd9.htm. Information on new, recalibration process methodology for
provided comment that additional time revised, and deleted ICD–9–CM codes is FY 2007 to move to an HSRV weighting
would be needed to update hospital also provided to the AHA for method as discussed in section II.C.2. of
systems and obtain new code books and publication in the Coding Clinic for the preamble to this proposed rule. For
coding software. There was considerable ICD–9–CM. AHA also distributes FY 2006 and years prior, we have
concern expressed about the impact this information to publishers and software recalibrated the DRG weights based on
new April update would have on vendors. charge data for Medicare discharges
providers. CMS also sends copies of all ICD–9– using the most current charge
In the FY 2005 IPPS final rule, we CM coding changes to its contractors for information available (for example, the
implemented section 1886(d)(5)(K)(vii) use in updating their systems and FY 2005 MedPAR file would have been
of the Act, as added by section 503(a) providing education to providers. used for FY 2007). Our thorough
of Public Law 108–173, by developing a These same means of disseminating analysis of the March 2005 MedPAC
mechanism for approving, in time for information on new, revised, and recommendations regarding refinement
the April update, diagnosis and deleted ICD–9–CM codes will be used to of the DRG system used for the IPPS (see
procedure code revisions needed to notify providers, publishers, software discussion of the MedPAC
describe new technologies and medical vendors, contractors, and others of any recommendations in section II.C.2. of
services for purposes of the new changes to the ICD–9–CM codes that are this preamble) has shown that using
technology add-on payment process. We implemented in April. The code titles gross charges as a basis for setting the
also established the following process are adopted as part of the ICD–9–CM DRG weights has introduced bias into
for making these determinations. Topics Coordination and Maintenance the weighting process. Specifically,
considered during the Fall ICD–9–CM Committee process. Thus, although we hospitals that are systematically more
Coordination and Maintenance publish the code titles in the IPPS expensive than others (that is, teaching
Committee meeting are considered for proposed and final rules, they are not hospitals and specialty hospitals) tend
an April 1 update if a strong and subject to comment in the proposed or to treat certain cases more commonly
convincing case is made by the final rules. We will continue to publish than others, causing the weights for
requester at the Committee’s public the October code updates in this manner these cases to be artificially high. In
meeting. The request must identify the within the IPPS proposed and final addition, hospitals may mark up their
reason why a new code is needed in rules. For codes that are implemented in charges for routine days, intensive care
April for purposes of the new April, we will assign the new procedure days, and various ancillary services by
technology process. The participants at code to the same DRG in which its different percentages. This practice of
the meeting and those reviewing the predecessor code was assigned so there differential markups among hospital
Committee meeting summary report are will be no DRG impact as far as DRG cost centers may also introduce bias into
provided the opportunity to comment assignment. This mapping was specified the weights. For instance, we have
on this expedited request. All other by section 1886(d)(5)(K)(vii) of the Act observed that ancillary service cost
topics are considered for the October 1 as added by section 503(a) of Pub. L. centers generally have higher charge
update. Participants at the Committee 108–173. Any midyear coding updates markups than routine services. Thus,
meeting are encouraged to comment on will be available through the websites the charge-based relative weight
all such requests. There were no indicated above and through the Coding methodology may result in high weights
requests for an expedited April l, 2006 Clinic for ICD–9–CM. Publishers and for DRGs that use more ancillary
implementation of an ICD–9–CM code software vendors currently obtain code services relative to DRGs that use more
at the September 29–30, 2005 changes through these sources in order routine services than would occur under
Committee meeting. Therefore, there to update their code books and software a system where the weights are based on
were no new ICD–9–CM codes systems. We will strive to have the April costs.
implemented on April 1, 2006. 1 updates available through these Web As discussed in section II.C.2. of this
We believe that this process captures sites 5 months prior to implementation preamble, based on our study of the
the intent of section 1886(d)(5)(K)(vii) of (that is, early November of the previous MedPAC recommendations, we have
the Act. This requirement was included year), as is the case for the October 1 developed an alternative methodology
in the provision revising the standards updates. Codebook publishers are for recalibrating the DRG weights. This
and process for recognizing new evaluating how they will provide any method involves applying the HSRV
technology under the IPPS. In addition, code updates to their subscribers. Some methodology at the cost center level
the need for approval of new codes publishers may decide to publish mid- (HSRVcc) to remove the bias introduced
outside the existing cycle (October 1) year book updates. Others may decide to by hospital characteristics (that is,
arises most frequently and most acutely sell an addendum that lists the changes teaching, disproportionate share,
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where the new codes will capture new to the October 1 code book. Coding location, and size, among others) and
technologies that are (or will be) under personnel should contact publishers to then scaling the weights to costs using
consideration for new technology add- determine how they will update their national cost center CCRs derived from
on payments. Thus, we believe this books. CMS and its contractors will also cost report data.
provision was intended to expedite data consider developing provider education In developing this proposed system of
collection through the assignment of articles concerning this change to the weights, we used two data sources:
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Claims data and cost report data. As in • Charges would have been transplants continue to be paid on a
previous years, the claims data source is standardized to remove the effects of reasonable cost basis. Because these
the MedPAR file. This file is based on differences in area wage levels, indirect acquisition costs are paid separately
fully coded diagnostic and procedure medical education and disproportionate from the prospective payment rate, it is
data for all Medicare inpatient hospital share payments, and, for hospitals in necessary to subtract the acquisition
bills. The FY 2005 MedPAR data used Alaska and Hawaii, the applicable cost- charges from the total charges on each
in this proposed rule include discharges of-living adjustment. transplant bill that showed acquisition
occurring between October 1, 2004 and • The average standardized charge charges before adjusting the charges
September 30, 2005, based on bills per DRG was calculated by summing the under the HSRVcc methodology and
received by CMS through December 31, standardized charges for all cases in the before eliminating statistical outliers.
2005, from all hospitals subject to the DRG and dividing that amount by the • Claims for IPPS hospitals were used
IPPS and short-term acute care hospitals number of cases classified in the DRG. in this analysis (claims for IPFs, IRFs,
in Maryland (which are under a waiver A transfer case would have been LTCHs, cancer and children’s hospitals,
from the IPPS under section 1814(b)(3) counted as a fraction of a case based on and RNHCIs were dropped). Claims
of the Act). The FY 2005 MedPAR file the ratio of its transfer payment under with total charges or total length of stay
used in calculating the relative weights the per diem payment methodology to less than or equal to zero were dropped.
includes data for approximately the full DRG payment for non-transfer Claims that had an amount in the total
12,137,358 Medicare discharges. cases. That is, a transfer case receiving charge field that differed by more than
Discharges for Medicare beneficiaries payment under the transfer $10.00 from the sum of the routine day
enrolled in a Medicare+Choice managed methodology equal to half of what the charges, intensive care charges,
care plan are excluded from this case would receive as a non-transfer pharmacy charges, special equipment
analysis. The data exclude CAHs, would be counted as 0.5 of a total case. charges, therapy services charges,
including hospitals that subsequently • Statistical outliers were eliminated operating room charges, cardiology
became CAHs after the period from by removing all cases that were beyond charges, laboratory charges, radiology
which the data were taken. The second 3.0 standard deviations from the mean charges, and other service charges were
data source used in the new HSRVcc of the log distribution of both the also dropped. At least 96 percent of the
weight methodology are the FY 2003 charges per case and the charges per day providers in the MedPAR file had
Medicare cost report data files from for each DRG. charges for 8 of the 10 cost centers.
HCRIS, which represents the most • The average charge for each DRG Claims for providers that did not have
recent full set of cost report data was then recomputed (excluding the charges greater than zero for at least 8
available. We used the December 31, statistical outliers) and divided by the of the 10 cost centers were dropped.
national average standardized charge • Statistical outliers were eliminated
2005 update of the HCRIS cost report
per case to determine the relative by removing all cases that were beyond
files for FY 2003 in setting the proposed
weight. 3.0 standard deviations from the mean
relative weights.
These charge-based weights were then of the log distribution of both the
Previously, the charge-based
normalized by an adjustment factor so charges per case and the charges per day
methodology used to calculate the DRG for each DRG.
that the average case weight after
relative weights from the MedPAR data Once the MedPAR data were
recalibration is equal to the average case
was as follows: trimmed, the data were sorted by
weight before recalibration. We will
• To the extent possible, all the continue to apply this normalization provider so that charges could be
claims were regrouped using the DRG adjustment as it is intended to ensure standardized under the HSRVcc
classification revisions that we would that recalibration by itself neither methodology (discussed in section
have proposed. increases nor decreases total payments II.C.2. of this preamble). To do this, an
• The transplant cases that were used under the IPPS as required by section average charge was computed for each
to establish the proposed relative weight 1886(d)(4)(C)(iii) of the Act. provider for each of 10 proposed cost
for heart and heart-lung, liver and/or The methodology we are proposing to centers. The average charge was
intestinal, and lung transplants (DRGs calculate the DRG weights from the FY computed by summing the charges for
103, 480, and 495) were limited to those 2005 MedPAR and FY 2003 cost report each cost center and dividing by the
Medicare-approved transplant centers data is as follows: transfer adjusted case count for each
that have cases in the FY 2005 MedPAR • To the extent possible, all the provider. A transfer case, identified by
file. (Medicare coverage for heart, heart- claims were regrouped using the discharge code, DRG, and length of stay,
lung, liver and/or intestinal, and lung proposed DRG classification revisions was counted as a fraction of a case based
transplants is limited to those facilities discussed in section II.D. of this on the ratio of its length of stay plus 1
that have received approval from CMS preamble. day relative to the geometric mean
as transplant centers.) • The transplant cases that were used length of stay for that DRG. That is, a
• Organ acquisition costs for kidney, to establish the proposed relative weight transfer case with a length of stay of 2
heart, heart-lung, liver, lung, pancreas, for heart and heart-lung, liver and/or days in a DRG with a geometric mean
and intestinal (or multivisceral organs) intestinal, and lung transplants (DRGs length of stay of 6 days would be
transplants continue to be paid on a 103, 480, and 495) were limited to those counted as 3 (2 days plus 1 extra day)
reasonable cost basis. Because these Medicare-approved transplant centers divided by 6 or 0.5 of a total case as this
acquisition costs are paid separately that have cases in the FY 2005 MedPAR reflects current payment policy.
from the prospective payment rate, it file. (Medicare coverage for heart, heart- The 10 cost centers that we are
would have been necessary to subtract lung, liver and/or intestinal, and lung proposing to use in the HSRV weight
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the acquisition charges from the total transplants is limited to those facilities calculation are shown in the following
charges on each transplant bill that that have received approval from CMS table. In addition, the table shows the
showed acquisition charges before as transplant centers.) lines on the cost report that we are
computing the average charge for the • Organ acquisition costs for kidney, proposing to use to create the national
DRG and before eliminating statistical heart, heart-lung, liver, lung, pancreas, cost center CCRs that will be discussed
outliers. and intestinal (or multivisceral organs) later in this section:
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EP25AP06.006</GPH>
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24047
BILLING CODE 4120–01–C are then multiplied by the provider’s charges by DRG are calculated for each
After computing the average charge CMI. cost center by taking the sum of the
for each provider for each cost center, This adjustment for CMI is needed to relative, CMI adjusted charges for that
the cost center charges on each claim rescale the hospital-specific relative DRG and dividing by the transfer
are divided by the provider’s average charge values which, by definition, will adjusted case count for that DRG.
charge for the matching cost center. For average to 1.0 for each cost center. A national average charge is
example, the routine day charges on the Because the average relative weight for calculated for each cost center by
claim are divided by the average routine a provider is that provider’s CMI, we summing all relative CMI adjusted
day charge for the provider, the believe CMI is a reasonable scale factor charges in the trimmed MedPAR data
intensive care unit charges on the claim to use to further adjust the relative set and dividing by the total transfer-
are divided by the average intensive charges to reflect the complexity of adjusted case count. The first set of DRG
care unit charge for the provider, and so cases treated by the provider. A starting weights is created by dividing the
on. By using a hospital’s relative charge CMI of one was assigned to each cost average charge for each DRG for each
structure, the resulting weights from center for each provider. cost center by the national average
this step do not reflect differences in After the relative charges (cost center charge for that cost center. The result is
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charges among providers for factors claim charge divided by the average cost a set of 10 weights for each DRG. These
such as location, size, wages, relative center charge for the provider) are 10 weights are then assigned to each
efficiency, average markup, IME, DSH multiplied by the hospital’s matching claim, a new CMI is created for each
and the variety of cases treated. Once cost center CMI, they are summed by provider, the relative charges for each
these charges are adjusted by the DRG. The transfer adjusted case count cost center on the claim (total charge for
EP25AP06.007</GPH>
average charge for the cost center, they for each DRG is also summed. Average cost center is divided by the provider’s
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24048 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
average charge for that cost center) are CCRs for each provider for each cost percent of total cost. We are proposing
multiplied by the new CMI and the center (see prior table for line items to use these percentages as scaling
weights are iterated until the national used in the calculations) and removed factors to apply to the relative weights.
average CMI for each cost center stops any cost CCRs that were greater than 10 For each DRG, the cost center weights
changing between iterations. In or less than .01. We then took the logs are multiplied by these scaling factors
preparing the proposed weights for this of all of the cost center CCRs and (that is, routine day weight is multiplied
proposed rule, we used a straight CMI removed any cost center CCRs where by the routine day scaling factor,
calculation where each case was given the log of the cost center CCR was intensive care unit weight is multiplied
a full weight and counted as a full case greater or less than the mean log plus/ by the intensive care unit scaling factor,
regardless of transfer status. minus 1.96 times the standard deviation and so on). After the weights are
Alternatively, we could use the for the log of that cost center CCR. We adjusted by the scaling factor, they are
method we applied in our study of the are proposing to use 1.96 times the summed by DRG to create one final
MedPAC recommendations (see section standard deviation as a trim factor weight for each DRG. Following that,
II.C. of this preamble) where we used a because the logs of the cost center CCRs they are normalized by a factor of
CMI that was computed by taking the are normally distributed and 1.96 times 1.49216 so that the weights so that the
sum of the transfer-adjusted weights and the standard deviation represents the 95 average case weight after recalibration is
dividing by a full case count, where the percentile of the T-Distribution for large equal to the average case weight before
transfer-adjusted weight is computed by sample size, for which 2,000 to 3,000 recalibration. This normalization
multiplying the transfer-adjusted case hospitals should qualify. Once the cost adjustment was intended to ensure that
count (length of stay for claim plus one report data was trimmed, we calculated recalibration by itself neither increases
day divided by geometric mean length the geometric mean CCR for each cost nor decreases total payments under the
of stay for the DRG) by the DRG weight. center. IPPS.
We are soliciting public comment on
which CMI calculation would be the We are proposing to use these When we recalibrated the DRG
most appropriate to use in this geometric mean CCRs to create cost weights for previous years, we set a
weighting methodology. scaling factors to apply to the DRG threshold of 10 cases as the minimum
After the iteration process is weights. Once the national average number of cases required to compute a
completed, we remove the effects of CCRs are computed, they are multiplied reasonable weight. We are proposing to
differential markups within cost centers. by the total unadjusted charges for the use that same case threshold in
To do this, we are proposing to use matching group of cost centers in recalibrating the DRG weights for FY
national average departmental CCRs in MedPAR. The resulting costs for each 2007. Using the FY 2005 MedPAR data
conjunction with the total charges from group of cost centers are then summed set, there are 40 DRGs that contain fewer
the trimmed MedPAR file to create to derive a total cost for all cases across than 10 cases. Because we believe that
scaling factors for each cost center. The the Nation. The percentage that each we do not have sufficient MedPAR data
first step in this process is to develop cost center is contributing to the overall to set accurate and stable HSRVcc
national cost center CCRs. total costs is calculated by dividing the weights for these low-volume DRGs, we
Taking the FY 2003 cost report data, individual cost center cost by the total are proposing to assign them the
we removed CAHs, Maryland hospitals, amount. For example, the total cost for weights of similar DRGs for which we
Indian Health Service hospitals, all- routine days is divided by the total cost have more complete data. The crosswalk
inclusive rate hospitals, and cost reports for all cases to arrive at 0.29, which we are proposing to use is shown below.
that represented time periods of less indicates that routine costs are We are soliciting comment on this
than 1 year (365 days). We then created responsible for approximately 29 crosswalk.
3 ............................... Craniotomy Age 0–17 ............................................................ 2 (Craniotomy Age >17 Without CC).
30 ............................. Traumatic Stupor & Coma, Coma <1 HR Age 0–17 ............ 29 (Traumatic Stupor & Coma, Coma <1 HR Age >17
Without CC).
33 ............................. Concussion Age 0–17 ........................................................... 32 (Concussion Age >17 Without CC).
41 ............................. Extraocular Procedures Except Orbit Age 0–17 ................... 40 (Extraocular Procedures Except Orbit Age >17).
48 ............................. Other Disorders Of The Eye Age 0–17 ................................. 47 (Other Disorders of The Eye Age >17 Without CC).
54 ............................. Sinus and Mastoid Procedures Age 0–17 ............................ 53 (Sinus and Mastoid Procedures Age >17).
58 ............................. T&A Proc, Except Tonsillectomy &/or Adenoidectomy Only, 57 (T&A Proc, Except Tonsillectomy &/or Adenoidectomy
Age 0–17. Only, Age >17).
60 ............................. Tonsillectomy and/or Adenoidectomy Only, Age 0–17 ......... 59 (Tonsillectomy and/or Adenoidectomy Only, Age >17).
62 ............................. Myringotomy W Tube Insertion Age 0–17 ............................ 61 (Myringotomy With Tube Insertion Age >17).
74 ............................. Other Ear, Nose, Mouth & Throat Diagnoses Age 0–17 ...... 73 (Other Ear, Nose, Mouth & Throat Diagnoses Age >17).
81 ............................. Respiratory Infections & Inflammations Age 0–17 ................ 79 (Respiratory Infections & Inflammations Age >17 With
CC).
137 ........................... Cardiac Congental & Valvular Disorders Age 0–17 .............. 135 (Cardiac Congental & Valvular Disorders Age >17 With
CC).
156 ........................... Stomach, Esophageal & Duodenal Procedures Age 0–17 ... 155 (Stomach, Esophageal & Duodenal Procedures Age
>17 Without CC).
163 ........................... Hernia Procedures Age 0–17 ................................................ 162 (Inguinal & Femoral Hernia Procedures Age >17 With-
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out CC).
186 ........................... Dental & Oral Disease Except Extractions & Restorations 185 (Dental & Oral Disease Except Extractions & Restora-
Age 0–17. tions, Age >17).
220 ........................... Lower Extrem & Humer Proc Except Hip, Foot, Femur Age 219 (Lower Extrem & Humer Proc Except Hip, Foot, Femur
0–17. Age >17 Without CC).
252 ........................... Fx, Sprn, Strn & Disl Of Foreman, Hand, Foot Age 0–17 .... 251 (Fx, Sprn, Strn & Disl of Foreman, Hand, Foot Age
>17 Without CC).
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255 ........................... Fx, Sprn, Strn & Disl Of Uparm, Lowleg Ex Foot Age 0–17 254 Fx, Sprn, Strn & Disl of Uparm, Lowleg Ex Foot Age
>17 Without CC).
279 ........................... Cellulitis Age 0–17 ................................................................. 278 (Cellulitis Age >17 Without CC).
282 ........................... Trauma To The Skin, Subcut Tiss & Breast Age 0–17 ........ 281 (Trauma To The Skin, Subcut Tiss & Breast Age >17
Without CC).
314 ........................... Urethral Procedures, Age 0–17 ............................................. 313 (Urethral Procedures, Age >17 Without CC).
330 ........................... Urethral Stricture Age 0–17 ................................................... 329 (Urethral Stricture Age >17 Without CC).
340 ........................... Testes Procedures, Non-Malignancy Age 0–17 ................... 339 (Testes Procedures, Non-Malignancy Age >17).
343 ........................... Circumcism Age 0–17 ........................................................... 342 (Circumcism Age >17).
351 ........................... Sterilization, Male .................................................................. 352 (Other Male Reproductive System Diagnoses).
362 ........................... Endoscopic Tubal Interruption ............................................... 361 (Laparoscopy & Incisional Tubal Interruption).
385 ........................... Neonates, Died Or Transferred To Another Acute Care Fa- FY 2006 FR weight (adjusted by percent change in aver-
cility. age weight of the cases in other DRGs).
386 ........................... Extreme Immaturity Or Respiratory Distress Syndrome, FY 2006 FR weight (adjusted by percent change in aver-
Neonate. age weight of the cases in other DRGs).
387 ........................... Prematurity With Major Problems ......................................... FY 2006 FR weight (adjusted by percent change in aver-
age weight of the cases in other DRGs).
388 ........................... Prematurity Without Major Problems .................................... FY 2006 FR weight (adjusted by percent change in aver-
age weight of the cases in other DRGs).
389 ........................... Full Term Neonate With Major Problems .............................. FY 2006 FR weight (adjusted by percent change in aver-
age weight of the cases in other DRGs).
390 ........................... Neonate With Other Significant Problems ............................ FY 2006 FR weight (adjusted by percent change in aver-
age weight of the cases in other DRGs).
391 ........................... Normal Newborn .................................................................... FY 2006 FR weight (adjusted by percent change in aver-
age weight of the cases in other DRGs).
393 ........................... Splenectomy Age 0–17 ......................................................... 392 (Splenectomy Age >17).
405 ........................... Acute Leukemia Without Major O.R. Procedure Age 0–17 .. 473 (Acute Leukemia Without Major O.R. Procedure Age
>17).
411 ........................... History Of Malignancy Without Endoscopy ........................... 465 (Aftercare With History of Malignancy As Secondary
Diagnosis).
412 ........................... History Of Malignancy With Endoscopy ................................ 465 (Aftercare With History of Malignancy As Secondary
Diagnosis).
446 ........................... Traumatic Injury Age 0–17 .................................................... 445 (Traumatic Injury Age >17 Without CC).
448 ........................... Allergic Reactions Age 0–17 ................................................. 447 (Allergic Reactions Age >17).
451 ........................... Poisoning and Toxic Effects Of Drugs Age 0–17 ................. 450 (Poisoning and Toxic Effects of Drugs Age >17 With-
out CC).
Section 1886(d)(4)(C)(iii) of the Act 1. Background discussed in the FY 2006 IPPS final rule
requires that, beginning with FY 1991, In the June 6, 2003 LTCH PPS final (70 FR 47323 through 47341) and in the
reclassification and recalibration rule (68 FR 34122), we changed the Rate Year (RY) 2007 LTCH PPS
changes be made in a manner that LTCH PPS annual payment rate update proposed rule (71 FR 4652 through
assures that the aggregate payments are cycle to be effective July 1 through June 4658), with the implementation of
neither greater than nor less than the 30 instead of October 1 through section 503(a) of Pub. L. 108–173, there
aggregate payments that would have September 30. In addition, because the is the possibility that one feature of the
been made without the changes. patient classification system utilized GROUPER software program may be
Although normalization is intended to under the LTCH PPS uses the same updated twice during a Federal fiscal
achieve this effect, equating the average DRGs as those currently used under the year (October 1 and April 1) as required
case weight after recalibration to the IPPS for acute care hospitals, in that by the statute for the IPPS. Specifically,
average case weight before recalibration same final rule, we explained that the ICD–9–CM diagnosis and procedure
does not necessarily achieve budget annual update of the long-term care codes for new medical technology may
neutrality with respect to aggregate diagnosis-related group (LTC–DRG) be created and added to existing DRGs
payments to hospitals because payments classifications and relative weights will in the middle of the Federal fiscal year
to hospitals are affected by factors other continue to remain linked to the annual on April 1. However, this policy change
than average case weight. Therefore, as reclassification and recalibration of the will have no effect on the LTC–DRG
we have done in past years, and as DRGs used under the IPPS. In that same relative weights, which will continue to
discussed in section II.A.4.a. of the final rule, we specified that we will be updated only once a year (October 1),
Addendum to this proposed rule, we are continue to update the LTC–DRG nor will there be any impact on
making a budget neutrality adjustment classifications and relative weights to be Medicare payments under the LTCH
to ensure that the requirement of section effective for discharges occurring on or PPS. The use of the ICD–9–CM code set
1886(d)(4)(C)(iii) of the Act is met. after October 1 through September 30 is also compliant with the current
each year. Furthermore, we stated that requirements of the Transactions and
F. Proposed LTC–DRG Reclassifications Code Sets Standards regulations at 45
and Relative Weights for LTCHs for FY we will publish the annual update of
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the LTC–DRGs in the proposed and final CFR Parts 160 and 162, promulgated in
2007 accordance with the Health Insurance
rules for the IPPS.
(If you choose to comment on issues In the past, the annual update to the Portability and Accountability Act of
in this section, please include the IPPS DRGs has been based on the 1996 (HIPAA), Pub. L. 104–191.
caption ‘‘LTC–DRGs’’ at the beginning annual revisions to the ICD–9–CM codes As we explained in the RY 2007
of your comment.) and was effective each October 1. As LTCH PPS proposed rule (71 FR 4654
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24050 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
through 4658), in the health care annual IPPS proposed and final rules implemented on October 1, 2005, will
industry, historically annual changes to and are effective each October 1. We continue through September 30, 2006
the ICD–9–CM codes were effective for also explained that because we do not (FY 2006). The proposed update to the
discharges occurring on or after October publish a midyear IPPS rule, any April ICD–9–CM coding system for FY 2007 is
1 each year. Thus, the manual and 1 code updates will not be published in discussed above in section II.D.10. of
electronic versions of the GROUPER a midyear IPPS rule. Rather, we will this preamble. Accordingly, in this
software, which are based on the ICD– assign any new diagnosis or procedure proposed rule, as discussed in greater
9–CM codes, were also revised annually codes to the same DRG in which its detail below, we are proposing revisions
and effective for discharges occurring on predecessor code was assigned, so that to the LTC–DRG classifications and
or after October 1 each year. As noted there will be no impact on the DRG relative weights, and to the extent that
above, the patient classification system assignments (as also discussed in they are finalized, we will publish them
used under the LTCH PPS (LTC–DRGs) section II.D.10. of this preamble). Any in the corresponding IPPS final rule, to
is based on the patient classification coding updates will be available be effective October 1, 2006 through
system used under the IPPS (CMS through the Web sites provided in September 30, 2007 (FY 2007).
DRGs), which historically had been section II.D.10. of this preamble and Furthermore, we would notify LTCHs of
updated annually and effective for through the Coding Clinic for ICD–9– any revisions to the GROUPER software
discharges occurring on or after October CM. Publishers and software vendors used under the IPPS and the LTCH PPS
1 through September 30 each year. As currently obtain code changes through that would be implemented April 1,
also mentioned above, the ICD–9–CM these sources in order to update their 2007. The proposed LTC–DRGs and
coding update process was revised as a code books and software system. If new relative weights for FY 2007 in this
result of implementing section 503(a) of codes are implemented on April 1, proposed rule are based on the proposed
Pub. L. 108–173, which includes a revised code books and software IPPS DRGs (GROUPER Version 24.0)
requirement for updating ICD–9–CM systems, including the GROUPER discussed in section II.B. of the
codes as often as twice a year instead of software program, will be necessary preamble to this proposed rule.
the current process of annual updates because we must use current ICD–9–CM
codes. Therefore, for purposes of the 2. Proposed Changes in the LTC–DRG
on October 1 of each year (as discussed
LTCH PPS, because each ICD–9–CM Classifications
in greater detail in section II.D.10. of the
preamble of this proposed rule). This code must be included in the GROUPER a. Background
requirement is included as part of the algorithm to classify each case into a
Section 123 of Pub. L. 106–113
amendments to the Act relating to LTC–DRG, the GROUPER software
specifically requires that the agency
recognition of new medical technology program used under the LTCH PPS
would need to be revised to implement a PPS for LTCHs be a per
under the IPPS. Section 503(a) of Pub. discharge system with a DRG-based
L. 108–173 amended section accommodate any new codes.
In implementing section 503(a) of patient classification system reflecting
1886(d)(5)(K) of the Act by adding a the differences in patient resources and
new clause (vii) which states that ‘‘the Pub. L. 108–173, there will only be an
April 1 update if new technology codes costs in LTCHs while maintaining
Secretary shall provide for the addition budget neutrality. Section 307(b)(1) of
of new diagnosis and procedure codes are requested and approved. We note
that any new codes created for April 1 Pub. L. 106–554 modified the
in [sic] April 1 of each year, but the requirements of section 123 of Pub. L.
implementation will be limited to those
addition of such codes shall not require 106–113 by specifically requiring that
diagnosis and procedure code revisions
the Secretary to adjust the payment (or the Secretary examine ‘‘the feasibility
primarily needed to describe new
diagnosis-related group classification) and the impact of basing payment under
technologies and medical services.
* * * until the fiscal year that begins such a system [the LTCH PPS] on the
However, we reiterate that the process
after such date.’’ This requirement use of existing (or refined) hospital
of discussing updates to the ICD–9–CM
improves the recognition of new diagnosis-related groups (DRGs) that
has been an open process through the
technologies under the IPPS by have been modified to account for
ICD–9–CM Coordination and
accounting for those ICD–9–CM codes different resource use of long-term care
Maintenance Committee since 1995.
in the MedPAR claims data at an earlier hospital patients as well as the use of
Requestors will be given the
date. opportunity to present the merits for a the most recently available hospital
Despite the fact that aspects of the new code and make a clear and discharge data.’’
GROUPER software may be updated to convincing case for the need to update In accordance with section 307(b)(1)
recognize any new technology ICD–9– ICD–9–CM codes for purposes of the of Pub. L. 106–554 and § 412.515 of our
CM codes, as discussed most recently in IPPS new technology add-on payment existing regulations, the LTCH PPS uses
the RY 2007 LTCH PPS proposed rule process through an April 1 update (as information from LTCH patient records
(71 FR 4654 through 4655), there will be also discussed in section II.D.10. of this to classify patient cases into distinct
no impact on either LTC–DRG preamble). LTC–DRGs based on clinical
assignments or payments under the However, as we discussed in the RY characteristics and expected resource
LTCH PPS at that time. That is, changes 2007 LTCH PPS proposed rule (71 FR needs. The LTC–DRGs used as the
to the LTC–DRGs (such as the creation 4655), at the September 29–30, 2005 patient classification component of the
or deletion of LTC–DRGs) and the ICD–9–CM Coordination and LTCH PPS correspond to the DRGs
relative weights will continue to be Maintenance Committee meeting, there under the IPPS for acute care hospitals.
updated in the manner and timing were no requests for an April 1, 2006 Thus, in this proposed rule, we are
(October 1) as they are now. As noted implementation of ICD–9–CM codes, proposing to use the IPPS GROUPER
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above and as described in the RY 2007 and, therefore, the next update to the Version 24.0 for FY 2007 to process
LTCH PPS proposed rule (71 FR 4655), ICD–9–CM coding system would not LTCH PPS claims for LTCH discharges
updates to the GROUPER for both the occur until October 1, 2006 (FY 2007). occurring from October 1, 2006 through
IPPS and the LTCH PPS (with respect to Presently, as there were no coding September 30, 2007. The proposed
relative weights and the creation or changes suggested for an April 1, 2006 changes to the CMS–DRG classification
deletion of DRGs) are made in the update, the ICD–9–CM coding set system used under the IPPS for FY 2007
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(GROUPER Version 24.0) are discussed LTC–DRGs (based on FY 2004 MedPAR The emphasis on the need for proper
in section II.D. of the preamble to this data) appears in section II.G.3. of the FY coding cannot be overstated.
proposed rule. 2006 IPPS final rule (70 FR 47325 Inappropriate coding of cases can
We note that, as we discuss in section through 47332).) We also adjust for adversely affect the uniformity of cases
II.C.6. of the preamble to this proposed cases in which the stay at the LTCH is in each LTC–DRG and produce
rule, MedPAC, in its 2005 Report to less than or equal to five-sixths of the inappropriate weighting factors at
Congress on Physician-Owned Specialty geometric average length of stay; that is, recalibration and result in inappropriate
Hospitals, recommended that CMS, short-stay outlier cases (§ 412.529), as payments under the LTCH PPS. LTCHs
among other things, refine the current discussed below in section II.F.4. of this are to follow the same coding guidelines
DRGs under the IPPS to more fully preamble. used by acute care hospitals to ensure
capture differences in severity of illness accuracy and consistency in coding
among patients. As we also discuss in b. Patient Classifications Into DRGs
practices. There will be only one LTC–
that same section, in evaluating the Generally, under the LTCH PPS, DRG assigned per long-term care
MedPAC recommendation for the IPPS, Medicare payment is made at a hospitalization; it will be assigned at the
we are evaluating the APR DRG predetermined specific rate for each time of discharge of the patient.
GROUPER used by MedPAC in its discharge; that is, payment varies by the Therefore, it is mandatory that the
analysis. Based on this analysis, we LTC–DRG to which a beneficiary’s stay coders continue to report the same
concur with MedPAC that the modified is assigned. Just as cases are classified principal diagnosis on all claims and
version of the APR DRGs would account into DRGs for acute care hospitals under include all diagnosis codes for
more completely for differences in the IPPS (see section II.B. of this conditions that coexist at the time of
severity of illness and associated costs preamble), cases are classified into admission, for conditions that are
among hospitals. Therefore, as LTC–DRGs for payment under the LTCH subsequently developed, or for
discussed in greater detail in section PPS based on the principal diagnosis, conditions that affect the treatment
II.C.6. of the preamble of this proposed up to eight additional diagnoses, and up received. Similarly, all procedures
rule, we are proposing to adopt the to six procedures performed during the performed in a LTCH, or paid for under
consolidated severity adjusted DRGs for stay, as well as age, sex, and discharge arrangements by a LTCH, during that
implementation in the IPPS in FY 2008 status of the patient. The diagnosis and stay are to be reported on each claim.
(if not earlier). As discussed above in procedure information is reported by Upon the discharge of the patient
this section, the LTCH PPS uses the the hospital using the ICD–9–CM codes. from a LTCH, the LTCH must assign
same patient classification system As discussed in section II.B. of this appropriate diagnosis and procedure
(DRGs). In response to MedPAC’s preamble, the CMS–DRGs are organized codes from the ICD–9–CM. Completed
recommendation that severity adjusted into 25 major diagnostic categories claim forms are to be submitted
DRGs, such as the APR DRGs or a (MDCs), most of which are based on a electronically to the LTCH’s Medicare
modified version of the APR DRGs, be particular organ system of the body; the fiscal intermediary. Medicare fiscal
adopted under the IPPS (as discussed in remainder involve multiple organ intermediaries enter the clinical and
greater detail in section II.C. of this systems (such as MDC 22, Burns). demographic information into their
preamble), we are proposing to adopt Accordingly, the principal diagnosis claims processing systems and subject
consolidated severity-adjusted DRGs determines MDC assignment. Within this information to a series of automated
under the IPPS in FY 2008 (if not most MDCs, cases are then divided into screening processes called the Medicare
earlier). At that time, we would need to surgical DRGs and medical DRGs. Some Code Editor (MCE). These screens are
consider whether to propose revisions surgical and medical DRGs are further designed to identify cases that require
to the patient classification system differentiated based on the presence or further review before assignment into an
under the LTCH PPS. Any proposed absence of CCs. (See section II.B. of this LTC–DRG can be made.
changes to the patient classification preamble for further discussion of After screening through the MCE,
system would be done through notice surgical DRGs and medical DRGs.) each LTCH claim will be classified into
and comment rulemaking. Because the assignment of a case to a the appropriate LTC–DRG by the
Under the LTCH PPS, we determine particular LTC–DRG will determine the Medicare LTCH GROUPER. The LTCH
relative weights for each of the DRGs to amount that is paid for the case, it is GROUPER is specialized computer
account for the difference in resource important that the coding is accurate. As software and is the same GROUPER
use by patients exhibiting the case used under the IPPS, classifications and used under the IPPS. After the LTC–
complexity and multiple medical terminology used under the LTCH PPS DRG is assigned, the Medicare fiscal
problems characteristic of LTCH are consistent with the ICD–9–CM and intermediary determines the prospective
patients. In a departure from the IPPS, the Uniform Hospital Discharge Data Set payment by using the Medicare LTCH
as we discussed in the August 30, 2002 (UHDDS), as recommended to the PPS PRICER program, which accounts
LTCH PPS final rule (67 FR 55985), Secretary by the National Committee on for LTCH hospital-specific adjustments
which implemented the LTCH PPS, and Vital and Health Statistics (‘‘Uniform and payment rates. As provided for
the FY 2006 IPPS final rule (70 FR Hospital Discharge Data: Minimum Data under the IPPS, we provide an
47324), we use low-volume quintiles in Set, National Center for Health opportunity for the LTCH to review the
determining the LTC–DRG relative Statistics, April 1980’’) and as revised in LTC–DRG assignments made by the
weights for LTC–DRGs with less than 25 1984 by the Health Information Policy fiscal intermediary and to submit
LTCH cases, because LTCHs do not Council (HIPC) of the U.S. Department additional information within a
typically treat the full range of of Health and Human Services. We specified timeframe (§ 412.513(c)).
diagnoses as do acute care hospitals. point out again that the ICD–9–CM The LTCH GROUPER is used both to
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Specifically, we group those low- coding terminology and the definitions classify past cases in order to measure
volume LTC–DRGs (that is, LTC–DRGs of principal and other diagnoses of the relative hospital resource consumption
with fewer than 25 cases) into 5 UHDDS are consistent with the to establish the LTC–DRG weights and
quintiles based on average charge per requirements of the Transactions and to classify current cases for purposes of
discharge. (A listing of the composition Code Sets Standards under HIPAA (45 determining payment. The records for
of low-volume quintiles for the FY 2006 CFR Parts 160 and 162). all Medicare hospital inpatient
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24052 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
discharges are maintained in the available (that is, data from the March by its case-mix to an average that
MedPAR file. The data in this file are 2006 update of the MedPAR file, for reflects the complexity of the cases it
used to evaluate possible DRG example), we would use that data and treats relative to the complexity of the
classification changes and to recalibrate use the finalized Version 24.0 of the cases treated by all other LTCHs (the
the DRG weights during our annual CMS GROUPER used under the IPPS. average case-mix of all LTCHs).
update (as discussed in section II.E. of As we discussed in the FY 2006 IPPS In accordance with the methodology
this preamble). The LTC–DRG relative final rule (70 FR 47325), we have established under § 412.523, as
weights are based on data for the excluded the data from LTCHs that are implemented in the August 30, 2002
population of LTCH discharges, all-inclusive rate providers and LTCHs LTCH PPS final rule (67 FR 55989
reflecting the fact that LTCH patients that are reimbursed in accordance with through 55991), we standardize charges
represent a different patient-mix than demonstration projects authorized for each case by first dividing the
patients in short-term acute care under section 402(a) of Pub. L. 90–248 adjusted charge for the case (adjusted
hospitals. (42 U.S.C. 1395b–1) or section 222(a) of for short-stay outliers under § 412.529 as
Pub. L. 92–603 (42 U.S.C. 1395b–1). described in section II.F.4. (step 3) of
3. Development of the Proposed FY Therefore, in the development of the this preamble) by the average adjusted
2007 LTC–DRG Relative Weights proposed FY 2007 LTC–DRG relative charge for all cases at the LTCH in
a. General Overview of Development of weights, we have excluded the data of which the case was treated. Short-stay
the LTC–DRG Relative Weights the 19 all-inclusive rate providers and outliers under § 412.529 are cases with
the 3 LTCHs that are paid in accordance a length of stay that is less than or equal
As we stated in the August 30, 2002 with demonstration projects that had to five-sixths the average length of stay
LTCH PPS final rule (67 FR 55981), one claims in the FY 2005 MedPAR file. of the LTC–DRG. The average adjusted
of the primary goals for the charge reflects the average intensity of
implementation of the LTCH PPS is to c. Hospital-Specific Relative Value
the health care services delivered by a
pay each LTCH an appropriate amount Methodology
particular LTCH and the average cost
for the efficient delivery of care to By nature, LTCHs often specialize in level of that LTCH. The resulting ratio
Medicare patients. The system must be certain areas, such as ventilator- is multiplied by that LTCH’s case-mix
able to account adequately for each dependent patients and rehabilitation index to determine the standardized
LTCH’s case-mix in order to ensure both and wound care. Some case types charge for the case.
fair distribution of Medicare payments (DRGs) may be treated, to a large extent, Multiplying by the LTCH’s case-mix
and access to adequate care for those in hospitals that have, from a index accounts for the fact that the same
Medicare patients whose care is more perspective of charges, relatively high relative charges are given greater weight
costly. To accomplish these goals, we (or low) charges. This nonarbitrary at a LTCH with higher average costs
adjust the LTCH PPS standard Federal distribution of cases with relatively high than they would at a LTCH with low
prospective payment system rate by the (or low) charges in specific LTC–DRGs average costs, which is needed to adjust
applicable LTC–DRG relative weight in has the potential to inappropriately each LTCH’s relative charge value to
determining payment to LTCHs for each distort the measure of average charges. reflect its case-mix relative to the
case. Under the LTCH PPS, relative To account for the fact that cases may average case-mix for all LTCHs. Because
weights for each LTC–DRG are a not be randomly distributed across we standardize charges in this manner,
primary element used to account for the LTCHs, we use a hospital-specific we count charges for a Medicare patient
variations in cost per discharge and relative value method to calculate the at a LTCH with high average charges as
resource utilization among the payment LTC–DRG relative weights instead of the less resource intensive than they would
groups (§ 412.515). To ensure that methodology used to determine the DRG be at a LTCH with low average charges.
Medicare patients classified to each relative weights under the IPPS For example, a $10,000 charge for a case
LTC–DRG have access to an appropriate described in section II.E. of this at a LTCH with an average adjusted
level of services and to encourage preamble. We believe this method will charge of $17,500 reflects a higher level
efficiency, we calculate a relative weight remove this hospital-specific source of of relative resource use than a $10,000
for each LTC–DRG that represents the bias in measuring LTCH average charge for a case at a LTCH with the
resources needed by an average charges. Specifically, we reduce the same case-mix, but an average adjusted
inpatient LTCH case in that LTC–DRG. impact of the variation in charges across charge of $35,000. We believe that the
For example, cases in an LTC–DRG with providers on any particular LTC–DRG adjusted charge of an individual case
a relative weight of 2 will, on average, relative weight by converting each more accurately reflects actual resource
cost twice as much as cases in an LTC– LTCH’s charge for a case to a relative use for an individual LTCH because the
DRG with a weight of 1. value based on that LTCH’s average variation in charges due to systematic
charge. differences in the markup of charges
b. Data Under the hospital-specific relative among LTCHs is taken into account.
To calculate the proposed LTC–DRG value method, we standardize charges
relative weights for FY 2007 in this for each LTCH by converting its charges d. Proposed Low-Volume LTC–DRGs
proposed rule, we obtained total for each case to hospital-specific relative In order to account for LTC–DRGs
Medicare allowable charges from FY charge values and then adjusting those with low-volume (that is, with fewer
2005 Medicare LTCH bill data from the values for the LTCH’s case-mix. The than 25 LTCH cases), in accordance
December 2005 update of the MedPAR adjustment for case-mix is needed to with the methodology established in the
file, which are the best available data at rescale the hospital-specific relative August 30, 2002 LTCH PPS final rule
this time, and we used the proposed charge values (which, by definition, (67 FR 55984), we group those ‘‘low-
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Version 24.0 of the CMS GROUPER averages 1.0 for each LTCH). The volume LTC–DRGs’’ (that is, DRGs that
used under the IPPS (as discussed in average relative weight for a LTCH is its contained between 1 and 24 cases
section II.B. of this preamble) to classify case-mix, so it is reasonable to scale annually) into one of five categories
cases. To calculate the final LTC–DRG each LTCH’s average relative charge (quintiles) based on average charges, for
relative weights for FY 2007, we are value by its case-mix. In this way, each the purposes of determining relative
proposing that, if more recent data are LTCH’s relative charge value is adjusted weights. For this FY 2007 IPPS
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proposed rule, we are proposing to determine which low-volume quintile are proposing to use the five low-
continue to employ this treatment of received the additional LTC–DRG. After volume quintiles described above. The
low-volume LTC–DRGs in determining sorting the 173 low-volume LTC–DRGs composition of each of the proposed
the FY 2007 LTC–DRG relative weights in ascending order, we are proposing to five low-volume quintiles shown in the
using the best available LTCH data. In group the first fifth of low-volume LTC– chart below was used in determining
this proposed rule, using LTCH cases DRGs with the lowest average charge the proposed LTC–DRG relative weights
from the December 2005 update of the into Quintile 1. The highest average for FY 2007. We would determine a
FY 2005 MedPAR file, we identified 173 charge cases would be grouped into proposed relative weight and
LTC–DRGs that contained between 1 Quintile 5. Because the average charge (geometric) average length of stay for
and 24 cases. This list of LTC–DRGs was of the 35th LTC–DRG in the sorted list each of the five proposed low-volume
then divided into one of the 5 low- is closer to the 34th proposed LTC– quintiles using the formula that we
volume quintiles, each containing a DRG’s average charge (assigned to apply to the regular proposed LTC–
Quintile 1) than to the average charge of DRGs (25 or more cases), as described
minimum of 34 LTC–DRGs (173/5 = 34
the proposed 36th LTC–DRG in the below in section II.F.4. of this preamble.
with 3 LTC–DRGs as the remainder). In
sorted list (to be assigned to Quintile 2),
accordance with our established We are proposing to assign the same
we are proposing to place it into
methodology, we are proposing to make relative weight and average length of
Quintile 1. This process was repeated
an assignment to a specific low-volume stay to each of the proposed LTC–DRGs
through the remaining proposed low-
quintile by sorting the low-volume volume LTC–DRGs so that 3 proposed that make up that proposed low-volume
LTC–DRGs in ascending order by low-volume quintile contain 35 quintile. We note that, as this system is
average charge. For this proposed rule, proposed LTC–DRGs and 2 proposed dynamic, it is possible that the number
this results in an assignment to a low-volume quintiles contain 34 and specific type of LTC–DRGs with a
specific low-volume quintile of the proposed LTC–DRGs. low volume of LTCH cases will vary in
sorted 173 low-volume LTC–DRGs by In order to determine the proposed the future. We use the best available
ascending order by average charge. relative weights for the proposed LTC– claims data in the MedPAR file to
Because the number of LTC–DRGs with DRGs with low volume for FY 2007, in identify low-volume LTC–DRGs and to
less than 25 LTCH cases is not evenly accordance with the methodology calculate the relative weights based on
divisible by five, the average charge of established in the August 30, 2002 our methodology.
the low-volume LTC–DRG was used to LTCH PPS final rule (67 FR 55984), we BILLING CODE 4120–01–P
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BILLING CODE 4120–01–C 55989 through 55991). In summary, in greater detail below. The short-stay
We note that we will continue to LTCH cases must be grouped in the adjusted discharges and corresponding
monitor the volume (that is, the number appropriate LTD–DRG, while taking into charges are used to calculate ‘‘relative
of LTCH cases) in these low-volume account the proposed low-volume LTD– adjusted weights’’ in each proposed
quintiles to ensure that our proposed
DRGs as described above, before the LTD–DRG using the hospital-specific
quintile assignment results in
proposed FY 2007 LTD–DRG relative relative value method described above.
appropriate payment for such cases and
weights can be determined. After Below we discuss in detail the steps
does not result in an unintended
financial incentive for LTCHs to grouping the cases in the appropriate for calculating the proposed FY 2007
inappropriately admit these types of proposed LTD–DRG, we are proposing LTD–DRG relative weights. We note
cases. to calculate the relative weights for FY that, as we stated above in section
2007 in this proposed rule by first II.F.3.b. of this preamble, we have
4. Steps for Determining the Proposed removing statistical outliers and cases excluded the data of all-inclusive rate
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FY 2007 LTC–DRG Relative Weights with a length of stay of 7 days or less, LTCHs and LTCHs that are paid in
As we noted previously, the proposed as discussed in greater detail below. accordance with demonstration projects
FY 2007 LTC–DRG relative weights are Next, we are proposing to adjust the that had claims in the FY 2005 MedPAR
determined in accordance with the number of cases in each proposed LTD– file.
methodology established in the August DRG for the effect of short-stay outlier
Step 1—Remove statistical outliers.
EP25AP06.012</GPH>
30, 2002 LTCH PPS final rule (67 FR cases under § 412.529, as also discussed
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The first step in the calculation of the average length of stay of the LTD–DRG, value across all cases for all LTCHs.
proposed FY 2007 LTD–DRG relative in accordance with § 412.529.) Using these recalculated proposed LTC–
weights is to remove statistical outlier We make this adjustment by counting DRG relative weights, each LTCH’s
cases. We define statistical outliers as a short-stay outlier as a fraction of a average relative weight for all of its
cases that are outside of 3.0 standard discharge based on the ratio of the cases (case-mix) is calculated by
deviations from the mean of the log length of stay of the case to the average dividing the sum of all the LTCH’s
distribution of both charges per case and length of stay for the proposed LTD– proposed LTC–DRG relative weights by
the charges per day for each proposed DRG for nonshort-stay outlier cases. its total number of cases. The LTCHs’
LTD–DRG. These statistical outliers are This has the effect of proportionately hospital-specific relative charge values
removed prior to calculating the reducing the impact of the lower above are multiplied by these hospital-
proposed relative weights. As noted charges for the short-stay outlier cases specific case-mix indexes. These
above, we believe that they may in calculating the average charge for the hospital-specific case-mix adjusted
represent aberrations in the data that proposed LTD–DRG. This process relative charge values are then used to
distort the measure of average resource produces the same result as if the actual calculate a new set of proposed LTC–
use. Including those LTCH cases in the charges per discharge of a short-stay DRG relative weights across all LTCHs.
calculation of the proposed relative outlier case were adjusted to what they In this proposed rule, this iterative
weights could result in an inaccurate would have been had the patient’s process is continued until there is
proposed relative weight that does not length of stay been equal to the average convergence between the weights
truly reflect relative resource use among length of stay of the proposed LTD– produced at adjacent steps, for example,
the proposed LTD–DRGs. DRG. when the maximum difference is less
Step 2—Remove cases with a length As we explained in the FY 2006 IPPS than 0.0001.
of stay of 7 days or less. final rule (70 FR 47336), counting short- Step 5—Adjust the proposed FY 2007
The proposed FY 2007 LTD–DRG stay outlier cases as full discharges with LTC–DRG relative weights to account
relative weights reflect the average of no adjustment in determining the for nonmonotonically increasing
resources used on representative cases proposed LTC–DRG relative weights relative weights.
of a specific type. Generally, cases with would lower the proposed LTC–DRG As explained in section II.B. of this
a length of stay 7 days or less do not relative weight for affected proposed preamble, the proposed FY 2007 CMS
belong in a LTCH because these stays do LTC–DRGs because the relatively lower DRGs, on which the proposed FY 2007
not fully receive or benefit from charges of the short-stay outlier cases LTC–DRGs are based, contain ‘‘pairs’’
treatment that is typical in a LTCH stay, would bring down the average charge that are differentiated based on the
and full resources are often not used in for all cases within a proposed LTC– presence or absence of CCs. The
the earlier stages of admission to a DRG. This would result in an proposed LTC–DRGs with CCs are
LTCH. As explained above, if we were ‘‘underpayment’’ for nonshort-stay defined by certain secondary diagnoses
to include stays of 7 days or less in the outlier cases and an ‘‘overpayment’’ for not related to or inherently a part of the
computation of the proposed FY 2007 short-stay outlier cases. Therefore, in disease process identified by the
LTD–DRG relative weights, the value of this proposed rule, we adjust for short- principal diagnosis, but the presence of
many proposed relative weights would stay outlier cases under § 412.529 in this additional diagnoses does not
decrease and, therefore, payments manner because it results in more automatically generate a CC. As we
would decrease to a level that may no appropriate payments for all LTCH discussed in the FY 2006 IPPS final rule
longer be appropriate. cases. (70 FR 47336), the value of
We do not believe that it would be Step 4—Calculate the proposed FY monotonically increasing relative
appropriate to compromise the integrity 2007 LTC–DRG relative weights on an weights rises as the resource use
of the payment determination for those iterative basis. increases (for example, from
LTCH cases that actually benefit from The process of calculating the uncomplicated to more complicated).
and receive a full course of treatment at proposed LTC–DRG relative weights The presence of CCs in a proposed LTC–
a LTCH, in order to include data from using the hospital-specific relative value DRG means that cases classified into a
these very short-stays. methodology is iterative. First, for each ‘‘without CC’’ proposed LTC–DRG are
Thus, as explained above, in LTCH case, we calculate a hospital- expected to have lower resource use
determining the proposed FY 2007 specific relative charge value by (and lower costs). In other words,
LTD–DRG relative weights, we remove dividing the short-stay outlier adjusted resource use (and costs) are expected to
LTCH cases with a length of stay of 7 charge per discharge (see step 3) of the decrease across ‘‘with CC/without CC’’
days or less. LTCH case (after removing the statistical pairs of proposed LTC–DRGs.
Step 3—Adjust charges for the effects outliers (see step 1)) and LTCH cases For a case to be assigned to a
of short-stay outliers. with a length of stay of 7 days or less proposed LTC–DRG with CCs, more
After removing cases with a length of (see step 2) by the average charge per coded information is called for (that is,
stay of 7 days or less, we are left with discharge for the LTCH in which the at least one relevant secondary
cases that have a length of stay of greater case occurred. The resulting ratio is diagnosis), than for a case to be assigned
than or equal to 8 days. The next step then multiplied by the LTCH’s case-mix to a proposed LTC–DRG ‘‘without CCs’’
in the calculation of the proposed FY index to produce an adjusted hospital- (which is based on only one principal
2007 LTD–DRG relative weights is to specific relative charge value for the diagnosis and no relevant secondary
adjust each LTCH’s charges per case. An initial case-mix index value of diagnoses). Currently, the LTCH claims
discharge for those remaining cases for 1.0 is used for each LTCH. data include both accurately coded
the effects of short-stay outliers as For each proposed LTC–DRG, the cases without complications and cases
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defined in § 412.529(a). (However, we proposed FY 2007 LTC–DRG relative that have complications (and cost more),
note that even if a case was removed in weight is calculated by dividing the but were not coded completely. Both
Step 2 (that is, cases with a length of average of the adjusted hospital-specific types of cases are grouped to a proposed
stay of 7 days or less), it was paid as a relative charge values (from above) for LTC–DRG ‘‘without CCs’’ when only the
short-stay outlier if its length of stay was the proposed LTC–DRG by the overall principal diagnosis was coded. Since
less than or equal to five-sixths of the average hospital-specific relative charge the LTCH PPS was only implemented
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24060 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
for cost reporting periods beginning on proposed rule, using the LTCH cases in The third category of
or after October 1, 2002 (FY 2003), and the December 2005 update of the FY nonmonotonically increasing proposed
LTCHs were previously paid under cost- 2005 MedPAR file (the most recent and relative weights for proposed LTC–DRG
based reimbursement, which is not complete data available at this time), we pairs ‘‘with and without CCs’’ consists
based on patient diagnoses, coding by identified one of the three types of of one pair of proposed LTC–DRGs
LTCHs for these cases may not have nonmonotonic LTC–DRG pairs. As we where one of the proposed LTC–DRGs
been as detailed as possible. stated in the August 30, 2002 LTCH PPS has fewer than 25 LTCH cases and is
Thus, in developing the FY 2003 final rule (67 FR 55990), we believe this grouped to a low-volume quintile and
LTC–DRG relative weights for the LTCH anomaly may be due to coding the other proposed LTC–DRG has 25 or
PPS based on FY 2001 claims data, as inaccuracies and expect that, as was the more LTCH cases and has its own
we discussed in the August 30, 2002 case when we first implemented the proposed LTC–DRG relative weight, and
LTCH PPS final rule (67 FR 55990), we acute care hospital IPPS, this problem the proposed LTC–DRG ‘‘without CCs’’
found on occasion that the data will be self-correcting, as LTCHs submit has the proposed higher relative weight.
suggested that cases classified to the more completely coded data in the Based on our established methodology,
LTC–DRG ‘‘with CCs’’ of a ‘‘with CC’’/ future. we removed the proposed low-volume
‘‘without CC’’ pair had a lower average The first category of LTC–DRG from the proposed low-
charge than the corresponding LTC– nonmonotonically increasing relative volume quintile and combined it with
DRG ‘‘without CCs.’’ Similarly, as weights for LTC–DRG pairs ‘‘with and the other proposed LTC–DRG for the
discussed in the FY 2006 IPPS final rule without CCs’’ contains one pair of LTC– computation of a proposed new relative
(70 FR 47336 through 47337), based on DRGs in which both the proposed LTC– weight for each of these proposed LTC–
FY 2004 claims data, we also found on DRG ‘‘with CCs’’ and the proposed DRGs. This proposed new relative
occasion that the data suggested that LTC–DRG ‘‘without CCs’’ had 25 or weight is assigned to both proposed
cases classified to the LTC–DRG ‘‘with more LTCH cases and, therefore, did not LTC–DRGs, so they each have the same
CCs’’ of a ‘‘with CC’’/‘‘without CC’’ pair fall into one of the 5 low-volume proposed relative weight. In this
have a lower average charge than the quintiles. For those nonmonotonic LTC– proposed rule, for FY 2007, 4 ‘‘pairs’’ of
corresponding LTC–DRG ‘‘without CCs’’ DRG pairs, based on our established proposed LTC–DRGs fall into this
for the FY 2006 LTC–DRG relative methodology (67 FR 55983 through category: LTC–DRGs 94 and 95; LTC–
weights. 55990), we would combine the LTCH DRGs 96 and 97; LTC–DRGs 141 and
We believe this anomaly may be due cases and compute a new relative 142; and LTC–DRGs 292 and 293.
to coding that may not have fully weight based on the case-weighted Step 6—Determine a proposed FY
reflected all comorbidities that were average of the combined LTCH cases of 2007 LTC–DRG relative weight for
present. Specifically, LTCHs may have the LTC–DRGs. The case-weighted proposed LTC–DRGs with no LTCH
failed to code relevant secondary average charge is determined by cases.
diagnoses, which resulted in cases that dividing the total charges for all LTCH As we stated above, we determine the
actually had CCs being classified into a cases by the total number of LTCH cases proposed relative weight for each
‘‘without CC’’ LTC–DRG. It would not for the combined LTC–DRG. This new proposed LTC–DRG using charges
be appropriate to pay a lower amount relative weight would then be assigned reported in the December 2005 update
for the ‘‘with CC’’ LTC–DRG because, in to both of the LTC–DRGs in the pair. In of the FY 2005 MedPAR file. Of the 526
general, cases classified into a ‘‘with this proposed rule, for FY 2007, there proposed LTC–DRGs for FY 2007, we
CC’’ LTC–DRG are expected to have were no LTC–DRGs that fell into this identified 191 proposed LTC–DRGs for
higher resource use (and higher cost) as category. which there were no LTCH cases in the
discussed above. Therefore, previously The second category of database. That is, based on data from the
when we determined the LTC–DRG nonmonotonically increasing relative FY 2005 MedPAR file used in this
relative weights in accordance with the weights for LTC–DRG pairs ‘‘with and proposed rule, no patients who would
methodology established in the August without CCs’’ consists of one pair of have been classified to those proposed
30, 2002 LTCH PPS final rule (67 FR LTC–DRGs that has fewer than 25 cases, LTC–DRGs were treated in LTCHs
55990), we grouped both the cases and each LTC–DRG would be grouped during FY 2005 and, therefore, no
‘‘with CCs’’ and ‘‘without CCs’’ together to different low-volume quintiles in charge data were reported for those
for the purpose of calculating the LTC– which the ‘‘without CC’’ LTC–DRG is in proposed LTC–DRGs. Thus, in the
DRG relative weights since the a higher-weighted low-volume quintile process of determining the proposed
implementation of the LTCH PPS in FY than the ‘‘with CC’’ LTC–DRG. For those LTC–DRG relative weights, we are
2003. As we stated in that same final pairs, based on our established unable to determine weights for these
rule, we will continue to employ this methodology, we would combine the 191 proposed LTC–DRGs using the
methodology to account for LTCH cases and determine the case- methodology described in Steps 1
nonmonotonically increasing relative weighted average charge for all LTCH through 5 above. However, because
weights until we have adequate data to cases. The case-weighted average charge patients with a number of the diagnoses
calculate appropriate separate weights is determined by dividing the total under these proposed LTC–DRGs may
for these anomalous LTC–DRG pairs. charges for all LTCH cases by the total be treated at LTCHs beginning in FY
We expect that, as was the case when number of LTCH cases for the combined 2007, we are proposing to assign
we first implemented the IPPS, this proposed LTC–DRG. Based on the case- proposed relative weights to each of the
problem will be self-correcting, as weighted average LTCH charge, we 191 proposed ‘‘no volume’’ LTC–DRGs
LTCHs submit more completely coded determine within which low-volume based on clinical similarity and relative
data in the future. quintile the ‘‘combined LTC–DRG’’ is costliness to one of the remaining 335
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There are three types of ‘‘with CC’’ grouped. Both LTC–DRGs in the pair are (526¥191 = 335) proposed LTC–DRGs
and ‘‘without CC’’ pairs that could be then grouped into the same low-volume for which we are able to determine
nonmonotonic; that is, where the quintile, thus have the same relative proposed relative weights, based on FY
‘‘without CC’’ LTC–DRG would have a weight. In this proposed rule, for FY 2005 LTCH claims data.
higher average charge than the ‘‘with 2007, there are no LTC–DRGs that fell As there are currently no LTCH cases
CC’’ proposed LTC–DRG. For this into this category. in these proposed ‘‘no volume’’ LTC–
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DRGs, we determined proposed relative similarity and intensity of use of compare the proposed relative weight of
weights for the 191 proposed LTC–DRGs resources as determined by care the proposed LTC–DRG to which the
with no LTCH cases in the FY 2005 provided during the period of time proposed no volume LTC–DRG is
MedPAR file used in this proposed rule surrounding surgery, surgical approach crosswalked to the proposed relative
by grouping them to the appropriate (if applicable), length of time of surgical weights of each of the proposed five
proposed low-volume quintile. This procedure, post-operative care, and quintiles and we assign the proposed no
methodology is consistent with our length of stay. We assign the proposed volume LTC–DRG the relative weight of
methodology used in determining relative weight for the applicable the proposed low-volume quintile with
proposed relative weights to account for proposed low-volume quintile to the the closest weight. For this proposed
the proposed low-volume LTC–DRGs
proposed no volume LTC–DRG if the rule, a list of the proposed no volume
described above.
Our methodology for determining the proposed LTC–DRG to which it is FY 2007 LTC–DRGs and the proposed
proposed relative weights for the crosswalked is grouped to one of the FY 2007 LTC–DRG to which it is
proposed ‘‘no volume’’ LTC–DRGs is as proposed low-volume quintiles. If the crosswalked in order to determine the
follows: We crosswalk the proposed no proposed LTC–DRG to which the appropriate proposed low-volume
volume LTC–DRGs by matching them to proposed no volume LTC–DRG is quintile for the assignment of a
other similar proposed LTC–DRGs for crosswalked is not one of the proposed proposed relative weight for FY 2007 is
which there were LTCH cases in the FY LTC–DRGs to be grouped to one of the shown in the chart below.
2005 MedPAR file based on clinical proposed low-volume quintiles, we BILLING CODE 4120–01–P
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BILLING CODE 4120–01–C proposed LTC–DRG 91. There were over hospital that has been certified for the
To illustrate this methodology for 25 cases in proposed LTC–DRG 90. specific procedures by Medicare and
determining the proposed relative Therefore, it would not be assigned to presently no LTCH has been so certified.
weights for the proposed 191 LTC–DRGs a proposed low-volume quintile for the Based on our research, we found that
with no LTCH cases, we are providing purpose of determining the proposed most LTCHs only perform minor
the following examples, which refer to LTC–DRG relative weights. However, surgeries, such as minor small and large
the proposed no volume LTC–DRGs under our established methodology, bowel procedures, to the extent any
crosswalk information for FY 2007 proposed LTC–DRG 91, with no LTCH surgeries are performed at all. Given the
provided in the chart above. cases, would need to be grouped to a extensive criteria that must be met to
Example 1: There were no cases in the proposed low-volume quintile. We become certified as a transplant center
FY 2005 MedPAR file used for this determined that the proposed low- for Medicare, we believe it is unlikely
proposed rule for proposed LTC–DRG 3 volume quintile with the closest weight that any LTCHs would become certified
(Craniotomy Age 0–17). Since the to proposed LTC–DRG 90 (0.4981) (refer as a transplant center. In fact, in the
procedure is similar in resource use and to Table 11 in the Addendum to this nearly 20 years since the
the length and complexity of the proposed rule) would be proposed low- implementation of the IPPS, there has
procedures and the length of stay are volume Quintile 2 (0.5655) (refer to never been a LTCH that even expressed
similar, we determined that proposed Table 11 in the Addendum to this an interest in becoming a transplant
LTC–DRG 1 (Craniotomy Age >17 with proposed rule). Therefore, we assign center.
CC), which is assigned to proposed low- proposed LTC–DRG 91 a proposed However, if in the future a LTCH
volume Quintile 1 for the purpose of relative weight of 0.5655 for FY 2007. applies for certification as a Medicare-
determining the proposed FY 2007 We note that we will continue to approved transplant center, we believe
relative weights, would display similar monitor the volume (that is, the number that the application and approval
clinical and resource use. Therefore, we of LTCH cases) that have few or no procedure would allow sufficient time
assign the same proposed relative LTCH cases to ensure that our proposed for us to determine appropriate weights
weight of proposed LTC–DRG 1 of no volume LTC–DRG crosswalking and for the LTC–DRGs affected. At the
1.6479 (Quintile 5) for FY 2007 (Table relative weight assignment results in present time, we would only include
11 in the Addendum to this proposed appropriate payments for such cases these six transplant LTC–DRGs in the
rule) to LTC–DRG 3. and does not result in an unintended GROUPER program for administrative
Example 2: There were no LTCH financial incentive for LTCHs to purposes. Because we use the same
cases in the FY 2005 MedPAR file used inappropriately admit these types of GROUPER program for LTCHs as is used
in this proposed rule for LTC–DRG 91 cases. under the IPPS, removing these LTC–
(Simple Pneumonia and Pleurisy Age 0– Furthermore, we are proposing to DRGs would be administratively
17). Since the severity of illness in establish proposed LTC–DRG relative burdensome.
patients with bronchitis and asthma is weights of 0.0000 for heart, kidney, Again, we note that as this system is
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similar in patients regardless of age, we liver, lung, pancreas, and simultaneous dynamic, it is entirely possible that the
determined that proposed LTC–DRG 90 pancreas/kidney transplants (LTC–DRGs number of proposed LTC–DRGs with a
(Simple Pneumonia and Pleurisy Age 103, 302, 480, 495, 512, and 513, zero volume of LTCH cases based on the
>17 Without CC) would display similar respectively) for FY 2007 because system will vary in the future. We used
clinical and resource use characteristics Medicare will only cover these the best most recent available claims
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24068 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
volume LTC–DRGs and to determine the and opportunity for public comment. in October 2005 and entered the market
proposed relative weights in this Section 1886(d)(5)(K)(ii)(I) of the Act at that time may be eligible to receive
proposed rule. specifies that the process must apply to add-on payments as a new technology
Table 11 in the Addendum to this a new medical service or technology if, until FY 2008 (discharges occurring
proposed rule lists the proposed LTC– ‘‘based on the estimated costs incurred before October 1, 2007), when data
DRGs and their respective proposed with respect to discharges involving reflecting the costs of the technology
relative weights, geometric mean length such service or technology, the DRG would be used to recalibrate the DRG
of stay, and five-sixths of the geometric prospective payment rate otherwise weights. Because the FY 2008 DRG
mean length of stay (to assist in the applicable to such discharges under this weights will be calculated using FY
determination of short-stay outlier subsection is inadequate.’’ 2006 MedPAR data, the costs of such a
payments under § 412.529) for FY 2007. The regulations implementing this new technology would likely be
We also wish to point out that in provision establish three criteria for new reflected in the FY 2008 DRG weights.
section VI.A.5. of the preamble of this medical services and technologies to Section 412.87(b)(3) further provides
proposed rule, we discuss our proposal receive an additional payment. First, that, to receive special payment
to revise the regulations for § 412.87(b)(2) defines when a specific treatment, new medical services or
grandfathered HwHs, grandfathered medical service or technology will be technologies must be inadequately paid
hospital satellite facilities, and considered new for purposes of new otherwise under the DRG system. To
grandfathered satellite units at medical service or technology add-on assess whether technologies would be
§§ 412.22(f), 412.22(h)(3); and payments. The statutory provision inadequately paid under the DRGs, we
412.25(e)(3), respectively. In addition, contemplated the special payment establish thresholds to evaluate
in section VI.A.6. of the preamble of this treatment for new medical services or applicants for new technology add-on
proposed rule, we discuss our proposal technologies until such time as data are payments. In the FY 2004 IPPS final
to revise and clarify the existing policies available to reflect the cost of the rule (68 FR 45385, August 1, 2003), we
governing the determination of LTCHs’ technology in the DRG weights through established the threshold at the
CCRs and the reconciliation of high-cost recalibration. There is a lag of 2 to 3 geometric mean standardized charge for
and short-stay outlier payments under years from the point a new medical all cases in the DRG plus 75 percent of
the LTCH PPS. (We note that these service or technology is first introduced 1 standard deviation above the
proposed changes concerning the on the market and when data reflecting geometric mean standardized charge
determination of LTCHs’ CCRs and the the use of the medical service or (based on the logarithmic values of the
reconciliation of LTCH PPS high-cost technology are used to calculate the charges and transformed back to
and short-stay outlier payments are the DRG weights. For example, data from charges) for all cases in the DRG to
same as the changes proposed in the RY discharges occurring during FY 2005 are which the new medical service or
2007 LTCH PPS proposed rule (71 FR used to calculate the proposed FY 2007 technology is assigned (or the case-
674 through 4676 and 4690 through DRG weights in this proposed rule. weighted average of all relevant DRGs,
4692). As discussed in greater detail in Section 412.87(b)(2) provides that a if the new medical service or technology
that section, in response to comments ‘‘medical service or technology may be occurs in many different DRGs). Table
and requests, in this IPPS proposed rule, considered new within 2 or 3 years after 10 in the Addendum to the FY 2004
we are presenting the same proposed the point at which data begin to become IPPS final rule (68 FR 45648) listed the
changes to the policies governing the available reflecting the ICD–9–CM code qualifying threshold by DRG, based on
determination of LTCHs’ CCRs and the assigned to the new medical service or the discharge data that we used to
reconciliation of high-cost and short- technology (depending on when a new calculate the FY 2004 DRG weights.
stay outlier payments, and providing code is assigned and data on the new However, section 503(b)(1) of Pub. L.
additional information on the values of medical service or technology become 108–173 amended section
the proposed LTCH CCR ceiling and the available for DRG recalibration). After 1886(d)(5)(K)(ii)(I) of the Act to provide
proposed statewide average LTCH CCRs CMS has recalibrated the DRGs, based for ‘‘applying a threshold * * * that is
that would be effective October 1, 2006, on available data, to reflect the costs of the lesser of 75 percent of the
rather than responding to comments or an otherwise new medical service or standardized amount (increased to
finalizing any policy changes in the RY technology, the medical service or reflect the difference between cost and
2007 LTCH PPS final rule.) technology will no longer be considered charges) or 75 percent of 1 standard
‘new’ under the criterion for this deviation for the diagnosis-related group
G. Proposed Add-On Payments for New section.’’ involved.’’ The provisions of section
Services and Technologies The 2-year to 3-year period during 503(b)(1) apply to classification for
(If you choose to comment on issues which a medical service or technology fiscal years beginning with FY 2005. We
in this section, please include the can be considered new would ordinarily updated Table 10 from the Federal
caption ‘‘New Technology’’ at the begin with FDA approval, unless there Register document that corrected the FY
beginning of your comment.) was some documented delay in bringing 2004 final rule (68 FR 57753, October 6,
the product onto the market after that 2003), which contained the thresholds
1. Background approval (for instance, component that we used to evaluate applications for
Sections 1886(d)(5)(K) and (L) of the production or drug production had been new service or technology add-on
Act establish a process of identifying postponed until FDA approval due to payments for FY 2005, using the section
and ensuring adequate payment for new shelf life concerns or manufacturing 503(b)(1) measures stated above, and
medical services and technologies issues). After the DRGs have been posted these new thresholds on our Web
(sometimes collectively referred to in recalibrated to reflect the costs of an site at: http://www.cms.hhs.gov/
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section IV.D. of the preamble to the FY changes to the DRG classifications and technologies for which applications for
2005 IPPS final rule (69 FR 49084, recalibration. The impact of additional add-on payments are pending.
August 11, 2004) for a discussion of a payments under this provision was then • Accept comments,
revision of the regulations to included in the budget neutrality factor, recommendations, and data from the
incorporate the change made by section which was applied to the standardized public regarding whether a service or
503(b)(1) of Pub. L. 108–173.) Table 10 amounts and the hospital-specific technology represents a substantial
of the Addendum to the FY 2006 final amounts. clinical improvement.
rule (70 FR 47680) contained the final Section 1886(d)(5)(K)(ii)(III) of the • Provide, before publication of a
thresholds that are being used to Act, as amended by section 503(d)(2) of proposed rule, for a meeting at which
evaluate applications for new Pub. L. 108–173, provides that there organizations representing hospitals,
technology add-on payments for FY shall be no reduction or adjustment in physicians, manufacturers, and any
2007. aggregate payments under the IPPS due other interested party may present
Section 412.87(b)(1) of our existing to add-on payments for new medical comments, recommendations, and data
regulations provides that a new services and technologies. Therefore, regarding whether a new service or
technology is an appropriate candidate add-on payments for new medical technology represents a substantial
for an additional payment when it services or technologies for FY 2005 and clinical improvement to the clinical
represents ‘‘an advance that later years are not budget neutral. staff of CMS.
substantially improves, relative to Applicants for add-on payments for In order to provide an opportunity for
technologies previously available, the new medical services or technologies for public input regarding add-on payments
diagnosis or treatment of Medicare FY 2008 must submit a formal request, for new medical services and
beneficiaries.’’ For example, a new including a full description of the technologies for FY 2007 before
technology represents a substantial clinical applications of the medical publication of this FY 2007 IPPS
clinical improvement when it reduces service or technology and the results of proposed rule, we published a notice in
mortality, decreases the number of any clinical evaluations demonstrating the Federal Register on December 23,
hospitalizations or physician visits, or that the new medical service or 2005 (70 FR 76315) and held a town hall
reduces recovery time compared to the technology represents a substantial meeting at the CMS Headquarters Office
technologies previously available. (Refer clinical improvement, along with a in Baltimore, MD, on February 16, 2006.
to the September 7, 2001 final rule (66 significant sample of data to In the announcement notice for the
FR 46902) for a complete discussion of demonstrate the medical service or meeting, we stated that the opinions and
this criterion.) technology meets the high-cost alternatives provided during the
The new medical service or threshold, no later than October 15, meeting would assist us in our
technology add-on payment policy 2006. Applicants must submit a evaluations of applications by allowing
provides additional payments for cases complete database no later than public discussions of the substantial
with high costs involving eligible new December 30, 2006. Complete clinical improvement criterion for each
medical services or technologies while application information, along with of the FY 2007 new medical service and
preserving some of the incentives under final deadlines for submitting a full technology add-on payment
the average-based payment system. The application, will be available at our Web applications before the publication of
payment mechanism is based on the site: http://www.cms.hhs.gov/ this FY 2007 IPPS proposed rule.
cost to hospitals for the new medical AcuteInpatientPPS/08_newtech.asp. To Approximately 35 participants
service or technology. Under § 412.88, allow interested parties to identify the registered and attended the town hall
Medicare pays a marginal cost factor of new medical services or technologies meeting in person, while additional
50 percent for the costs of a new under review before the publication of participants listened over an open
medical service or technology in excess the proposed rule for FY 2008, the Web telephone line. The participants focused
of the full DRG payment. If the actual site will also list the tracking forms on presenting data on the substantial
costs of a new medical service or completed by each applicant. clinical improvement aspect of their
technology case exceed the DRG products, as well as the need for
payment by more than the 50-percent 2. Public Input Before Publication of additional payments to ensure access to
marginal cost factor of the newmedical This Notice of Proposed Rulemaking on Medicare beneficiaries. In addition, we
service or technology, Medicare Add-On Payments received written comments regarding
payment is limited to the DRG payment Section 1886(d)(5)(K)(viii) of the Act, the substantial clinical improvement
plus 50 percent of the estimated costs of as amended by section 503(b)(2) of Pub. criterion for the applicants. We
the new technology. L. 108–173, provides for a mechanism considered these comments in our
The report language accompanying for public input before publication of a evaluation of each new application for
section 533 of Pub. L. 106–554 indicated notice of proposed rulemaking regarding FY 2007 in this proposed rule. We have
Congressional intent that the Secretary whether a medical service or technology summarized these comments or, if
implement the new mechanism on a represents a substantial clinical applicable, indicated that no comments
budget neutral basis (H.R. Conf. Rep. improvement or advancement. The were received, at the end of the
No. 106–1033, 106th Cong., 2nd Sess. at process for evaluating new medical discussion of the individual
897 (2000)). Section 1886(d)(4)(C)(iii) of service and technology applications applications. We received two general
the Act requires that the adjustments to requires the Secretary to— comments about application of the
annual DRG classifications and relative • Provide, before publication of a newness and substantial clinical
weights must be made in a manner that proposed rule, for public input improvement criteria.
ensures that aggregate payments to regarding whether a new service or Comment: AdvaMed encouraged CMS
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hospitals are not affected. Therefore, in technology represents an advance in to amend the definition of substantial
the past, we accounted for projected medical technology that substantially clinical improvement for the IPPS new
payments under the new medical improves the diagnosis or treatment of technology provision to conform with
service and technology provision during Medicare beneficiaries. the outpatient definition of substantial
the upcoming fiscal year at the same • Make public and periodically clinical improvement used in 2001.
time we estimated the payment effect of update a list of the services and Specifically, AdvaMed requests that
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24070 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
after ‘‘decreased pain, bleeding, or other In this proposed rule, we evaluate replaces the synthetic graft normally
quantifiable symptom,’’ CMS should whether new technology add-on sutured in place during open surgery.
insert, the following language: ‘‘such as payments will continue in FY 2007 for The device was initially identified using
convenience, durability, ease of the three technologies that currently ICD–9–CM procedure code 39.79 (Other
operation or make other improvements receive such payments. In addition, we endovascular repair (of aneurysm) of
in quality of life.’’ present our evaluations of three other vessels). The applicant also
Response: We believe we addressed applications for add-on payments in FY requested a unique ICD–9–CM
this concern in the FY 2006 IPPS final 2007. procedure code. As noted in Table 6B of
rule (70 FR 47360). We use similar the FY 2006 IPPS final rule (70 FR
3. FY 2007 Status of Technologies 47637), new procedure code 39.73
standards to evaluate substantial
Approved for FY 2006 Add-On (Endovascular implantation of graft in
clinical improvement in the IPPS and
Payments thoracic aorta) was assigned to this
OPPS and, in both systems, we employ
identical language to explain and a. Kinetra Implantable Neurostimulator technology.
elaborate on the kinds of considerations for Deep Brain Stimulation In the FY 2006 IPPS final rule (70 FR
that are taken into account in 47356), we approved the GORE TAG
Medtronic, Inc. submitted an
determining whether a new technology device for new technology add-on
application for approval of the Kinetra
represents a substantial clinical payment for FY 2006. We noted that any
implantable neurostimulator device for
improvement. We do not believe a substantially similar device that is FDA-
new technology add-on payments for FY approved before or during FY 2006 that
change to the regulations text is 2005. In the IPPS final rule for FY 2005
necessary. uses the same ICD–9–CM procedure
(69 FR 49019, August 11, 2004), we code as GORE TAG and falls into the
Comment: AdvaMed commented that approved Kinetra for new technology
CMS should not use ‘‘substantial same DRGs as those approved for new
add-on payments. technology add-on payments may also
similarity’’ to evaluate newness without As noted above, the period for which
also determining whether the product is receive the new technology add-on
technologies are eligible to receive new payment associated with this
a substantial clinical improvement. technology add-on payments is 2 to 3
AdvaMed argues that CMS is applying technology in FY 2006.
years after the product becomes FDA approved GORE TAG on March
a concept that is not defined in available on the market and data 23, 2005. The technology remains
regulations. If CMS applies the concept reflecting the cost of the technology are within the 2-to 3-year period during
as part of determining whether a reflected in the DRG weights. This which it can be considered new.
product is new without evaluating technology received FDA approval on Therefore, we are proposing to continue
substantial clinical improvement, December 16, 2003. Therefore, the add-on payments for the endovascular
AdvaMed commented that we should technology will be beyond the 2- to 3- graft repair of the thoracic aorta for FY
define substantial similarity through year period during which it can be 2007.
notice and comment rulemaking. considered new during FY 2007.
Response: We addressed this Therefore, we are proposing to c. Restore Rechargeable Implantable
comment in the FY 2006 IPPS final rule discontinue add-on payments for the Neurostimulator
(70 FR 47350 through 47351). We refer Kinetra rechargeable, implantable Medtronic Neurological submitted an
readers to that final rule for a detailed neurostimulator device for FY 2007. application for new technology add-on
response to this comment. The manufacturer has submitted a payments for its Restore Rechargeable
Section 1886(d)(5)(K)(ix) of the Act, as request that we consider a higher paying Implantable Neurostimulator for FY
added by section 503(c) of Pub. L. 108– DRG assignment for dual array 2006. The Restore Rechargeable
173, requires that, before establishing neurostimulator pulse generator cases. Implantable Neurostimulator is
any add-on payment for a new medical We have taken this request into designed to deliver electrical
service or technology, the Secretary consideration and have reviewed the FY stimulation to the spinal cord to block
shall seek to identify one or more DRGs 2005 Medicare charge data for cases that the sensation of pain. The technology
associated with the new technology, use implantable neurostimulator for standard for neurostimulators uses
based on similar clinical or anatomical deep brain stimulation. Our findings internal sealed batteries as the power
characteristics and the costs of the and a full discussion of this issue can source to generate the electrical current.
technology and assign the new be found in Section II.D.2.a. of the These internal batteries have finite lives,
technology into a DRG where the preamble of this proposed rule. and require replacement when their
average costs of care most closely power has been completely discharged.
approximate the costs of care using the b. Endovascular Graft Repair of the According to the manufacturer, the
new technology. No add-on payment Thoracic Aorta Restore Rechargeable Implantable
shall be made if the new technology is W. L. Gore & Associates, Inc. Neurostimulator ‘‘represents the next
assigned to a DRG that most closely submitted an application for generation of neurostimulator
approximates its costs. consideration of its Endovascular Graft technology, allowing the physician to
At the time an application for new Repair of the Thoracic Aorta (GORE set the voltage parameters in such a way
technology add-on payments is TAG) for new technology add-on that fully meets the patient’s
submitted, the DRGs associated with the payments for FY 2006. The requirements to achieve adequate pain
new technology are identified. We only manufacturer argued that endovascular relief without fear of premature
determine that a new DRG assignment is stent-grafting of the descending thoracic depletion of the battery.’’ The applicant
necessary or a new technology add-on aorta provides a less invasive alternative stated that the expected life of the
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payment is appropriate when the to the traditional open surgical Restore rechargeable battery is 9 years,
payment under these currently assigned approach required for the management compared to an average life of 3 years
DRGs is not adequate and the of descending thoracic aortic for conventional neurostimulator
technology otherwise meets the aneurysms. The GORE TAG device is a batteries. We approved new technology
newness, cost, and substantial clinical tubular stent-graft mounted on a add-on payments for all rechargeable,
improvement criteria. catheter-based delivery system, and it implantable neurostimulators for FY
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24071
2006. Cases involving these devices, clips have been used for more than a technology would have been assigned in
made by any manufacturer, are decade in a wide range of surgical FY 2005 (the MedPAR data we are
identified by the presence of newly procedures. In fact, the FDA found that currently using) are DRGs 107 and 109.
created ICD–9–CM code 86.98 (Insertion the C–Port System ‘‘is substantially These DRGs were terminated in FY
or replacement of dual array equivalent to the predicate devices with 2006, and 4 new coronary bypass DRGs
rechargeable neurostimulator pulse regard to indications, device were created for these cases (DRGs 547,
generator). characteristics, method of use, labeling 548, 549, and 550). The manufacturer
As noted above, the period for which and materials.’’ Thus, given its provided estimates showing a case-
technologies are eligible to receive new similarity to other devices currently on weighted threshold for DRGs 106, 547,
technology add-on payments is 2 to 3 the market, we are concerned that the 548, 549 and 550 of $75,373. The
years after the product becomes C–Port System may not qualify as new. applicant projects a 20-percent market
available on the market and data We welcome comments on whether this penetration for the device in FY 2007 or
reflecting the cost of the technology are device is new and how it can be its use in approximately 23,000 cases
reflected in the DRG weights. The FDA distinguished from predicate devices across the 5 DRGs. The applicant
approved the Restore Rechargeable that perform the same or a similar submitted data showing average
Implantable Neurostimulator in 2005. function. standardized charges for cases using the
However, as noted above and in the FY We also note that there is currently no C–Port System of $80,887. Therefore,
2006 IPPS final rule (70 FR 47357), at ICD–9–CM code used to identify how the applicant argued that the device
least one similar product was approved the anastomosis is performed. The meets the cost threshold for a new
by the FDA as early as April 2004. surgical technique used to graft the technology add-on payment. Our
Nevertheless, consistent with current bypass to the arterial vessel is part of the internal data analysis of the technology,
policy (70 FR 47362) and decisions for surgical procedure itself and is not using the FY 2005 MedPAR data and
prior products (that is, bone separately identified in our current Table 10 thresholds for FY 2005, shows
morphogenetic products and CRT–D coding structure. Thus, if a new code is a case-weighted threshold of $68,416.
devices), we are proposing to continue created, we would be creating a code We identified cases using coronary
new technology add-on payments for that is a subset of the surgical procedure bypass procedure codes 36.10, 36.11,
rechargeable, implantable that identifies whether the graft was 36.12, 36.13 and 36.14, and concluded
neurostimulators in FY 2007 because performed by hand-sewing or using a that the case-weighted average
the product will be beyond the 3-year device like the C–Port System, a standardized charge for these bypass
period only in the latter 6 months of the distinction that has been unnecessary to cases was $79,394. Thus, our internal
fiscal year. date for inpatient hospital payments. data also suggest that the device may
Furthermore, we note that such a coding meet the cost threshold.
4. FY 2007 Applications for New distinction would only be necessary for
Technology Add-On Payments the new technology add-on payment The applicant made several
period if the device met all of the arguments in support of the device
a. C–Port Distal Anastomosis System meeting the substantial clinical
criteria. Once the new technology add-
Cardica, Inc. submitted an application on payments are completed, the surgical improvement criterion. The
for new technology add-on payments for technique used for the anasotomosis manufacturer argues that the C–Port
FY 2007 for its Cardica C–Port Distal would not need to be identified because creates a reliable and fully compliant
Anastomosis System. The manufacturer the code that describes the grafting end-to-side anastomosis between a vein
states that the C–Port System is procedure would be the same whether graft and a coronary artery, in less time
indicated for all patients requiring a or not this technology is used. than is required to create a hand-sewn
vein as a conduit during a coronary The applicant made several distal anastomosis. The applicant also
bypass operation for bypassing a arguments in support of the device states that the C–Port System integrates
coronary artery stenosis or occlusion. meeting the cost criterion. Cardica, Inc. deployment of the anastomotic clips
The manufacturer contends that the C– estimates that the cost of each device and creation of the arteriotomy, thus
Port System is specifically designed to will be approximately $1,200. The enabling deployment to occur without
create a reliable and consistent end-to- applicant assumes a hospital markup of occlusion of blood flow through the
side anastomosis between a conduit, 100 percent, with an average use of 2.5 target vessel. However, we note that the
such as a venous graft, and a small C–Port devices per case. Therefore it applicant submitted evidence suggesting
arterial vessel during the bypass estimates that the total average charge that the device does not always produce
surgery. The device consists of eight per patient will be $6,000. The C–Port reliable anastomoses; specifically, a
stainless steel clips and a delivery System would be used when a coronary study of 130 patients receiving 132
system. Once the vein graft has been artery bypass graft is performed. Thus, devices reported 13 incomplete
loaded into the device and the device we are assessing whether it meets the anastomoses in 12 patients, and the
positioned against the target vessel, the cost criterion in relation to the threshold study also noted that additional manual
anastomosis is created by pushing a for DRGs 106 (Coronary Bypass with stitches were required in the majority of
single button. Cardica, Inc. states the Percutaneous Transluminal Coronary the patients studied. Therefore, we are
main purpose of the device is to replace Angioplasty), 547 (Coronary Bypass concerned that these studies suggest
a conventional hand-sewn, distal with Cardiac Catheter with Major CV that the C–Port System may not
anastomosis with an automated, Diagnosis), 548 (Coronary Bypass with represent a substantial clinical
compliant, mechanical anastomosis. Cardiac Catheter without Major CV improvement over the traditional hand-
The C–Port System was granted Diagnosis), 549 (Coronary Bypass sewn technique. At the town hall
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section 510(K) approval from the FDA without Cardiac Catheter with Major CV meeting, the applicant noted that these
on November 10, 2005. While the device Diagnosis), and 550 (Coronary Bypass results were associated with
appears to meet the criteria for being without Cardiac Catheter without Major inexperience preparing the target vessel,
considered new based on its FDA CV Diagnosis). We note that the data vein thickness assessment, proper
approval date, we are concerned that analysis for this technology is slightly device alignment and anastomosis site
various forms of surgical staples and unusual, as the DRGs to which the selection rather than problems with the
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24072 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
device itself. The applicant believes that technology add-on payments for the use The applicant also maintained that
these problems will become infrequent of its product in the treatment of the technology meets the substantial
as surgeons have more experience with intracerebral hemorrhage (ICH) using clinical improvement criterion. The
the device. We welcome further ICD–9–CM diagnosis code 431 applicant explained that several studies
information from commenters that (Intracerebral hemorrhage). have shown a correlation between the
would suggest how the product meets On March 25, 1999, the FDA size of the intracranial hematoma and
the substantial clinical improvement approved NovoSeven for the treatment the mortality rate of patients with ICH
criterion. of bleeding episodes in patients with within 30 days. As a result,
We received the following public hemophilia A or B with inhibitors to Recombinant Coagulation Factors VIIa
comments at the new technology town Factor VIII or Factor IX. The applicant (rFVIIa), such as NovoSeven, are being
hall meeting regarding whether this is now seeking FDA approval for the explored as a treatment option for ICH.
technology meets the substantial additional indication of ICH in patients The applicant further explained that
clinical improvement criteria: without hemophilia or other clotting NovoSeven activates prothrombin to
Comment: The manufacturer argued abnormalities. The applicant noted that thrombin by binding factor VIIa to
that this technology meets the it expects FDA approval sometime in exposed tissue factor, which then
substantial clinical improvement the first quarter of 2007. Because the activates Factor IX into IXa and Factor
criterion because: technology is not currently FDA X into Xa. The applicant noted that use
• It achieves higher patency rates at 6 approved, we are not presenting our full of rFVIIa for hemophilia patients
months compared to conventional hand- analysis on whether the technology showed an 84-percent efficacy rate, with
sown anastomoses. meets the criteria for the new only one fatality and no major adverse
• Use of the device will result in less technology add-on payment in this events or evidence of disseminated
surgeon-to-surgeon variability in the proposed rule. However, we note that intravascular coagulation. The applicant
quality of the anastomosis compared to the applicant did submit the stated that the use of rFVIIa in a
hand sewing. information below on the cost and nonhemophilia population was safe
• The device leads to reduced substantial clinical improvement across a wide range of doses.
operative time. criteria. In addition, a recent randomized trial
• The product allows for the creation published in the New England Journal
of an anastomosis during minimally Cases using the NovoSeven are
assigned to DRG 14 (Intracranial of Medicine 11 researched 399 patients
invasive surgery. with ICH diagnosed by CT within 3
In addition, we received written Hemorrhage or Cerebral Infraction). The
applicant expects NovoSeven to be hours after onset who received either
comments expressing support for placebo or one of three doses of
approval of new technology add-on used in 20 to 35 percent of patients with
ICH diagnosis code 431 in FY 2007. The NovoSeven (40µg, 80µg, or 160µg).
payments for the C–Port System. These Some of the outcomes reported from the
commenters noted that: applicant searched the FY 2004
MedPAR and found a total of 31,407 study for those patients treated with
• The device allows the anastomosis
cases with a principal diagnosis code of NovoSeven compared to placebo
to be completed quickly, reducing
ICH. The condition was present as a include: Mortality was reduced by 38
patient complications during surgery
secondary diagnosis in 32,730 cases. percent; the odds of improving by one
from ischemia.
The average standardized charge per level on the modified Rankin Scale at 90
• The device will allow for smaller
case was $18,752.12 when ICH was the days doubled; and the proportion of
incisions during heart surgery and
principal diagnosis and $19,045.58 patients who died or were severely
physicians will not have to position
when ICH was the secondary diagnosis. disabled declined from 69 percent in the
their hands in the chest cavity in order
The applicant submitted data placebo group to 53 percent in the
to hand-sew the anastomosis.
• The rapidly deployed anastomosis demonstrating that the technology costs treatment group (combined for all three
clamp provides patients with a surgical a total of $7,265, including the costs for levels of doses). The applicant noted
alternative where one would otherwise the drug, sterile water, IV supplies, that the study concluded that ultra early
not be available due to the nursing services, pharmaceuticals, and hemostatic therapy within 4 hours after
comorbidities associated with the more followup CT scan. However, some of the onset of ICH with rFVIIa
invasive CABG procedures. these costs (for example, nursing and significantly reduced the growth of the
Response: We appreciate the time and pharmacy) are not part of the drug or hemorrhage, reduced mortality, and
effort the applicant took to present at technology itself and are normal improved the functional outcomes at 3
the town hall meeting. We will consider operating costs included in the months, thus demonstrating substantial
the information presented in the written Medicare DRG payment for the inpatient clinical improvement.
comments and at the town hall meeting, stay and cannot be considered ‘‘new.’’ We received no public comments
and welcome objective data that will Therefore, based on data from the regarding this application for new
support the assertions presented above applicant, the total cost for this technology add-on payments at the
by the commenters. technology is $5,997. We then added the town hall meeting.
revised cost of the technology to c. X STOP Interspinous Process
b. NovoSeven for Intracerebral determine a total average standardized
Hemorrhage Decompression System
charge per case of $24,749.12 when ICH
The Pinnacle Health Group in was the principal diagnosis and St. Francis Medical Technologies
conjunction with Novo Nordisk Inc. (the $25,455.58 when it was the secondary submitted an application for new
manufacturer) submitted an application diagnosis. The threshold for DRG 14 is technology add-on payments for the X
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for new technology add-on payments for $23,807. Based on the analysis above, STOP Interspinous Process
FY 2007 for NovoSeven for the applicant maintains that Decompression System for FY 2007.
Intracerebral Hemorrhage. The NovoSeven meets the cost criterion 11 Mayer, S.A., et al. ‘‘Recombinant Activated
technology is a drug that promotes because the average standardized charge Factor VII for Acute Intracerebral Hemorrhage.’’
hemostasis by activating clotting factors. per case exceeds the threshold for DRG New England Journal of Medicine, Vol. 352, No. 8,
The applicant is seeking new 14. pp. 777–785, 2005.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24073
Lumbar spinal stenosis describes a comorbidities, the threshold should be Center for Devices and Radiological
condition that occurs when the spaces calculated by estimating that 20 percent Health (CDRH) Advisory Panel voted
between bones in the spine become of patients would be assigned to DRG against premarket approval (PMA) in
narrowed due to arthritis and other age- 499 and 80 percent would to DRG 500. August 2004 because of concerns about
related conditions. This narrowing, or The manufacturer stated in its proper patient selection as well as the
stenosis, causes nerves coming from the application that, using this lack of objective endpoints, especially
spinal cord to be compressed, thereby methodology, the applicable threshold radiographic endpoints. The Panel also
causing symptoms including pain, should be $19,796. Using either mentioned the overall low clinical
numbness, and weakness. It particularly calculation, it appears that the efficacy rate in the study population.
causes symptoms when the spine is in technology meets the cost threshold for The device subsequently received PMA
extension, as occurs when a patient new technology add-on payments. approval, but only on the condition that
stands fully upright or leans back. The The applicant also submitted it be used in the context of a long term
X STOP device is inserted between the information in support of its claim of (5 year) follow-up study. We welcome
spinous processes of adjacent vertebrae substantial clinical improvement. The information from commenters that
in order to provide a minimally invasive manufacturer stated that the X STOP addresses the concerns raised by the
alternative to conservative treatment device is placed between the spinous CDRH Advisory Panel or other
(exercise and physical therapy) and processes to limit extension of the information bearing on the issue of
invasive surgery (spinal fusion). It symptomatic level(s), yet allowing whether this product meets the
works by limiting the spine extension flexion, axial rotation, and lateral substantial clinical improvement
that compresses the nerve roots while bending (that is, the device limits criterion.
still preserving as much motion as pressure on the spinal nerves and the We received the following public
possible. The device is inserted in a resulting pain symptoms when the comments through the new technology
relatively simple, primarily outpatient patient is in an upright position or leans town hall meeting process regarding this
procedure using local anesthesia. backward while also preserving the application for add-on payments.
However, in some circumstances, the patient’s ability to turn side-to-side, Comment: The applicant asserted that
physician may prefer to admit the bend forward, and to turn to either the X STOP Interspinous Process
patient for an inpatient stay. The side). The applicant contends that this Decompression system has the
manufacturer has described the device technology provides an alternative with following advantages:
as providing ‘‘a new minimally improved clinical outcomes to • It retains spinal anatomy and all
invasive, stand-alone alternative conservative and surgical treatments. spinal structures.
treatment for lumbar spinal stenosis.’’ The manufacturer further stated that the • The device allows for increased
The X STOP Interspinous Process device may offer a new alternative to function and less pain after
Decompression system received lumbar spinal decompression implantation as evidenced by
premarket approval from the FDA on procedures such as laminectomy and radiographic measures that showed
November 21, 2005. The device is laminotomy. Additional information increases in the spinal canal area by 18
currently described by ICD–9–CM code included in the application suggests that percent, diameter by 9 percent, and
84.58 (Implantation of Interspinous the device preserves spinal motion and subarticular diameter (the route that the
process decompression device) is superior to a spinal decompression nerves exit the spine) by 50 percent. In
(excluding: fusion of spine (codes 81.00 procedure that requires concomitant lateral view: area increased by 25
through 81.08, and 81.30 through fusion (with or without percent and width by 41 percent.
81.39)). This ICD–9–CM code went into instrumentation). The applicant argued • The X STOP is a reversible
effect on October 1, 2005. that the advantages over spinal procedure that causes no damage to
The manufacturer provided data in decompression include reduced risk, facets or disks.
support of the device meeting the cost shorter hospital stay, and earlier • The device allows for a treatment
threshold criterion. The applicant stated improvement in pain and function. The option for patients that cannot undergo
that there would be an average of 1.6 manufacturer further contends that surgeries with general anesthesia.
units used per case. Each unit costs disease progression at adjacent levels is • The rate of complications
$5,500; therefore, the technology is minimal following X STOP associated with implantation of the
expected to cost $8,800 per case. The implantation compared to the known device is below 1 percent.
device is currently assigned to DRGs risk associated with surgical Response: We will evaluate these
499 (Back and Neck Procedures Except decompression and concomitant fusion. assertions as we further consider this
Spinal Fusion with CC) and 500 (Back The applicant stated that the X STOP is application for new technology add-on
and Neck Procedures Except Spinal comparable to traditional surgical payments for the final rule. We also note
Fusion without CC). The manufacturer decompression of lumbar spinal that the study that the applicant
projected that there would be stenosis with respect to improved summarized at the town hall meeting for
approximately 424 patients eligible to quality of life postoperatively. the X STOP used a randomized study
receive the device in DRG 499 in FY According to the applicant, the device that targeted lumbar spinal stenosis
2007, while there may be approximately provides advantages over nonoperative patients with mild to moderate
1,700 patients who receive the device in care, including better symptom relief, symptoms. The control group did not
DRG 500. The manufacturer also improved function, and increased require operative care. We welcome
provided data for cases involved in the patient satisfaction. information from the comments that
clinical trials. The average standardized We believe that the device satisfies demonstrates how the study
charge for the cases in FY 2004 was the newness and cost threshold criteria populations showed substantial clinical
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$24,065. The weighted threshold for for new technology add-on payments. improvement compared to the control
DRGs 499 and 500 is $20,096. However, However, we are concerned that the group.
the manufacturer argued that because information included with the We note that the town hall meeting
significantly less than 20 percent of application may raise issues about produced contradictory information
patients receiving the X STOP substantial clinical improvement. regarding whether this procedure is
experienced complications or had During the FDA approval process, the generally performed in inpatient or
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24074 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
outpatient settings. The presenter when calculating the wage index. Under The general concept of the CBSAs is
indicated that over 90 percent of his section 1886(d)(8)(D) of the Act, the that of an area containing a recognized
patients were treated as outpatients. The Secretary is required to adjust the population nucleus and adjacent
manufacturer noted 90 percent of non- standardized amounts so as to ensure communities that have a high degree of
U.S. patients and approximately two- that aggregate payments under the IPPS integration with that nucleus. The
thirds of U.S. patients since FDA after implementation of the provisions purpose of the standards is to provide
approval have been treated in inpatient of sections 1886(d)(8)(B) and (C) and nationally consistent definitions for
settings. While the setting where the 1886(d)(10) of the Act are equal to the collecting, tabulating, and publishing
procedure is typically performed has no aggregate prospective payments that Federal statistics for a set of geographic
bearing on whether the product would have been made absent these areas. CBSAs include adjacent counties
represents a substantial clinical provisions. The proposed budget that have a minimum of 25 percent
improvement, we note that we believe neutrality adjustment for FY 2007 is commuting to the central counties of the
the physician should select the most discussed in section II.A.4.b. of the area. (This is an increase over the
appropriate site to perform the Addendum to this proposed rule. minimum commuting threshold of 15
procedure based on the clinical needs of Section 1886(d)(3)(E) of the Act also percent for outlying counties applied in
the patient. provides for the collection of data every the previous MSA definition.)
3 years on the occupational mix of The revised CBSAs established by
III. Proposed Changes to the Hospital employees for short-term, acute care OMB comprised MSAs and
Wage Index hospitals participating in the Medicare Micropolitan Areas based on Census
A. Background program, in order to construct an 2000 data. (A copy of the announcement
occupational mix adjustment to the may be obtained at the following
Section 1886(d)(3)(E) of the Act wage index. A discussion of the Internet address: http://
requires that, as part of the methodology occupational mix adjustment that we www.whitehouse.gov/omb/bulletins/
for determining prospective payments to propose to apply beginning October 1, fy04/b04-03.html.) The revised
hospitals, the Secretary must adjust the 2006 (the proposed FY 2007 wage definitions recognize 49 MSAs and 565
standardized amounts ‘‘for area index) appears under section III.C. of Micropolitan Areas, and extensively
differences in hospital wage levels by a this preamble. changed the composition of many of the
factor (established by the Secretary) MSAs that existed prior to the revisions.
reflecting the relative hospital wage B. Core-Based Statistical Areas for the The revised area designations resulted
level in the geographic area of the Proposed Hospital Wage Index in a higher wage index for some areas
hospital compared to the national (If you choose to comment on issues and a lower wage index for others.
average hospital wage level.’’ In in this section, please include the Further, some hospitals that were
accordance with the broad discretion caption ‘‘CBSAs’’ at the beginning of previously classified as urban are now
conferred under the Act, we currently your comment.) in rural areas. Given the significant
define hospital labor market areas based The wage index is calculated and payment impacts upon some hospitals
on the definitions of statistical areas assigned to hospitals on the basis of the because of these changes, we provided
established by the Office of Management labor market area in which the hospital a transition period to the new labor
and Budget (OMB). A discussion of the is located. In accordance with the broad market areas in the FY 2005 IPPS final
proposed FY 2007 hospital wage index discretion under section 1886(d)(3)(E) of rule (69 FR 49027 through 49034). As
based on the statistical areas, including the Act, beginning with FY 2005, we part of that transition, we allowed urban
OMB’s revised definitions of define hospital labor market areas based hospitals that became rural under the
Metropolitan Areas, appears under on the Core-Based Statistical Areas new definitions to maintain their
section III.B. of this preamble. (CBSAs) established by OMB and assignment to the MSA where they were
Beginning October 1, 1993, section announced in December 2003 (69 FR previously located for the 3-year period
1886(d)(3)(E) of the Act requires that we 49027). OMB defines a CBSA, beginning of FY 2005, FY 2006, and FY 2007.
update the wage index annually. in 2003, as ‘‘a geographic entity Specifically, these hospitals were
Furthermore, this section provides that associated with at least one core of assigned the wage index of the urban
the Secretary base the update on a 10,000 or more population, plus area to which they previously belonged.
survey of wages and wage-related costs adjacent territory that has a high degree (For purposes of the wage index
of short-term, acute care hospitals. The of social and economic integration with computation, the wage data of these
survey should measure the earnings and the core as measured by commuting hospitals remained assigned to the
paid hours of employment by ties.’’ The standards designate and statewide rural area in which they are
occupational category, and must define two categories of CBSAs: located.) The hospitals receiving this
exclude the wages and wage-related Metropolitan Statistical Areas (MSAs) transition will not be considered urban
costs incurred in furnishing skilled and Micropolitan Statistical Areas (65 hospitals; rather, they will maintain
nursing services. This provision also FR 82235). their status as rural hospitals. Thus, the
requires us to make any updates or According to OMB, MSAs are based hospital would not be eligible, for
adjustments to the wage index in a on urbanized areas of 50,000 or more example, for a large urban add-on
manner that ensures that aggregate population, and Micropolitan Statistical payment under the capital PPS. In other
payments to hospitals are not affected Areas (referred to in this discussion as words, it is the wage index, but not the
by the change in the wage index. The Micropolitan Areas) are based on urban urban or rural status, of these hospitals
proposed adjustment for FY 2007 is clusters with a population of at least that is being affected by this transition.
discussed in section II.B. of the 10,000 but less than 50,000. Counties The higher wage indices that these
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Addendum to this proposed rule. that do not fall within CBSAs are hospitals are receiving are also being
As discussed below in section III.H. of deemed ‘‘Outside CBSAs.’’ In the past, taken into consideration in determining
this preamble, we also take into account OMB defined MSAs around areas with whether they qualify for the out-
the geographic reclassification of a minimum core population of 50,000, migration adjustment discussed in
hospitals in accordance with sections and smaller areas were ‘‘Outside section III.I. of this preamble and the
1886(d)(8)(B) and 1886(d)(10) of the Act MSAs.’’ amount of any adjustment.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24075
FY 2007 will be the third year of this C. Proposed Occupational Mix index, we are proposing to use the same
transition period. We will continue to Adjustment to the Proposed FY 2007 CMS Wage Index Occupational Mix
assign the wage index for the urban area Index Survey and Bureau of Labor Statistics
in which the hospital was previously (If you choose to comment on issues (BLS) data that we used for the FYs
located through FY 2007. In order to in this section, please include the 2005 and 2006 wage indices, with two
ensure this provision remains budget caption ‘‘Occupational Mix exceptions. The CMS survey requires
neutral, we will continue to adjust the Adjustment’’ at the beginning of your hospitals to report the number of total
standardized amount by a transition comment.) paid hours for directly hired and
budget neutrality factor to account for As stated earlier, section 1886(d)(3)(E) contract employees in occupations that
these hospitals. Doing so is consistent of the Act provides for the collection of provide the following services: Nursing,
with the requirement of section data every 3 years on the occupational physical therapy, occupational therapy,
1886(d)(3)(E) of the Act that any mix of employees for each short-term, respiratory therapy, pharmacy, dietary
‘‘adjustments or updates [to the acute care hospital participating in the and medical and clinical laboratory.
adjustment for different area wage Medicare program, in order to construct These services each include several
levels] * * * shall be made in a manner an occupational mix adjustment to the standard occupational classifications
that assures that aggregate payments wage index, for application beginning (SOCs), as defined by the BLS’
* * * are not greater or less than those October 1, 2004 (the FY 2005 wage Occupational Employment Statistics
that would have been made in the year index). The purpose of the occupational (OES) survey. For the proposed FY 2007
without such adjustment.’’ mix adjustment is to control for the wage index, we are using revised survey
effect of hospitals’ employment choices data for 16 hospitals that took advantage
Beginning in FY 2008, these hospitals of the opportunity we afforded hospitals
will receive their statewide rural wage on the wage index. For example,
hospitals may choose to employ to submit changes to their occupational
index, although they will be eligible to mix data during the FY 2007 wage index
apply for reclassification by the MGCRB different combinations of registered
nurses, licensed practical nurses, data collection process (see the
both during this transition period and in discussion of wage data corrections
subsequent years. These hospitals will nursing aides, and medical assistants for
the purpose of providing nursing care to process under section III.J. of this
be considered rural for reclassification preamble). We also excluded survey
purposes. their patients. The varying labor costs
associated with these choices reflect data for hospitals that became
Consistent with the FY 2005 and FY hospital management decisions rather designated as CAHs since the original
2006 IPPS final rules, as we did than geographic differences in the costs survey data were collected and for
beginning in FY 2006, for FY 2007 we of labor. hospitals for which there are no
are proposing to provide that hospitals corresponding cost report data for the
receive 100 percent of their wage index 1. Development of Data for the Proposed FY 2007 wage index. The proposed FY
based upon the CBSA configurations. Occupational Mix Adjustment 2007 wage index includes occupational
Specifically, we will determine for each In the FY 2005 IPPS final rule (69 FR mix data from 3,362 out of 3,580
hospital a proposed wage index for FY 49034), we discussed in detail the data hospitals (93.9 percent response rate).
2007 employing wage index data from we used to calculate the occupational The results of the occupational mix
FY 2003 hospital cost reports and using mix adjustment to the FY 2005 wage survey are included in the chart below.
the CBSA labor market definitions. index. For the proposed FY 2007 wage BILLING CODE 4120–01–P
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24076 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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EP25AP06.019</GPH>
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24077
BILLING CODE 4120–01–C calculating the proposed FY 2007 is determined by multiplying the
2. Calculation of the Proposed FY 2007 occupational mix adjustment factor and percentage of the general service
Occupational Mix Adjustment Factor the proposed FY 2007 occupational mix category (from Step 1) by the national
and the Proposed FY 2007 Occupational adjusted wage index: average hourly rate for that SOC from
Mix Adjusted Wage Index Step 1—For each hospital, the the 2001 BLS OES survey, which was
percentage of the general service used in calculating the occupational
For the proposed FY 2007 wage category attributable to an SOC is mix adjustment for the FY 2005 wage
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index, we are proposing to use the same determined by dividing the SOC hours index. The 2001 OES survey is BLS’
methodology that we used to calculate by the general service category’s total latest available hospital-specific survey.
the occupational mix adjustment to the hours. Repeat this calculation for each (See Chart 4 in the FY 2005 IPPS final
FY 2005 and FY 2006 wage indices (69 of the 19 SOCs. rule, 69 FR 49038.) Repeat this
FR 49042 and 70 FR 47367). We are Step 2—For each hospital, the calculation for each of the 19 SOCs.
EP25AP06.020</GPH>
proposing to use the following steps for weighted average hourly rate for an SOC
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24078 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
Step 3—For each hospital, the calculation in section III.F. of this calculation, the proposed wage index
hospital’s adjusted average hourly rate preamble). values for 17 rural areas (36.2 percent)
for a general service category is Step 7—To compute the occupational and 204 urban areas (52.8 percent)
computed by summing the weighted mix adjusted average hourly wage for an would decrease as a result of the
hourly rate for each SOC within the urban or rural area, sum the total adjustment. Five rural areas (10.6
general category. Repeat this calculation occupational mix adjusted salaries and percent) and 106 urban areas (27.5
for each of the seven general service wage-related costs for all hospitals in percent) would experience a decrease of
categories. the area, then sum the total hours for all 1 percent or greater in their wage index
Step 4—For each hospital, the hospitals in the area. Next, divide the values. The largest negative impact for
occupational mix adjustment factor for area’s occupational mix adjusted a rural area would be 1.8 percent and for
a general service category is calculated salaries and wage-related costs by the an urban area, 4.2 percent. Meanwhile,
by dividing the national adjusted area’s hours. 30 rural areas (63.8 percent) and 178
average hourly rate for the category by Step 8—To compute the national urban areas (46.1 percent) would
the hospital’s adjusted average hourly occupational mix adjusted average experience an increase in their wage
rate for the category. (The national hourly wage, sum the total occupational index values. Although these results
adjusted average hourly rate is mix adjusted salaries and wage-related show that rural hospitals would gain the
computed in the same manner as Steps costs for all hospitals in the Nation, then most from an occupational mix
1 through 3, using instead, the total SOC sum the total hours for all hospitals in adjustment to the wage index, their
and general service category hours for the Nation. Next, divide the national gains may not be as great as might have
all hospitals in the occupational mix occupational mix adjusted salaries and been expected. Further, it might not
survey database.) Repeat this calculation wage-related costs by the national have been anticipated that
for each of the seven general service hours. The proposed national approximately one-third of rural
categories. If the hospital’s adjusted rate occupational mix adjusted average hospitals would actually fare worse
is less than the national adjusted rate hourly wage for FY 2007 is $29.6213. under the adjustment. Overall, a fully
(This figure represents a 100 percent implemented occupational mix adjusted
(indicating the hospital employs a less
adjustment for occupational mix.) wage index would have a redistributive
costly mix of employees within the
Step 9—To compute the occupational effect on Medicare payments to
category), the occupational mix mix adjusted wage index, divide each
adjustment factor will be greater than hospitals.
area’s occupational mix adjusted In the FY 2006 IPPS final rule (70 FR
1.0000. If the hospital’s adjusted rate is average hourly wage (Step 7) by the
greater than the national adjusted rate, 47368), we indicated that, for future
national occupational mix adjusted data collections, we would revise the
the occupational mix adjustment factor average hourly wage (Step 8). occupational mix survey to allow
will be less than 1.0000. Step 10—To compute the Puerto Rico hospitals to provide both salaries and
Step 5—For each hospital, the specific occupational mix adjusted wage hours data for each of the employment
occupational mix adjusted salaries and index, follow Steps 1 through 9 above. categories that are included on the
wage-related costs for a general service The proposed Puerto Rico occupational survey. We also indicated that we
category are calculated by multiplying mix adjusted average hourly wage for would assess whether future
the hospital’s total salaries and wage- FY 2007 is $12.9490. (This figure occupational mix surveys should be
related costs (from Step 5 of the represents a 100 percent adjustment for based on the calendar year or if the data
unadjusted wage index calculation in occupational mix.) should be collected on a fiscal year basis
section III.F. of this preamble) by the An example of the occupational mix as part of the Medicare cost report. (One
percentage of the hospital’s total adjustment was included in the FY 2005 logistical problem is that cost report
workers attributable to the general IPPS final rule (69 FR 49043). data are collected yearly, but
service category and by the general For the FY 2006 final wage index, we occupational mix survey data are
service category’s occupational mix used the unadjusted wage data for collected only every 3 years.)
adjustment factor (from Step 4 above). hospitals that did not submit In a document published in the
Repeat this calculation for each of the occupational mix survey data. For Federal Register on October 14, 2005
seven general service categories. The calculation purposes, this equates to (70 FR 60092), we proposed a new
remaining portion of the hospital’s total applying the national SOC mix to the survey, the 2006 Medicare Wage Index
salaries and wage-related costs that is wage data for these hospitals, because Occupational Mix Survey. The 2006
attributable to all other employees of the hospitals having the same mix as the survey provides for the collection of
hospital is not adjusted for occupational Nation would have an occupational mix data on hospital-specific wages and
mix. adjustment factor equaling 1.0000. In hours for a 6-month reporting period
Step 6—For each hospital, the total the FYs 2005 and 2006 IPPS final rule (January 1, 2006 through June 30, 2006),
occupational mix adjusted salaries and (69 FR 49035 and 70 FR 47368), we as well as additional clarification of the
wage-related costs for a hospital are noted that we would revisit this matter definitions for the occupational
calculated by summing the occupational with subsequent collections of the categories, an expansion of the
mix adjusted salaries and wage-related occupational mix data. Because we are registered nurse category to include
costs for the seven general service using essentially the same survey data functional subcategories, the exclusion
categories (from Step 5) and the for the proposed FY 2007 occupational of average hourly rate data associated
unadjusted portion of the hospital’s mix adjustment that we used for FYs with advance practice nurses, and the
salaries and wage-related costs for all 2005 and 2006, with the only exceptions transfer of each general service category
other employees. To compute a as stated in section III.C.1. of this that comprised less than 4 percent of
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hospital’s occupational mix adjusted preamble, we are treating the wage data total hospital employees in the 2003
average hourly wage, divide the for hospitals that did not respond to the survey to the ‘‘all other occupations’’
hospital’s total occupational mix survey in this same manner for the category. The results of the 2006
adjusted salaries and wage-related costs proposed FY 2007 wage index. occupational mix survey will be used to
by the hospital’s total hours (from Step In implementing an occupational mix adjust the IPPS wage index beginning
4 of the unadjusted wage index adjusted wage index based on the above with FY 2008. On February 10, 2006, we
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24079
published in the Federal Register a • Wage-related costs, including elements and to transmit any changes to
notice with a 30-day comment period pensions and other deferred the wage data no later than April 14,
for the 2006 survey (71 FR 7047). We compensation costs. 2006. We believe all unresolved data
will provide a full discussion of the Consistent with the wage index elements will be resolved by the date
2006 survey design, the survey results, methodology for FY 2006, the proposed the final rule is issued. The revised data
and the methodology for calculating and wage index for FY 2007 also excludes will be reflected in the final rule.
applying the new occupational mix the direct and overhead salaries and Also, as part of our editing process,
adjustment in the FY 2008 IPPS hours for services not subject to IPPS we removed the data for 215 hospitals
proposed rule. payment, such as SNF services, home from our database: 178 hospitals
In our continuing efforts to meet the health services, costs related to GME designated as CAHs between February
information needs of the public, we are (teaching physicians and residents) and 18, 2005, the cutoff date for exclusion of
providing via the Internet three certified registered nurse anesthetists CAHs from the FY 2006 wage index,
additional public use files (PUFs) for the (CRNAs), and other subprovider and February 17, 2006, the cutoff date
proposed occupational mix adjusted components that are not paid under the for CAH exclusion for the FY 2007 wage
wage index concurrently with the IPPS. The proposed FY 2007 wage index index (that is, 7 or more days prior to
publication of this proposed rule: (1) A also excludes the salaries, hours, and the posting of the preliminary February
file including each hospital’s wage-related costs of hospital-based 24, 2006 PUF), and 30 hospitals were
unadjusted and adjusted average hourly rural health clinics (RHCs), and low Medicare utilization hospitals or
wage (FY 2007 Proposed Rule Federally qualified health centers failed edits that could not be corrected
Occupational Mix Adjusted and (FQHCs) because Medicare pays for because the hospitals terminated the
Unadjusted Average Hourly Wage by these costs outside of the IPPS (68 FR program or changed ownership. In
Provider); (2) a file including each 45395). In addition, salaries, hours, and addition, we removed the wage data for
CBSA’s adjusted and unadjusted wage-related costs of CAHs are excluded 7 hospitals with incomplete or
average hourly wage (FY 2007 Proposed from the wage index, for the reasons inaccurate data resulting in zero or
Rule Occupational Mix Adjusted and explained in the FY 2004 IPPS final rule negative, or otherwise aberrant, average
Unadjusted Average Hourly Wage and (68 FR 45397). hourly wages. We have notified the
Pre-Reclassified Wage Index by CBSA); Data collected for the IPPS wage fiscal intermediaries of these hospitals
and (3) a file including each hospital’s index are also currently used to and will continue to work with the
occupational mix adjustment factors by calculate wage indices applicable to fiscal intermediaries to correct these
occupational category (Provider other providers, such as SNFs, home data until we finalize our database to
Occupational Mix Adjustment Factors health agencies, and hospices. In compute the final wage index. The data
for Each Occupational Category). These addition, they are used for prospective for these hospitals will be included in
additional files are posted on the payments to IRFs, IPFs, and LTCHs, and the final wage index if we receive
Internet at http://www.cms.hhs.gov/ for hospital outpatient services. We note corrected data that pass our edits. As a
AcuteInpatientPPS. We also plan to post that, in the IPPS rules, we do not result, the proposed FY 2007 wage
these files via the Internet with future address comments pertaining to the index is calculated based on FY 2003
applications of the occupational mix wage indices for non-IPPS providers. wage data from 3,580 hospitals.
adjustment. Such comments should be made in In constructing the proposed FY 2007
response to separate proposed rules for wage index, we include the wage data
D. Worksheet S–3 Wage Data for the those providers. for facilities that were IPPS hospitals in
Proposed FY 2007 Wage Index Update FY 2003, even for those facilities that
E. Verification of Worksheet S–3 Wage have since terminated their
(If you choose to comment on issues Data
in this section, please include the participation in the program as
caption ‘‘Wage Data’’ at the beginning of (If you choose to comment on this hospitals, as long as those data do not
your comment.) section, please include the caption fail any of our edits for reasonableness.
The proposed FY 2007 wage index ‘‘Wage Data’’ at the beginning of your We believe that including the wage data
values (effective for hospital discharges comment.) for these hospitals is, in general,
occurring on or after October 1, 2006 The wage data for the proposed FY appropriate to reflect the economic
and before October 1, 2007) in section 2007 wage index were obtained from conditions in the various labor market
II.B. of the Addendum to this proposed Worksheet S–3, Parts II and III of the FY areas during the relevant past period.
rule are based on the data collected from 2003 Medicare cost reports. Instructions However, we exclude the wage data for
the Medicare cost reports submitted by for completing the Worksheet S–3, Parts CAHs as discussed in 68 FR 45397.
hospitals for cost reporting periods II and III are in the Provider Section 4410 of Pub. L. 105–33
beginning in FY 2003 (the FY 2006 wage Reimbursement Manual, Part I, sections provides that, for the purposes of
index was based on FY 2002 wage data). 3605.2 and 3605.3. The data file used to section 1886(d)(3)(E) of the Act, for
The proposed FY 2007 wage index construct the proposed wage index discharges occurring on or after October
includes the following categories of data includes FY 2003 data submitted to us 1, 1997, the area wage index applicable
associated with costs paid under the as of March 1, 2006. As in past years, to any hospital that is located in an
IPPS (as well as outpatient costs): we performed an intensive review of the urban area of a State may not be less
• Salaries and hours from short-term, wage data, mostly through the use of than the area wage index applicable to
acute care hospitals (including paid edits designed to identify aberrant data. hospitals located in rural areas in the
lunch hours and hours associated with We asked our fiscal intermediaries to State. This provision is commonly
military leave and jury duty). revise or verify data elements that referred to as the ‘‘rural floor.’’ In the
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• Home office costs and hours. resulted in specific edit failures. Some August 11, 2004 IPPS final rule (69 FR
• Certain contract labor costs and unresolved data elements are included 49109), we discussed situations where a
hours (which includes direct patient in the calculation of the proposed FY State has only urban areas and no
care, certain top management, 2007 wage index. We instructed the geographically rural areas, or a State has
pharmacy, laboratory, and nonteaching fiscal intermediaries to complete their geographically rural areas but no IPPS
physician Part A services). data verification of questionable data hospitals are located in those rural
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24080 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
areas. As a result, these States did not Consequently, the only wage index that the Part B salaries reported on Lines 3,
have rural IPPS hospitals from which to would be available for such a new IPPS 5 and 5.01, home office salaries reported
compute and apply a ‘‘rural floor.’’ In rural hospital in the first 3 years of the on Line 7, and excluded salaries
that final rule, we developed a policy hospital’s existence is the imputed reported on Lines 8 and 8.01 (that is,
for imputing a ‘‘rural floor’’ for these ‘‘rural floor.’’ Therefore, if a new rural direct salaries attributable to SNF
States, effective for the FYs 2005, 2006, IPPS hospital opens in a State that has services, home health services, and
and 2007 wage indices, so that a ‘‘rural an imputed ‘‘rural floor’’ and has rural other subprovider components not
floor’’ could be applicable to IPPS urban areas, the hospital would receive the subject to the IPPS). We also subtracted
hospitals in those States in the same imputed ‘‘rural floor’’ as its wage index from Line 1 the salaries for which no
manner that a ‘‘rural floor’’ is applicable until its first cost report is hours were reported. To determine total
to IPPS urban hospitals in States that contemporaneous with the cost salaries plus wage-related costs, we
have IPPS rural hospitals. We revised reporting period being used to develop added to the net hospital salaries the
the regulations at § 412.64(h) to describe a given fiscal year’s wage index. costs of contract labor for direct patient
the methodology for computing the care, certain top management,
F. Computation of the Proposed FY
imputed ‘‘rural floors’’ for these States pharmacy, laboratory, and nonteaching
2007 Unadjusted Wage Index
and to define an all-urban State. physician Part A services (Lines 9 and
Specifically, § 412.64(h)(5) defines an (If you choose to comment on issues 10), home office salaries and wage-
all-urban State as ‘‘a State with no rural in this section, please include the related costs reported by the hospital on
areas * * * or a State in which there are caption ‘‘Unadjusted Wage Index’’ at the Lines 11 and 12, and nonexcluded area
no hospitals classified as rural. A State beginning of your comment.) wage-related costs (Lines 13, 14, and
with rural areas and with hospitals The method used to compute the 18).
reclassified as rural under § 412.103 is proposed FY 2007 wage index without
We note that contract labor and home
not an all-urban State.’’ an occupational mix adjustment
office salaries for which no
We have received questions as to follows:
Step 1—As noted above, we based the corresponding hours are reported were
what area wage index CMS would apply not included. In addition, wage-related
in the instance where a new rural IPPS proposed FY 2007 wage index on wage
data reported on the FY 2003 Medicare costs for nonteaching physician Part A
hospital opens in a State that has an employees (Line 18) are excluded if no
imputed ‘‘rural floor’’ because it has cost reports. We gathered data from each
of the non-Federal, short-term, acute corresponding salaries are reported for
rural areas but had no hospitals those employees on Line 4.
classified as rural. In addition, we have care hospitals for which data were
reported on the Worksheet S–3, Parts II Step 3—Hours—With the exception of
been asked whether a new IPPS hospital
and III of the Medicare cost report for wage-related costs, for which there are
could submit its wages and hours data
the hospital’s cost reporting period no associated hours, we computed total
to be used in computing the wage index,
beginning on or after October 1, 2002 hours using the same methods as
even though the hospital did not file a
and before October 1, 2003. In addition, described for salaries in Step 2.
cost report as an IPPS provider for the
cost report base year that is used in we included data from some hospitals Step 4—For each hospital reporting
calculating that wage index. that had cost reporting periods both total overhead salaries and total
A new hospital can be an entirely new beginning before October 2002 and overhead hours greater than zero, we
facility that did not exist before, or it reported a cost reporting period then allocated overhead costs to areas of
can be a hospital that participated in covering all of FY 2003. These data were the hospital excluded from the wage
Medicare under a previous provider included because no other data from index calculation. First, we determined
number, but has acquired a new these hospitals would be available for the ratio of excluded area hours (sum of
Medicare provider number (such as the cost reporting period described Lines 8 and 8.01 of Worksheet S–3, Part
when a CAH converts to IPPS status, or above, and because particular labor II) to revised total hours (Line 1 minus
vice versa). As a new IPPS hospital (in market areas might be affected due to the sum of Part II, Lines 2, 3, 4.01, 5,
this case, rural), the hospital would not the omission of these hospitals. 5.01, 6, 6.01, 7, and Part III, Line 13 of
yet have filed any wages and hours data However, we generally describe these Worksheet S–3). We then computed the
on a Medicare cost report. Even in the wage data as FY 2003 data. We note amounts of overhead salaries and hours
situation where a new IPPS hospital that, if a hospital had more than one to be allocated to excluded areas by
previously participated in Medicare as cost reporting period beginning during multiplying the above ratio by the total
another provider type (such as a CAH) FY 2003 (for example, a hospital had overhead salaries and hours reported on
and was able to develop its wages and two short cost reporting periods Line 13 of Worksheet S–3, Part III. Next,
hours data for the wage index base year, beginning on or after October 1, 2002 we computed the amounts of overhead
consistent with section 1886(d)(3)(E) of and before October 1, 2003), we wage-related costs to be allocated to
the Act which specifies that the wage included wage data from only one of the excluded areas using three steps: (1) We
index must be based on data from short- cost reporting periods, the longer, in the determined the ratio of overhead hours
term, acute care hospitals, CMS could wage index calculation. If there was (Part III, Line 13) to revised hours (Line
not include the hospital’s wages and more than one cost reporting period and 1 minus the sum of Lines 2, 3, 4.01, 5,
hours from a period during which the the periods were equal in length, we 5.01, 6, 6.01, 7, 8, and 8.01); (2) we
hospital was not an IPPS provider. included the wage data from the later computed overhead wage-related costs
Furthermore, even once the hospital period in the wage index calculation. by multiplying the overhead hours ratio
files its first Medicare cost report under Step 2—Salaries—The method used to by wage-related costs reported on Part
the new IPPS provider number, that first compute a hospital’s average hourly II, Lines 13, 14, and 18; and (3) we
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cost report is not used in computing the wage excludes certain costs that are not multiplied the computed overhead
wage index for the hospital’s geographic paid under the IPPS. In calculating a wage-related costs by the above
area until 4 years later. This is because hospital’s average salaries plus wage- excluded area hours ratio. Finally, we
a current fiscal year’s wage index is related costs, we subtracted from Line 1 subtracted the computed overhead
computed from cost reports that are 4 (total salaries) the GME and CRNA costs salaries, wage-related costs, and hours
years prior to that current fiscal year. reported on Lines 2, 4.01, 6, and 6.01, associated with excluded areas from the
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24081
total salaries (plus wage-related costs) market area before any reclassifications year if this section did not apply. For FY
and hours derived in Steps 2 and 3. under section 1886(d)(8)(B), section 2007, this change affects 187 hospitals
Step 5—For each hospital, we 1886(d)(8)(E), or section 1886(d)(10) of in 62 urban areas. The areas affected by
adjusted the total salaries plus wage- the Act. Within each urban or rural this provision are identified by a
related costs to a common period to labor market area, we added the total footnote in Tables 4A–1 and 4A–2 in the
determine total adjusted salaries plus adjusted salaries plus wage-related costs Addendum of this proposed rule.
wage-related costs. To make the wage obtained in Step 5 for all hospitals in
G. Computation of the Proposed FY
adjustment, we estimated the percentage that area to determine the total adjusted
2007 Blended Wage Index
change in the employment cost index salaries plus wage-related costs for the
(ECI) for compensation for each 30-day labor market area. (If you choose to comment on issues
increment from October 14, 2002, Step 7—We divided the total adjusted in this section, please include the
through April 15, 2004, for private salaries plus wage-related costs obtained caption ‘‘Blended Wage Index’’ at the
industry hospital workers from the BLS’ under both methods in Step 6 by the beginning of your comment.)
Compensation and Working Conditions. sum of the corresponding total hours For the final FY 2005 and FY 2006
We use the ECI because it reflects the (from Step 4) for all hospitals in each wage indices, we used a blend of the
price increase associated with total labor market area to determine an occupational mix adjusted wage index
compensation (salaries plus fringes) average hourly wage for the area. and the unadjusted wage index.
rather than just the increase in salaries. Step 8—We added the total adjusted Specifically, we adjusted 10 percent of
In addition, the ECI includes managers salaries plus wage-related costs obtained the FY 2005 and FY 2006 wage index
as well as other hospital workers. This in Step 5 for all hospitals in the Nation adjustment factor by a factor reflecting
methodology to compute the monthly and then divided the sum by the occupational mix. We refer readers to
update factors uses actual quarterly ECI national sum of total hours from Step 4 the FY 2005 IPPS final rule at 69 FR
data and assures that the update factors to arrive at a national average hourly 49052 and the FY 2006 IPPS final rule
match the actual quarterly and annual wage. Using the data as described above, at 70 FR 47376 for a detailed discussion
percent changes. The factors used to the proposed national average hourly of the blended wage index. For FY 2007,
adjust the hospital’s data were based on wage is $29.6008. we are proposing to apply the same
the midpoint of the cost reporting Step 9—For each urban or rural labor blended wage index as we did in FYs
period, as indicated below. market area, we calculated the hospital 2005 and 2006, so that 10 percent of the
wage index value by dividing the area wage index is adjusted by a factor
MIDPOINT OF COST REPORTING average hourly wage obtained in Step 7 reflecting occupational mix. We believe
by the national average hourly wage this is prudent policy because we are
PERIOD computed in Step 8. relying on the same survey data used in
Step 10—Following the process set FYs 2005 and 2006.
Adjustment
After Before forth above, we developed a separate In computing the occupational mix
factor
Puerto Rico-specific wage index for adjustment for the proposed FY 2007
10/14/2002 .... 11/15/2002 1.06058 purposes of adjusting the Puerto Rico wage index, we used the occupational
11/14/2002 .... 12/15/2002 1.05679 standardized amounts. (The national mix survey data that we collected for
12/14/2002 .... 01/15/2003 1.05304 Puerto Rico standardized amount is the FY 2006 wage index, replacing the
01/14/2003 .... 02/15/2003 1.04915 adjusted by a wage index calculated for survey data for 16 hospitals that
02/14/2003 .... 03/15/2003 1.04513 submitted revised data, and excluding
all Puerto Rico labor market areas based
03/14/2003 .... 04/15/2003 1.04108
04/14/2003 .... 05/15/2003 1.03713 on the national average hourly wage as the survey data for hospitals with no
05/14/2003 .... 06/15/2003 1.03325 described above.) We added the total corresponding Worksheet S–3 wage data
06/14/2003 .... 07/15/2003 1.02948 adjusted salaries plus wage-related costs for the FY 2007 wage index.
07/14/2003 .... 08/15/2003 1.02584 (as calculated in Step 5) for all hospitals With 10 percent of the proposed FY
08/14/2003 .... 09/15/2003 1.02231 in Puerto Rico and divided the sum by 2007 wage index adjusted for
09/14/2003 .... 10/15/2003 1.01878 the total hours for Puerto Rico (as occupational mix, the proposed national
10/14/2003 .... 11/15/2003 1.01510 calculated in Step 4) to arrive at an average hourly wage is $29.6029 and the
11/14/2003 .... 12/15/2003 1.01127 Puerto Rico-specific average hourly
12/14/2003 .... 01/15/2004 1.00743
overall proposed average hourly wage of
01/14/2004 .... 02/15/2004 1.00367 $12.9564 for Puerto Rico. For each labor wage is $12.9557. The wage index
02/14/2004 .... 03/15/2004 1.00000 market area in Puerto Rico, we values for 17 rural areas (36.2 percent)
03/14/2004 .... 04/15/2004 0.99644 calculated the Puerto Rico-specific wage and 200 urban areas (51.8 percent)
index value by dividing the area average would decrease as a result of the
For example, the midpoint of a cost hourly wage (as calculated in Step 7) by adjustment. These decreases would be
reporting period beginning January 1, the overall Puerto Rico average hourly minimal; the largest negative impact for
2003 and ending December 31, 2003 is wage. a rural area would be 0.18 percent and
June 30, 2003. An adjustment factor of Step 11—Section 4410 of Pub. L. 105– for an urban area, 0.42 percent.
1.02948 would be applied to the wages 33 provides that, for discharges on or Conversely, 29 rural areas (61.7 percent)
of a hospital with such a cost reporting after October 1, 1997, the area wage and 173 urban areas (44.8 percent)
period. In addition, for the data for any index applicable to any hospital that is would benefit from this adjustment,
cost reporting period that began in FY located in an urban area of a State may with 1 urban area increasing 2.2 percent
2003 and covered a period of less than not be less than the area wage index and 2 rural areas increasing 0.38
360 days or more than 370 days, we applicable to hospitals located in rural percent. As there are no significant
annualized the data to reflect a 1-year areas in that State. (For all-urban States, differences between the FY 2006 and
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cost report. Dividing the data by the we established an imputed floor (69 FR the FY 2007 occupational mix survey
number of days in the cost report and 49109). Furthermore, this wage index data and results, we believe it is
then multiplying the results by 365 floor is to be implemented in such a appropriate to again apply the
accomplishes annualization. manner as to ensure that aggregate IPPS occupational mix to 10 percent of the
Step 6—Each hospital was assigned to payments are not greater or less than proposed FY 2007 wage index. (See
its appropriate urban or rural labor those that would have been made in the Appendix A to this proposed rule for
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24082 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
further analysis of the impact of the reclassifications by the MGCRB are Act,12 the wage index values were
occupational mix adjustment on the located in §§ 412.230 through 412.280. determined by considering the
proposed FY 2007 wage index.) Section 1886(d)(10)(D)(v) of the Act following:
The proposed wage index values for provides that, beginning with FY 2001, • If including the wage data for the
FY 2007 (except those for hospitals a MGCRB decision on a hospital redesignated hospitals would reduce the
receiving wage index adjustments under reclassification for purposes of the wage wage index value for the area to which
section 505 of Pub. L. 108–173) are index is effective for 3 fiscal years, the hospitals are redesignated by 1
shown in Tables 4A–1, 4A–2, 4B, 4C– unless the hospital elects to terminate percentage point or less, the area wage
1, 4C–2, and 4F in the Addendum to the reclassification. Section index value determined exclusive of the
this proposed rule. 1886(d)(10)(D)(vi) of the Act provides wage data for the redesignated hospitals
Tables 3A and 3B in the Addendum that the MGCRB must use the 3 most applies to the redesignated hospitals.
to this proposed rule list the 3-year recent years’ average hourly wage data • If including the wage data for the
average hourly wage for each labor in evaluating a hospital’s redesignated hospitals reduces the wage
market area before the redesignation of reclassification application for FY 2003 index value for the area to which the
hospitals, based on FYs 2005, 2006, and any succeeding fiscal year. hospitals are redesignated by more than
2007 cost reporting periods. Table 3A Section 304(b) of Pub. L. 106–554 1 percentage point, the area wage index
lists these data for urban areas and provides that the Secretary must determined inclusive of the wage data
Table 3B lists these data for rural areas. establish a mechanism under which a for the redesignated hospitals (the
In addition, Table 2 in the Addendum statewide entity may apply to have all combined wage index value) applies to
to this proposed rule includes the of the geographic areas in the State the redesignated hospitals.
adjusted average hourly wage for each • If including the wage data for the
treated as a single geographic area for
hospital from the FY 2001 and FY 2002 redesignated hospitals increases the
purposes of computing and applying a
cost reporting periods, as well as the FY wage index value for the urban area to
single wage index, for reclassifications
2003 period used to calculate the which the hospitals are redesignated,
beginning in FY 2003. The
proposed FY 2007 wage index. The 3- both the area and the redesignated
implementing regulations for this
year averages are calculated by dividing hospitals receive the combined wage
provision are located at § 412.235.
the sum of the dollars (adjusted to a index value. Otherwise, the hospitals
Section 1886(d)(8)(B) of the Act located in the urban area receive a wage
common reporting period using the requires the Secretary to treat a hospital
method described previously) across all index excluding the wage data of
located in a rural county adjacent to one hospitals redesignated into the area.
3 years, by the sum of the hours. If a or more urban areas as being located in
hospital is missing data for any of the • The wage data for a reclassified
the MSA to which the greatest number urban hospital is included in both the
previous years, its average hourly wage of workers in the county commute, if
for the 3-year period is calculated based wage index calculation of the area to
the rural county would otherwise be which the hospital is reclassified
on the data available during that period. considered part of an urban area under
The proposed wage index values in (subject to the rules described above)
the standards for designating MSAs and and the wage index calculation of the
Tables 4A–1, 4A–2, 4B, 4C–1, 4C–2, and
if the commuting rates used in urban area where the hospital is
4F and the average hourly wages in
determining outlying counties were physically located.
Tables 2, 3A, and 3B in the Addendum
determined on the basis of the aggregate • Rural areas whose wage index
to this proposed rule include the
number of resident workers who values would be reduced by excluding
proposed occupational mix adjustment.
commute to (and, if applicable under the wage data for hospitals that have
H. Proposed Revisions to the Wage the standards, from) the central county been redesignated to another area
Index Based on Hospital Redesignations or counties of all contiguous MSAs. In continue to have their wage index
(If you choose to comment on issues light of the new CBSA definitions and values calculated as if no redesignation
in this section, please include the the Census 2000 data that we had occurred (otherwise, redesignated
caption ‘‘Hospital Redesignations and implemented for FY 2005 (69 FR rural hospitals are excluded from the
Reclassifications’’ at the beginning of 49027), we undertook to identify those calculation of the rural wage index).
your comment.) counties meeting these criteria. The • The wage index value for a
eligible counties are identified under redesignated rural hospital cannot be
1. General section III.H.4. of this preamble. reduced below the wage index value for
Under section 1886(d)(10) of the Act, the rural areas of the State in which the
2. Effects of Reclassification
the Medicare Geographic Classification hospital is located.
Review Board (MGCRB) considers Section 1886(d)(8)(C) of the Act • In cases where urban hospitals have
applications by hospitals for geographic provides that the application of the reclassified to rural areas under 42 CFR
reclassification for purposes of payment wage index to redesignated hospitals is
under the IPPS. Hospitals must apply to dependent on the hypothetical impact 12 Although section 1886(d)(8)(C)(iv)(I) of the Act
that the wage data from these hospitals also provides that the wage index for an urban area
the MGCRB to reclassify by September may not decrease as a result of redesignated
1 of the year preceding the year during would have on the wage index value for hospitals if the urban area wage index is already
which reclassification is sought. the area to which they have been below the wage index for rural areas in the State
redesignated. These requirements for in which the urban area is located, the provision
Generally, hospitals must be proximate was effectively made moot by section 4410 of Pub.
to the labor market area to which they determining the wage index values for L. 105–33, which provides that the area wage index
are seeking reclassification and must redesignated hospitals is applicable applicable to any hospital that is located in an
demonstrate characteristics similar to both to the hospitals located in rural urban area of a State may not be less than the area
wwhite on PROD1PC61 with PROPOSALS2
counties deemed urban under section wage index applicable to hospitals located in rural
hospitals located in that area. The areas in that State. For all-urban States, CMS
MGCRB issues its decisions by the end 1886(d)(8)(B) of the Act and hospitals established an imputed floor (69 FR 49109). Also,
of February for reclassifications that that were reclassified as a result of the section 1886(d)(8)(C)(iv)(II) of the Act provides that
MGCRB decisions under section an urban area’s wage index may not decrease as a
become effective for the following fiscal result of redesignated hospitals if the urban area is
year (beginning October 1). The 1886(d)(10) of the Act. Therefore, as located in a State that is composed of a single urban
regulations applicable to provided in section 1886(d)(8)(C) of the area.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24083
412.103, the urban hospital wage data 12 percent DSH cap under Pub. L. 109– § 412.273(d). Applications and other
are: (a) Included in the rural wage index 171 is discussed under Section IV.F.4. information about MGCRB
calculation, unless doing so would of this preamble.) reclassifications may be obtained,
reduce the rural wage index; and (b) Under § 412.273, hospitals that have beginning in mid-July 2006, via the
included in the urban area where the been reclassified by the MGCRB are CMS Internet Web site at: http://
hospital is physically located. permitted to withdraw their www.cms.hhs.gov/mgcrb/, or by calling
applications within 45 days of the the MGCRB at (410) 786–1174. The
3. FY 2007 MGCRB Reclassifications
publication of a proposed rule. The mailing address of the MGCRB is: 2520
At the time this proposed rule was request for withdrawal of an application Lord Baltimore Drive, Suite L,
constructed, the MGCRB had completed for reclassification or termination of an Baltimore, MD 21244–2670.
its review of FY 2007 reclassification existing 3-year reclassification that
requests. There are 214 hospitals 4. Proposed FY 2007 Redesignations
would be effective in FY 2007 must be
approved by the MGCRB for wage index Under Section 1886(d)(8)(B) of the Act
received by the MGCRB within 45 days
reclassifications for FY 2007. Because of the publication of this proposed rule. Beginning October 1, 1988, section
MGCRB wage index reclassifications are If a hospital elects to withdraw its wage 1886(d)(8)(B) of the Act required us to
effective for 3 years, hospitals index application after the MGCRB has treat a hospital located in a rural county
reclassified during FY 2005 or FY 2006 issued its decision, but within 45 days adjacent to one or more urban areas as
are eligible to continue to be reclassified of the publication of the proposed rule, being located in the MSA if certain
based on prior reclassifications to it may later cancel its withdrawal in a criteria were met. Prior to FY 2005, the
current MSAs during FY 2007. There subsequent year and request the MGCRB rule was that a rural county adjacent to
were 299 hospitals reclassified for wage to reinstate its wage index one or more urban areas would be
index for FY 2006, and 395 hospitals reclassification for the remaining fiscal treated as being located in the MSA to
reclassified for wage index for FY 2005. year(s) of the 3-year period which the greatest number of workers in
Some of the hospitals that reclassified (§ 412.273(b)(2)(i)). The request to the county commute, if the rural county
for FY 2005 and FY 2006 have elected cancel a prior withdrawal must be in would otherwise be considered part of
not to continue their reclassifications in writing to the MGCRB no later than the an urban area under the standards
FY 2007 because, under the revised deadline for submitting reclassification published in the Federal Register on
labor market area definitions, they are applications for the following fiscal year January 3, 1980 (45 FR 956) for
now physically located in the areas to (§ 412.273(d)). For further information designating MSAs (and New England
which they previously reclassified. Of about withdrawing, terminating, or County Metropolitan Areas (NECMAs)),
all of the hospitals approved for canceling a previous withdrawal or and if the commuting rates used in
reclassification for FY 2005, FY 2006, termination of a 3-year reclassification determining outlying counties (or, for
and FY 2007, 766 hospitals are in a for wage index purposes, we refer the New England, similar recognized areas)
reclassification status for FY 2007. reader to § 412.273, as well as the were determined on the basis of the
Prior to FY 2004, hospitals had been August 1, 2002 IPPS final rule (67 FR aggregate number of resident workers
able to apply to be reclassified for 50065) and the August 1, 2001 IPPS who commute to (and, if applicable
purposes of either the wage index or the final rule (66 FR 39887). under the standards, from) the central
standardized amount. Section 401 of Changes to the wage index that result county or counties of all contiguous
Pub. L. 108–173 established that all from withdrawals of requests for MSAs (or NECMAs). Hospitals that met
hospitals will be paid on the basis of the reclassification, wage index corrections, the criteria using the January 3, 1980
large urban standardized amount, appeals, and the Administrator’s review version of these OMB standards were
beginning with FY 2004. Consequently, process will be incorporated into the deemed urban for purposes of the
all hospitals are paid on the basis of the wage index values published in the final standardized amounts and for purposes
same standardized amount, which made rule. These changes may affect not only of assigning the wage data index.
such reclassifications moot. Although the wage index value for specific Effective beginning FY 2005, we use
there could still be some benefit in geographic areas, but also the wage OMB’s 2000 CBSA standards and the
terms of payments for some hospitals index value redesignated hospitals Census 2000 data to identify counties
under the DSH payment adjustment for receive; that is, whether they receive the qualifying for redesignation under
operating IPPS, section 402 of Pub. L. wage index that includes the data for section 1886(d)(8)(B) for the purpose of
108–173 equalized DSH payment both the hospitals already in the area assigning the wage index to the urban
adjustments for rural and urban and the redesignated hospitals. Further, area. The chart below contains the
hospitals, with the exception that the the wage index value for the area from listing of the rural counties designated
rural DSH adjustment is capped at 12 which the hospitals are redesignated as urban under section 1886(d)(8)(B) of
percent (except that RRCs and, effective may be affected. the Act that we are proposing to use for
for discharges occurring on or after Applications for FY 2008 FY 2007. For discharges occurring on or
October 1, 2006, MDHs have no cap). (A reclassifications are due to the MGCRB after October 1, 2006, hospitals located
detailed discussion of this application by September 1, 2006. We note that this in the first column of this chart will be
appears in section IV.I. of the preamble is also the deadline for canceling a redesignated for purposes of using the
of the FY 2005 IPPS final rule (69 FR previous wage index reclassification wage index of the urban area listed in
49085). The exclusion of MDHs from the withdrawal or termination under the second column.
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As in the past, hospitals redesignated Some hospitals currently receiving a we discussed our decision to exercise
under section 1886(d)(8)(B) of the Act section 508 reclassification are eligible this authority to establish a procedural
are also eligible to be reclassified to a to reclassify to that same area under the rule for section 508 hospitals to retain
different area by the MGCRB. Affected standard reclassification process as a their section 508 reclassification
hospitals are permitted to compare the result of the new labor market through its expiration on March 31,
reclassified wage index for the labor definitions that we adopted for FY 2005. 2007, and reclassify under the
market area in Tables 4C–1 and 4C–2 in The governing regulations indicate that regulations at 42 CFR Part 412, Subpart
the Addendum of this proposed rule ‘‘if a hospital is already reclassified to L, for the second half of FY 2007. The
into which they have been reclassified a given geographic area for wage index following procedural rules will apply
by the MGCRB to the wage index for the purposes for a 3-year period, and for section 508 hospitals that wish to
area to which they are redesignated submits an application to the same area reclassify for the second half of FY 2007
under section 1886(d)(8)(B) of the Act. for either the second or third year of the (April 1, 2007, through September 30,
Hospitals may withdraw from an 3-year period, that application will not 2007):
MGCRB reclassification within 45 days be approved.’’ However in the FY 2006 For section 508 hospitals applying for
of the publication of this proposed rule. IPPS final rule (70 FR 47382), we stated individual reclassification under
that hospitals that indicated in their FY § 412.230—
5. Reclassifications Under Section 508 2007 MGCRB applications that they
of Pub. L. 108–173 agreed to waive their section 508 (a) Hospitals must have applied for
reclassification for the first 6 months of reclassification through the MGCRB by
Under section 508 of Pub. L. 108–173, the September 1, 2005 deadline.
a qualifying hospital could appeal the FY 2007 if they were granted a 3-year
wage index classification otherwise reclassification under the traditional (b) Section 508 hospitals that are
applicable to the hospital and apply for MGCRB process will not be subject to approved by the MGCRB for
reclassification to another area of the the rule cited above. Thus, in applying reclassification will have 45 days from
State in which the hospital is located for a 3-year MGCRB reclassification the date this FY 2007 IPPS proposed
(or, at the discretion of the Secretary, to beginning in FY 2007, hospitals that are rule is published to cancel their section
an area within a contiguous State). We already reclassified to the same area 1886(d)(10) reclassification for either
implemented this process through under section 508 should have the first 6 months of FY 2007 or for the
notices published in the Federal indicated in their MGCRB entire fiscal year. Hospitals should note
Register on January 6, 2004 (69 FR 661), reclassification requests that if they that if they fail to cancel their section
and February 13, 2004 (69 FR 7340). receive the MGCRB reclassification, 1886(d)(10) reclassification by the
Such reclassifications are applicable to they would forfeit the section 508 deadline, they will not receive their
discharges occurring during the 3-year reclassification for the first 6 months of section 508 wage adjustment in FY
period beginning April 1, 2004, and FY 2007. 2007. To further clarify—
wwhite on PROD1PC61 with PROPOSALS2
ending March 31, 2007. Under section Under 1886(d)(10)(D)(v) of the Act, • Hospitals that cancel their section
508(b), reclassifications under this CMS has the authority to ‘‘establish 1886(d)(10) reclassification for the first
process do not affect the wage index procedures’’ under which a hospital 6 months receive their section 508
computation for any area or for any may elect to terminate a reclassification reclassification for October 1, 2006,
other hospital and cannot be effected in before the end of a 3-year period. In the through March 31, 2007, and their
a budget neutral manner. FY 2006 IPPS final rule (70 FR 47382), section 1886(d)(10) reclassification for
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24086 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
April 1, 2007, through September 30, reclassified for all of FY 2007, the 2007, through September 30, 2009, any
2009. hospital will be ineligible for the out- prior reclassifications are permanently
• Hospitals that cancel their section migration adjustment. If a hospital has terminated, consistent with 42 CFR
1886(d)(10) reclassification for the a half fiscal year reclassification, the 412.274(b)(2)(ii). In fact, because any
entire year will receive their section 508 hospital will be eligible for the out- withdrawal of the group reclassification
reclassification for October 1, 2006, migration adjustment for the portion of must be received within 45 days of the
through March 31, 2007 and their home the fiscal year that it is not reclassified. publication of this proposed rule, failure
area wage index for April 1, 2007, The procedural rules described in the to meet this deadline would effectively
through September 30, 2007. FY 2006 IPPS final rule were intended permanently terminate any remaining
• Hospitals that do not cancel their to address specific circumstances where years of the individual reclassification.
section 1886(d)(10) reclassification will individual and group reclassifications Further, a non-section 508 hospital that
receive their section 1886(d)(10) involve a section 508 hospital. The rules is part of a group reclassification that
reclassification, not their section 508 were designed to recognize the special includes a section 508 hospital that will
reclassification, for the entire fiscal year. circumstances of section 508 hospital not begin until April 1, 2007, will have
Hospital groups that include a section reclassifications ending mid-year during the option of canceling its preexisting
508 hospital were also permitted to FY 2007 and were intended to provide reclassification for the entire year
submit section 1886(d)(10) flexibility in our regulations that would consistent with section 412.274(b)(1)(ii)
reclassification applications by the allow previously approved within 45 days of publication of this
September 1, 2005 deadline. However, reclassifications to continue through proposed rule. Under this scenario, the
in order for a group reclassification to be March 31, 2007, and new hospital would receive its home wage
approved, either of the following reclassifications to begin April 1, 2007, index for the first half of the year and
conditions needed to be met: upon the conclusion of the section 508 the approved group reclassification
(a) The section 508 hospital that is reclassifications. We have received wage index for the second half of the
part of the group waived its section 508 questions about the application of these year. We are also reiterating that the
reclassification for the first half of FY special procedural rules to non-section special procedural rules that we have
2007. This is necessary because the 508 hospitals that are part of group adopted for half fiscal year
regulations at §§ 412.232 and 412.234 applications that previously were reclassifications and terminations are
state that all hospitals in a county must awarded an individual reclassification intended only to address the special
apply for reclassification as a group. The that continues into FY 2007. These circumstances created by section 508 of
hospitals either agreed to receive the hospitals are concerned that the Pub. L. 108–173 with respect to
same reclassification or failed to qualify procedural rules imply that such prior reclassifications beginning and ending
as a group. The Administrator upheld reclassification would be terminated mid-way through a fiscal year. These
this policy in an MGCRB appeal for FY beginning October 1, 2006, because the special procedural rules do not change
2006. rules specify that ‘‘the remainder of the any of the permanent provisions
(b) Each member of the group agreed, group receives the home wage index’’ currently in effect with respect to
in writing, at the time the application for the period October 1, 2006, through reclassifications under subpart L of 42
was submitted September 1, 2005, that March 31, 2007, if the group CFR Part 412.
they cancelled the group reclassification reclassification application specified As an example: Suppose Hospital A is
if granted for the first 6 months of FY that the section 1886(d)(10) group a non-section 508 hospital that was part
2007. The section 1886(d)(10) reclassification would not begin until of a group reclassification application
reclassification then is effective only April 1, 2007. We did not specifically for FYs 2007 through 2009 and such
from April 1, 2007, through September contemplate preexisting individual group contained a section 508 hospital.
30, 2007. In the FY 2006 final rule, we reclassifications when we drafted the In accordance with our special section
stated that, under this scenario, the special procedural rules for group 508 procedural rule, the entire group
section 508 hospital receives its section reclassifications that involve section 508 would be considered to have agreed it
508 reclassification from October 1, hospitals. However, we did not intend would waive its group reclassification
2006, through March 31, 2007, and the to adopt a less favorable policy for non- for the first half of FY 2007. Hospital A
remainder of the group receives the section 508 hospitals in a group with a also is currently (for FY 2006)
home wage index for that time period. pending individual geographic reclassified from Area X to Area Y for
For April 1, 2007, through September reclassification than we did for section FYs 2006 through 2008. For the first half
30, 2009, the section 508 hospital and 508 hospitals. Thus, we are clarifying of FY 2007, Hospital A will continue to
the remainder of the group receive the our procedural rule with respect to non- receive its individual reclassification to
group reclassification. The group may section 508 hospitals with preexisting Area Y; for the second half of FY 2007,
also cancel the April 1, 2007 through individual reclassifications that are part it will receive the group reclassification.
September 30, 2009 group of group reclassifications that include a Hospital A may terminate its
reclassification within 45 days of section 508 hospital. individual reclassification (termination
publication of this proposed rule. For the first half of FY 2007, we must be received within 45 days of
We will apply a similar rule for intend to either apply (a) the area wage publication of this proposed rule), in
purposes of the out-migration index where the hospital is physically which case it will receive its home wage
adjustment for FY 2007 discussed in located if there is no reclassification index for the first half of FY 2007 and
section III.I. of this preamble. The pending, or (b) the hospital’s individual the group reclassification for the second
statute states that a hospital cannot reclassification wage index if the half. Acceptance of the group
receive an out-migration adjustment if it hospital was part of a group awarded a reclassification effectively permanently
wwhite on PROD1PC61 with PROPOSALS2
is reclassified under section 1886(d)(10) group reclassification and the group terminates the individual
of the Act. Therefore, eligible hospitals followed the procedural rules for reclassification to Area Y.
that are not reclassified during any part postponing reclassification until April Hospital A’s group also has the option
of FY 2007 will, by default, receive an 1, 2007. However, once the hospital of withdrawing its group reclassification
out-migration adjustment during that begins its new section 1886(d)(10) (withdrawal must be received within 45
time period. If the hospital is reclassification for the period April 1, days of publication of this proposed rule
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24087
and all members of the group must provides requirements for determining we are proposing an alternative
agree). If such withdrawal occurs, the the wage index values for both hospitals approach. We are proposing to calculate
default rule is that Hospital A receives located in rural counties deemed urban one budget neutrality adjustment that
its FYs 2006 through 2008 individual under section 1886(d)(8)(B) of the Act reflects the average of the adjustments
reclassification for all of FY 2007. and hospitals that were reclassified as a required for first and second half fiscal
If Hospital A wishes to receive its result of the MGCRB decisions under year reclassifications, respectively, as
home wage index (plus any out- section 1886(d)(10) of the Act. As discussed in section II.A.4.b. of the
migration adjustment, if applicable), it provided in the statute, we are required Addendum to this proposed rule.
must also terminate the individual to calculate a separate wage index for
reclassification for all of FY 2007 I. Proposed FY 2007 Wage Index
hospitals reclassified to an area if Adjustment Based on Commuting
(termination must be received within 45 including the wage data for the
days of publication of this proposed Patterns of Hospital Employees
reclassified hospitals would reduce the
rule). area wage index by more than 1 percent. (If you choose to comment on issues
We show the reclassifications Conceivably, we could calculate one in this section, please include the
effective under the one-time appeal reclassified wage index for FY 2007 that caption ‘‘Out-Migration Adjustment’’ at
process in Table 9B in the Addendum would include the wage data of the beginning of your comment.)
to this proposed rule. All section hospitals that are reclassified to the area In accordance with the broad
1886(d)(10) reclassifications are listed in for any part of FY 2007. However, we discretion under section 1886(d)(13) of
Table 9A in the Addendum to this are aware of situations in which the Act, as added by section 505 of Pub.
proposed rule. including the wage data from hospitals L. 108–173, beginning with FY 2005, we
only reclassifying for the second half of established a process to make
6. Proposed Wage Indices for adjustments to the hospital wage index
Reclassified Hospitals and Proposed the fiscal year would change the wage
based on commuting patterns of
Reclassification Budget Neutrality index for reclassified hospitals for the
hospital employees. The process,
Factor entire fiscal year, even though the
outlined in the FY 2005 IPPS final rule
Under the procedural rules described reclassification would only be in effect
(69 FR 49061), provides for an increase
under section III.H.5. of this preamble, during the second half of the fiscal year.
in the wage index for hospitals located
different wage indices may be in effect We believe it would be unfair to have
in certain counties that have a relatively
for the first 6 months and the second 6 wage indices affected for the first half of
high percentage of hospital employees
months of FY 2007. Specifically, section the fiscal year by including the wage
who reside in the county but work in a
508 hospitals that were approved for data for hospital reclassifications in
different county (or counties) with a
individual reclassification under effect only for the second half of the higher wage index. Such adjustments to
§ 412.230 have the opportunity to cancel fiscal year. We believe that the most the wage index are effective for 3 years,
their section 1886(d)(10) reclassification equitable approach to this issue would unless a hospital requests to waive the
for the first 6 months within 45 days of be to calculate separate wage indices for application of the adjustment. A county
the publication of this proposed rule reclassified hospitals for the first and will not lose its status as a qualifying
and receive their section 508 second half of FY 2007. Therefore, we county due to wage index changes
reclassifications for October 1, 2006, are proposing to issue two separate during the 3-year period, and counties
through March 31, 2007, and their reclassified wage indices for affected will receive the same wage index
section 1886(d)(10) reclassifications for areas (one effective from October 1, increase for those 3 years. However, a
April 1, 2007, through September 30, 2006, through March 31, 2007, and a county that qualifies in any given year
2009. The special procedural rule also second reclassified wage index effective may no longer qualify after the 3-year
applied to urban county group April 1, 2007, through September 30, period, or it may qualify but receive a
applications including a section 508 2007). The reclassified wage indices different adjustment to the wage index
hospital. In order for the hospital to would be calculated based on the wage level. Hospitals that receive this
retain its section 508 reclassification for data for hospitals reclassified to the area adjustment to their wage index are not
the first 6 months, each member of the in the respective half of the fiscal year. eligible for reclassification under
group must have agreed in writing, at The half fiscal year reclassifications section 1886(d)(8) or section 1886(d)(10)
the time the application was submitted, also have implications for budget of the Act. Adjustments under this
that they cancel the group neutrality. The overall effect of provision are not subject to the IPPS
reclassification if granted for the first 6 geographic reclassification is required budget neutrality requirements under
months of FY 2007. Under this scenario, by section 1886(d)(8)(D) of the Act to be section 1886(d)(3)(E) or section
the section 508 hospital receives its budget neutral. We apply an adjustment 1886(d)(8)(D) of the Act.
section 508 reclassification from to the IPPS standardized amounts to Hospitals located in counties that
October 1, 2006, through March 31, ensure that the effects of geographic qualify for the wage index adjustment
2007, and the remainder of the group reclassification are budget neutral. are to receive an increase in the wage
receives their preexisting individual Because we are proposing to calculate index that is equal to the average of the
reclassification or home wage index for two separate reclassification wage differences between the wage indices of
that time period. For April 1, 2007, indices for the first half and the second the labor market area(s) with higher
through September 30, 2009, the section half of FY 2007, it is conceivable that wage indices and the wage index of the
508 hospital and the remainder of the we could apply budget neutrality resident county, weighted by the overall
group receive the group reclassification. separately for first and second half fiscal percentage of hospital workers residing
The half fiscal year section year reclassifications. Under this in the qualifying county who are
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1886(d)(10) reclassifications permitted scenario, we would issue two separate employed in any labor market area with
under these procedural rules present IPPS standardized amounts for FY 2007. a higher wage index. We have employed
issues related to the calculation of the However, we believe this approach the prereclassified wage indices in
reclassified wage indices and would be administratively burdensome making these calculations.
reclassification budget neutrality factor. and perhaps cause confusion in the We are proposing that hospitals
Section 1886(d)(8)(C) of the Act provider community. For this reason, located in the qualifying counties
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24088 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
identified in Table 4J in the Addendum Waiver notification should be sent to Medicare fiscal intermediaries to inform
to this proposed rule that have not the following address: Centers for the IPPS hospitals they service of the
already reclassified through section Medicare and Medicaid Services, Center availability of the wage index data files
1886(d)(10) of the Act, redesignated for Medicare Management, Attention: and the process and timeframe for
through section 1886(d)(8) of the Act, Wage Index Adjustment Waivers, requesting revisions (including the
received a section 508 reclassification, Division of Acute Care, Room C4–08– specific deadlines listed below). We also
or requested to waive the application of 06, 7500 Security Boulevard, Baltimore, instructed the fiscal intermediaries to
the out-migration adjustment will MD 21244–1850. advise hospitals that these data are also
receive the wage index adjustment In addition, under § 412.273, made available directly through their
listed in the table for FY 2007. We used hospitals that have been reclassified by representative hospital organizations.
the same formula described in the FY the MGCRB are permitted to terminate If a hospital wished to request a
2005 final rule (69 FR 49064) to existing 3-year reclassifications within change to its data as shown in the
calculate the out-migration adjustment. 45 days of publication of this proposed October 7, 2005 wage and occupational
This proposed adjustment was rule. Hospitals that are eligible to mix data files, the hospital was to
calculated as follows: receive the out-migration wage index submit corrections along with complete,
Step 1. Subtract the wage index for adjustment and that withdraw their detailed supporting documentation to
the qualifying county from the wage application for reclassification its fiscal intermediary by December 5,
index for the higher wage area(s). automatically receive the wage index 2005. Hospitals were notified of this
Step 2. Divide the number of hospital adjustment listed in Table 4J in the deadline and of all other possible
employees residing in the qualifying Addendum to this proposed rule. deadlines and requirements, including
county who are employed in such Requests for withdrawal of an the requirement to review and verify
higher wage index area by the total application for reclassification or their data as posted on the preliminary
number of hospital employees residing termination of an existing 3-year wage index data file on the Internet,
in the qualifying county who are reclassification will be effective in FY through the October 7, 2005
employed in any higher wage index 2007 and must be received by the memorandum referenced above.
area. Multiply this result by the result MGCRB within 45 days of the In the October 7, 2005 memorandum,
obtained in Step 1. publication of this proposed rule. we also specified that a hospital could
Step 3. Sum the products resulting Requests to waive section 1886(d)(8) only request revisions to the
from Step 2 (if the qualifying county has redesignations for FY 2007 must be occupational mix data for the reporting
workers commuting to more than one received by CMS within 45 days of the period that the hospital used in its
higher wage area). publication of this proposed rule. In original FY 2005 wage index
Step 4. Multiply the result from Step addition, hospitals that wished to retain occupational mix survey. That is, a
3 by the percentage of hospital their redesignation/reclassification hospital that submitted occupational
employees who are residing in the under section 1886(d)(8), section mix data for the 12-month reporting
qualifying county and who are 1886(d)(10), or section 508 (instead of period could not switch to submitting
employed in any higher wage index receiving the out-migration adjustment) data for the 4-week reporting period and
area. for FY 2007 do not need to submit a vice versa. Further, a hospital could not
The proposed adjustments calculated formal request to CMS; they will submit an occupational mix survey for
for qualifying hospitals are listed in automatically retain their redesignation/ the periods beginning before January 1,
Table 4J in the Addendum to this reclassification status for FY 2007. 2003, or after January 11, 2004. In
proposed rule. These adjustments Hospitals should carefully review the addition, a hospital that did not submit
would be effective for each county for wage index adjustment that they would an occupational mix survey for the FY
a period of 3 fiscal years. Hospitals that receive under this provision (as listed in 2005 wage index was not permitted to
received the adjustment in FY 2006 will Table 2 in the Addendum to this submit a survey for the FY 2007 wage
be eligible to retain that same proposed rule) in comparison to the index.
adjustment for FY 2007. For hospitals in wage index adjustment that they would The fiscal intermediaries notified the
newly qualified counties, adjustments to receive under the MGCRB hospitals by mid-February 2006 of any
the wage index are effective for 3 years, reclassification (Table 9 in the changes to the wage index data as a
beginning with discharges occurring on Addendum to this proposed rule). result of the desk reviews and the
or after October 1, 2006. resolution of the hospitals’ early
As previously noted, hospitals J. Process for Requests for Wage Index December 2005 change requests. The
receiving the wage index adjustment Data Corrections fiscal intermediaries also submitted the
under section 1886(d)(13)(F) of the Act (If you choose to comment on issues revised data to CMS by mid-February
are not eligible for reclassification under in this section, please include the 2006. CMS published the proposed
sections 1886(d)(8) or (d)(10) of the Act, caption ‘‘Wage Index Data Corrections’’ wage index PUFs that included
or under section 508 of Pub. L. 108–173, at the beginning of your comment.) hospitals’ revised wage data on
unless they waive such out-migration In the FY 2005 IPPS final rule (68 FR February 24, 2006. Also, in a
adjustment. As announced in the FYs 27194), we revised the process and memorandum dated February 14, 2006,
2005 and 2006 final rules, hospitals timetable for application for we instructed fiscal intermediaries to
redesignated under section 1886(d)(8) of development of the wage index, notify all hospitals regarding the
the Act or reclassified under section beginning with the FY 2005 wage index. availability of the proposed wage index
1886(d)(10) of the Act or under section The preliminary and unaudited PUFs and the criteria and process for
508 of Pub. L. 108–173 will be deemed Worksheet S–3 wage data and requesting corrections and revisions to
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to have chosen to retain their occupational mix survey files for FY the wage index data. Hospitals had until
redesignation or reclassification, unless 2007 were made available on October 7, March 13, 2006, to submit requests to
they explicitly notify CMS that they 2005, through the Internet on the CMS the fiscal intermediaries for
elect to receive the out-migration Web site at: http://www.cms.hhs.gov/ reconsideration of adjustments made by
adjustment instead within 45 days from AcuteInpatientPPS. In a memorandum the fiscal intermediaries as a result of
the publication of this proposed rule. dated October 7, 2005, we instructed all the desk review, and to correct errors
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24089
due to CMS’s or the fiscal At this point in the process, that is, intermediary or CMS before the
intermediary’s mishandling of the wage after the release of the May 2006 wage development and publication of the
index data. Hospitals were also required index data file, changes to the hospital final FY 2007 wage index by August 1,
to submit sufficient documentation to wage data will only be made in those 2006, and the implementation of the FY
support their requests. very limited situations involving an 2007 wage index on October 1, 2006. If
After reviewing requested changes error by the fiscal intermediary or CMS hospitals avail themselves of the
submitted by hospitals, fiscal that the hospital could not have known opportunities afforded to provide and
intermediaries are to transmit any about before its review of the final wage make corrections to the wage data, the
additional revisions resulting from the index data file. Specifically, neither the wage index implemented on October 1
hospitals’ reconsideration requests by intermediary nor CMS will approve the should be accurate. Nevertheless, in the
April 14, 2006. The deadline for a following types of requests: event that errors are identified by
hospital to request CMS intervention in • Requests for wage data corrections hospitals and brought to our attention
cases where the hospital disagreed with that were submitted too late to be after June 12, 2006, we retain the right
the fiscal intermediary’s policy included in the data transmitted to CMS to make midyear changes to the wage
interpretations is April 21, 2006. by fiscal intermediaries on or before index under very limited circumstances.
Hospitals should also examine Table April 14, 2006. Specifically, in accordance with
2 in the Addendum to this proposed • Requests for correction of errors § 412.64(k)(1) of our existing
rule. Table 2 contains each hospital’s that were not, but could have been, regulations, we make midyear
adjusted average hourly wage used to identified during the hospital’s review corrections to the wage index for an area
construct the wage index values for the of the February 24, 2006 wage index only if a hospital can show that: (1) The
past 3 years, including the FY 2003 data data file. fiscal intermediary or CMS made an
used to construct the proposed FY 2007 • Requests to revisit factual error in tabulating its data; and (2) the
wage index. We note that the hospital determinations or policy interpretations requesting hospital could not have
average hourly wages shown in Table 2 made by the fiscal intermediary or CMS known about the error or did not have
only reflect changes made to a hospital’s during the wage index data correction an opportunity to correct the error,
data and transmitted to CMS by March process. before the beginning of the fiscal year.
1, 2006. Verified corrections to the wage index For purposes of this provision, ‘‘before
We will release a final wage data PUF received timely by CMS and the fiscal the beginning of the fiscal year’’ means
in early May 2006 to hospital intermediaries (that is, by June 12, 2006) by the June deadline for making
associations and the public on the will be incorporated into the final wage corrections to the wage data for the
Internet at http://www.cms.hhs.gov/ index to be published by August 1, following fiscal year’s wage index. This
AcuteInpatientPPS. The May 2006 PUF 2006, to be effective October 1, 2006. provision is not available to a hospital
will be made available solely for the We created the processes described seeking to revise another hospital’s data
limited purpose of identifying any above to resolve all substantive wage that may be affecting the requesting
potential errors made by CMS or the index data correction disputes before we hospital’s wage index for the labor
fiscal intermediary in the entry of the finalize the wage and occupational mix market area. As indicated earlier, since
final wage data that result from the data for the FY 2007 payment rates. CMS makes the wage data available to
correction process described above Accordingly, hospitals that do not meet a hospital on the CMS Web site prior to
(revisions submitted to CMS by the the procedural deadlines set forth above publishing both the proposed and final
fiscal intermediaries by April 14, 2006). will not be afforded a later opportunity IPPS rules, and the fiscal intermediaries
If, after reviewing the May 2006 final to submit wage index data corrections or notify hospitals directly of any wage
file, a hospital believes that its wage to dispute the fiscal intermediary’s data changes after completing their desk
data are incorrect due to a fiscal decision with respect to requested reviews, we do not expect that midyear
intermediary or CMS error in the entry changes. Specifically, our policy is that corrections would be necessary.
or tabulation of the final wage data, it hospitals that do not meet the However, under our current policy, if
should send a letter to both its fiscal procedural deadlines set forth above the correction of a data error changes
intermediary and CMS outlining why will not be permitted to challenge later, the wage index value for an area, the
the hospital believes an error exists and before the Provider Reimbursement revised wage index value will be
to provide all supporting information, Review Board, the failure of CMS to effective prospectively from the date the
including relevant dates (for example, make a requested data revision. (See W. correction is made.
when it first became aware of the error). A. Foote Memorial Hospital v. Shalala, In the FY 2006 IPPS final rule (70 FR
CMS and the fiscal intermediaries must No. 99–CV–75202–DT (E.D. Mich. 2001) 47385), we revised § 412.64(k)(2) to
receive these requests no later than June and Palisades General Hospital v. specify that, effective on October 1,
12, 2006. (We note that the June 12, Thompson, No. 99–1230 (D.D.C. 2003.) 2005, that is beginning with the FY 2006
2006 date is revised from the June 9, We refer the reader also to the FY 2000 wage index, a change to the wage index
2006 date originally specified in the final rule (64 FR 41513) for a discussion can be made retroactive to the beginning
October 7, 2005 letter to hospitals.) of the parameters for appealing to the of the Federal fiscal year only when: (1)
Requests mailed to CMS should be sent Provider Reimbursement Review Board The fiscal intermediary or CMS made an
to: Centers for Medicare & Medicaid for wage index data corrections. error in tabulating data used for the
Services, Center for Medicare Again, we believe the wage index data wage index calculation; (2) the hospital
Management, Attention: Wage Index correction process described above knew about the error and requested that
Team, Division of Acute Care, C4–08– provides hospitals with sufficient the fiscal intermediary and CMS correct
06, 7500 Security Boulevard, Baltimore, opportunity to bring errors in their wage the error using the established process
wwhite on PROD1PC61 with PROPOSALS2
MD 21244–1850. index data to the fiscal intermediaries’ and within the established schedule for
Each request also must be sent to the attention. Moreover, because hospitals requesting corrections to the wage data,
fiscal intermediary. The fiscal will have access to the final wage index before the beginning of the fiscal year
intermediary will review requests upon data by early May 2006, they have the for the applicable IPPS update (that is,
receipt and contact CMS immediately to opportunity to detect any data entry or by the June 12, 2006 deadline for the FY
discuss its findings. tabulation errors made by the fiscal 2007 wage index); and (3) CMS agreed
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24090 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
that the fiscal intermediary or CMS relative labor costs, which is referred to which labor-related share resulted in a
made an error in tabulating the as the wage index. higher payment.
hospital’s wage data and the wage index In its June 2001 Report to Congress, Section 404 further required us to
should be corrected. MedPAC recommended that the include in the final IPPS rule for FY
In those circumstances where a Secretary ‘‘should reevaluate current 2006 an explanation of the reasons for,
hospital requests a correction to its wage assumptions about the proportion of and options considered, in determining
data before CMS calculates the final providers’ costs that reflect resources the frequency for revising the weights
wage index (that is, by the June purchased in local and national used in the hospital market basket,
deadline), and CMS acknowledges that markets.’’ (Report to the Congress: including the labor-related share. In
the error in the hospital’s wage data was Medicare in Rural America, addition, we have continued our
caused by CMS’s or the fiscal Recommendation 4D, page 80.) MedPAC research into the assumptions employed
intermediary’s mishandling of the data, recommended that the labor-related in calculating the labor-related share.
we believe that the hospital should not share include the weights for wages and Our research involves analyzing the
be penalized by our delay in publishing salaries, fringe benefits, contract labor, compensation share separately for urban
or implementing the correction. As with and other labor-related costs for locally and rural hospitals, using regression
our current policy, we indicated that the purchased inputs only. MedPAC noted analysis to determine the proportion of
provision is not available to a hospital that this would likely result in a lower costs influenced by the area wage index,
seeking to revise another hospital’s data. labor-related share, which would and exploring alternative methodologies
In addition, the provision cannot be decrease the amount of the national base to determine whether all or only a
used to correct prior years’ wage data; payment amount adjusted by the wage portion of professional fees and
it can only be used for the current index. As a result, hospitals located in nonlabor intensive services should be
Federal fiscal year. In other situations, low-wage markets (those with a wage considered labor-related.
we continue to believe that it is index less than 1.0) would receive In the FY 2006 IPPS final rule (70 FR
appropriate to make prospective higher payments, while those located in 47392), we presented our analysis and
corrections to the wage index in those conclusions regarding the frequency and
high-wage labor markets would receive
circumstances where a hospital could methodology for updating the labor-
lower payments.
not have known about or did not have related share for FY 2006. We also
In our proposed and final rules recalculated a labor-related share of
the opportunity to correct the fiscal
updating the IPPS for FY 2003 (67 FR 69.731 percent, using the FY 2002-based
intermediary’s or CMS’s error before the
31447, May 9, 2002 and 67 FR 50041, PPS market basket for discharges
beginning of the fiscal year (that is, by
August 1, 2002), we discussed the occurring on or after October 1, 2005. In
the June deadline). We note that, as with
methodology that we have used to addition, we implemented this revised
prospective changes to the wage index,
determine the labor-related share. We and rebased labor-related share in a
the final retroactive correction will be
noted that, at that time, the results of budget neutral manner, but consistent
made irrespective of whether the change
employing that methodology suggested with section 1886(d)(3)(E) of the Act, we
increases or decreases a hospital’s
payment rate. In addition, we note that that an increase in the labor-related did not take into account the additional
the policy of retroactive adjustment will share (from 71.066 percent to 72.495 payments that would be made as a
still apply in those instances where a percent) was warranted. However, we result of hospitals with a wage index
judicial decision reverses a CMS denial decided not to propose such an increase less than or equal to 1.0 being paid
of a hospital’s wage data revision in the labor-related share until we using a labor-related share lower than
request. conducted further research to determine the labor-related share of hospitals with
whether a different methodology for a wage index greater than 1.0.
K. Labor-Related Share for the Wage determining the labor-related share The labor-related share is used to
Index for FY 2007 should be adopted. determine the proportion of the national
(If you choose to comment on issues Section 403 of Pub. L. 108–173 PPS base payment rate to which the area
in this section, please include the amended section 1886(d)(3)(E) of the wage index is applied. In this proposed
caption ‘‘Labor-Related Share’’ at the Act to provide that the Secretary must rule, we are not making any changes to
beginning of your comment.) employ 62 percent as the labor-related the national average proportion of
Section 1886(d)(3)(E) of the Act share unless this ‘‘would result in lower operating costs that are attributable to
directs the Secretary to adjust the payments to a hospital than would wages and salaries, fringe benefits,
proportion of the national prospective otherwise be made.’’ However, this professional fees, contract labor, and
payment system base payment rates that provision of Pub. L. 108–173 did not labor intensive services. Therefore, we
are attributable to wages and wage- change the legal requirement that the are continuing to use a labor-related
related costs by a factor that reflects the Secretary estimate ‘‘from time to time’’ share of 69.731 percent for discharges
relative differences in labor costs among the proportion of hospitals’ costs that occurring on or after October 1, 2006, as
geographic areas. It also directs the are ‘‘attributable to wages and wage- reflected in Tables 1A and 1B in the
Secretary to estimate from time to time related costs.’’ In fact, section 404 of Addendum to this proposed rule. We
the proportion of hospital costs that are Pub. L. 108–173 required the Secretary note that section 403 of Pub. L. 108–173
labor-related: ‘‘The Secretary shall to develop a frequency for revising the amended sections 1886(d)(3)(E) and
adjust the proportion (as estimated by weights used in the hospital market 1886(d)(9)(C)(iv) of the Act to provide
the Secretary from time to time) of basket, including the labor-related that the Secretary must employ 62
hospitals’ costs which are attributable to share, to reflect the most current data percent as the labor-related share unless
wages and wage-related costs of the more frequently than once every 5 years. this employment ‘‘would result in lower
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DRG prospective payment rates * * *’’ We believe that this reflected payments to a hospital than would
We refer to the portion of hospital costs Congressional intent that hospitals otherwise be made.’’
attributable to wages and wage-related receive payment based on either a 62- We also are continuing to use a labor-
costs as the labor-related share. The percent labor-related share, or the labor- related share for the Puerto Rico-specific
labor-related share of the prospective related share estimated from time to standardized amounts of 58.7 percent
payment rate is adjusted by an index of time by the Secretary, depending on for discharges occurring on or after
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24091
October 1, 2006. Consistent with our rule. We believe they continue to be the Medicine (IOM) of the National
methodology for determining the best measures of price changes for the Academy of Sciences under section
national labor-related share, we added cost categories. 238(b) of Public Law 108–173, effective
the Puerto Rico-specific relative weights Beginning April 2006 with the for payments beginning with FY 2007.
for wages and salaries, fringe benefits, publication of March 2006 data, the The IOM measures include the Hospital
contract labor, nonmedical professional BLS’ ECI will use a different Quality Alliance (HQA) measures, the
fees, and other labor-intensive services classification system, the North Hospital Consumer Assessment of
to determine the labor-related share. American Industrial Classification Healthcare Providers and Systems
Puerto Rico hospitals are paid based on System (NAICS), instead of the Standard (HCAHPS) patient perspective survey,
75 percent of the national standardized Industrial Codes (SIC), which will no and three structural measures. We
amounts and 25 percent of the Puerto longer exist. We have consistently used discuss the IOM report more fully in
Rico-specific standardized amounts. For the ECI as the data source for our wages section IV.B. of the preamble to this
Puerto Rico hospitals, the national and salaries and other price proxies in proposed rule.
labor-related share will always be 62 the IPPS market basket and are not New sections 1886(b)(3)(B)(viii)(V)
percent because the wage index for all making any changes to the usage at this and (VI) of the Act require that, effective
Puerto Rico hospitals is less than 1.0. A time. However, we are soliciting for payments beginning with FY 2008,
Puerto Rico-specific wage index is comments on our continued use of the we add other quality measures that
applied to the Puerto Rico-specific BLS ECI data in light of the BLS change reflect consensus among affected
portion of payments to the hospitals. in system usage to the NAICS-based ECI. parties, and provide the Secretary with
The labor-related share of a hospital’s the discretion to replace any quality
Puerto Rico-specific rate will be either IV. Other Decisions and Proposed measures or indicators in appropriate
62 percent or the Puerto Rico-specific Changes to the IPPS for Operating Costs cases, such as where all hospitals are
labor-related share depending on which and GME Costs effectively in compliance with a
results in higher payments to the A. Reporting of Hospital Quality Data measure, or the measures or indicators
hospital. If the hospital has a Puerto for Annual Hospital Payment Update have been subsequently shown to not
Rico-specific wage index of greater than (§ 412.64(d)(2)) represent the best clinical practice.
1.0, we will set the hospital’s rates using Thus, the Secretary has broad discretion
a labor-related share of 62 percent for (If you choose to comment on issues to replace measures on the basis that
the 25 percent portion of the hospital’s in this section, please include the they are not appropriate.
payment determined by the Puerto Rico caption ‘‘Hospital Quality Data’’ at the New section 1886(b)(3)(B)(viii)(VII) of
standardized amounts because this beginning of your comment.) the Act requires that we establish
amount will result in higher payments. 1. Background procedures for making quality data
Conversely, a hospital with a Puerto available to the public after ensuring
Rico-specific wage index of less than 1.0 Section 5001(a) of Public Law 109– that a hospital has the opportunity to
will be paid using the Puerto Rico- 171 (DRA of 2005) sets out new review, in advance, its data that are to
specific labor-related share of 58.7 requirements for the Reporting Hospital be made public. In addition, this section
percent of the Puerto Rico-specific rates Quality Data for Annual Payment requires that we report quality measures
because the lower labor-related share Update (RHQDAPU) program. The of process, structure, outcome, patients’
will result in higher payments. The RHQDAPU program was established to perspective on care, efficiency, and
Puerto Rico labor-related share of 58.7 implement section 501(b) of Public Law costs of care that relate to services
percent for FY 2007 is reflected in the 108–173 (MMA). It builds on our furnished in inpatient settings on the
Table 1C of the Addendum of this ongoing voluntary Hospital Quality CMS Web site.
proposed rule. Initiative which is intended to empower Like the provisions of section 501(b)
consumers with quality of care of Public Law 108–173, the provisions
L. Proxy for the Hospital Market Basket information to make more informed of section 5001(a) of Public Law 109–
(If you choose to comment on issues decisions about their health care while 171 do not apply to hospitals and
in this section, please include the also encouraging hospitals and hospital units excluded from the IPPS,
caption ‘‘Hospital Market Basket Proxy’’ clinicians to improve the quality of care. or to payments to hospitals under other
at the beginning of your comment.) Section 5001(a) of Public Law 109– prospective payment systems such as
In the FY 2006 IPPS final rule (70 FR 171 revises the mechanism used to the hospital outpatient PPS. New
47387), we changed the base year cost update the standardized amount for section 1886(b)(3)(B(viii)(I) of the Act
structure for the IPPS hospital index for payment for hospital inpatient operating also provides that any reduction will
the hospital market basket for operating costs. New sections 1886(b)(3)(B)(viii)(I) apply only with respect to the fiscal
costs from FY 1997 to FY 2002. As and (II) of the Act provide that the year involved, and will not be taken into
discussed in that final rule, the IPPS payment update for FY 2007 and each account for computing the applicable
hospital index primarily uses the BLS subsequent fiscal year will be reduced percentage increase for a subsequent
data as price proxies, which are grouped by 2.0 percentage points for any fiscal year.
in one of the three BLS categories. The ‘‘subsection (d) hospital’’ that does not Initially, section 1886(b)(3)(B)(vii) of
categories are Producer Price Indexes submit certain quality data in a form the Act provided for a reduction of 0.4
(PPIs), Consumer Price Indexes (CPIs), and manner, and at a time, specified by percentage points to the update
and Employment Cost Indexes (ECIs), the Secretary. percentage increase for each of FYs 2005
discussed in detail in the FY 2006 IPPS New sections 1886(b)(3)(B)(viii)(III) through 2007 for any ‘‘subsection (d)
final rule (70 FR 47388 through 47391). and (IV) of the Act require that we hospital’’ that did not submit data on
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We evaluate the price proxies using the expand the ‘‘starter set’’ of 10 quality the starter set of 10 quality measures
criteria of reliability, timeliness, measures that we have used since 2003. established by the Secretary of Health
availability, and relevance. The PPIs, In expanding these measures, we must and Human Services as of November 1,
CPIs, and ECIs selected by us and used begin to adopt the baseline set of 2003. Section 5001(a) of Public Law
for this proposed rule meet these criteria performance measures as set forth in a 109–171 limits the 0.4 percentage point
as described in the FY 2006 IPPS final 2005 report issued by the Institute of reduction to FY 2005 and FY 2006, and
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24092 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
establishes a 2.0 percentage point information on hospital quality of care checks required in the QIO Clinical
reduction for FY 2007 and subsequent for consumers who need to select a Warehouse. Hospitals that did not treat
fiscal years. hospital. It further serves to encourage a condition or that had very few
The starter set of 10 quality measures consumers to work with their doctors discharges were not penalized, and they
we established as of November 1, 2003 and hospitals to discuss the quality of received the full payment update if they
are: care they provide to patients, thereby submitted appropriate data on each of
providing an additional incentive to the 10 quality measures that they treated
Heart Attack (Acute Myocardial
improve the quality of that care. for patients who were discharged during
Infarction) This starter set of 10 quality measures the reporting periods.
• Was aspirin given to the patient has been endorsed by the NQF and is a
upon arrival to the hospital? subset of measures currently collected 2. New Procedures for Hospital
• Was aspirin prescribed when the for the JCAHO as part of its certification Reporting of Quality Data
patient was discharged? program. We chose these 10 quality We are proposing to amend our
• Was a beta-blocker given to the measures in order to collect data that regulations at § 412.64(d)(2) to reflect
patient upon arrival to the hospital? will: (1) Provide useful and valid the 2.0 percentage point reduction in
• Was a beta-blocker prescribed when information about hospital quality to the the payment update for FY 2007 and
the patient was discharged? public; (2) provide hospitals with a subsequent fiscal years for hospitals that
• Was an ACE inhibitor given for the sense of predictability about public do not comply with requirements for
patient with heart failure? reporting expectations; (3) begin to reporting quality data as provided for
standardize data and data collection under section 5001(a) of Public Law
Heart Failure (HF)
mechanisms; and (4) foster hospital 109–171. We are also revising the
• Did the patient get an assessment of quality improvement. Many hospitals RHQDAPU program’s procedures to
his or her heart function? have participated in the HQA, and are reflect our experience with this program
• Was an ACE inhibitor given to the continuing to submit data to the QIO and to implement section 5001(a) of
patient? Clinical Warehouse. Since the HQA Public Law 109–171, including the new
Pneumonia (PNE) released the starter set of 10 quality requirement for reporting of an
measures, it has continued to release expanded set of quality measures.
• Was an antibiotic given to the additional quality measures, and has In addition to publication in this
patient in a timely way? released 11 additional NQF-endorsed proposed rule, all revised procedures
• Had the patient received a quality measures to date. Many HQA- will be added to the ‘‘Reporting Hospital
pneumococcal vaccination? participating hospitals have been Quality Data for Annual Payment
• Was the patient’s oxygen level voluntarily reporting on these Update Reference Checklist’’ section of
assessed? additional quality measures, although the QualityNet Exchange Web site. This
We adopted these measures after the only the starter set of 10 quality checklist also contains all of the forms
Secretary of HHS initiated a partnership measures were subject to potential to be completed by hospitals
with several collaborators intended to reductions in hospitals’ annual payment participating in the program. In order to
promote hospital quality improvement update percentages under section 501(b) participate in the hospital reporting
and public reporting of hospital quality of Public Law 108–173. initiative, hospitals must follow these
information. These collaborators To implement section 501(b) of Public steps:
include the American Hospital Law 108–173, we created the • Identify a QualityNet Exchange
Association, the Federation of American RHQDAPU program. Originally, the Administrator who follows the
Hospitals, the Association of American program set out the form, manner, and registration process and submits the
Medical Colleges, the Joint Commission timeframes for hospitals to submit data information through the QIO. This must
on Accreditation of Healthcare regarding the starter set of 10 quality be done regardless of whether the
Organizations (JCAHO), the National measures. For the FY 2005 payment hospital uses a vendor for transmission
Quality Forum (NQF), the American update, we permitted hospitals to of data.
Medical Association, the Consumer- withdraw from the RHQDAPU program • Complete the revised ‘‘Reporting
Purchaser Disclosure Project, the at any time up to August 1, 2004. Hospital Quality Data for Annual
American Association of Retired Hospitals that withdrew from the Payment Update Notice of
Persons, the American Federation of program did not receive the full Participation’’ form. All hospitals must
Labor-Congress of Industrial payment update and, instead, received a send this form to their QIO, no later
Organizations, the Agency for reduction of 0.4 percentage points in than August 1, 2006. In addition, before
Healthcare Research and Quality, as their payment update. We did not participating hospitals initially begin
well as CMS, Quality Improvement establish a deadline for withdrawal for reporting data, they must register with
Organizations (QIOs), and others. the FY 2006 payment update. the QualityNet Exchange, regardless of
This collaboration, originally known For FY 2006, in order to receive a full the method used for submitting data.
as the National Voluntary Hospital payment update, hospitals were • Continue to collect data for all 10
Reporting Initiative, is now known as required to continuously submit to the ‘‘starter set’’ quality measures (or begin
the HQA. Hospital data are submitted QIO Clinical Warehouse abstracted data collecting such data, if newly
through the QualityNet Exchange secure regarding the starter set of 10 quality participating in the program), and
Web site (www.qnetexchange.org). This measures each calendar quarter submit the data to the QIO Clinical
Web site meets or exceeds all current according to the schedule found on the Warehouse either using the CMS
Health Insurance Portability and QualityNet Exchange Web site. New Abstraction & Reporting Tool (CART),
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Accountability Act requirements. Data participants were required to submit the JCAHO ORYX Core Measures
from this initiative were initially used to these data using the same schedule, Performance Measurement System, or
populate the Hospital Compare Web starting with the quarter they began another third-party vendor tool that has
site, www.hospitalcompare.hhs.gov. discharging patients. The data for each met the measurement specification
This Web site assists beneficiaries and quarter had to be submitted on time and requirements for data transmission to
the general public by providing pass all of the edits and consistency QualityNet Exchange. The QIO Clinical
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24093
Warehouse will submit the data to CMS • Thrombolytic agent received within ‘‘for payments beginning with fiscal
on behalf of the hospitals. The 30 minutes of hospital arrival year 2007, in expanding the number of
submission will be done through • Percutaneous Coronary Intervention measures, under subclause (III), the
QualityNet Exchange. Because the (PCI) received within 120 minutes of Secretary shall begin to adopt’’ the IOM
information in the QIO Clinical hospital arrival report’s set of baseline measures.
Warehouse is considered QIO • Adult smoking cessation advice/ Section 1886(b)(3)(B)(viii)(III) of the Act
information, it is subject to the stringent counseling states that we must expand, for FY 2007
QIO confidentiality regulations in 42 Heart Failure (HF) and each subsequent fiscal year, the set
CFR part 480. We are proposing that of measures that the Secretary
hospitals continue to submit data • Left ventricular function assessment determines to be ‘‘appropriate’’ for the
regarding the starter set of 10 quality • ACE inhibitor (ACE–I) or measurement of the quality of care
measures because the existing data Angiotensin Receptor Blocker (ARBs) furnished by hospitals in inpatient
submission schedule that we will use for left ventricular systolic dysfunction settings beyond the original quality
for the FY 2007 update relies on • Discharge instructions measures that applied in FY 2005 and
discharges that occurred in calendar • Adult smoking cessation advice/ FY 2006.
year (CY) 2005. Because the first three counseling We believe that the statute gives the
quarters of CY 2005 data already have Pneumonia (PNE) Secretary the discretion to choose what
been submitted, we are not proposing to ‘‘begin to adopt’’ should involve in FY
require hospitals to submit any • Initial antibiotic received within 4
2007 and the number of additional
additional CY 2005 data to address the hours of hospital arrival
measures, if any, that would be
• Oxygenation assessment
new quality measures in the anticipated ‘‘appropriate’’ during that time. In
• Pneumococcal vaccination status
expanded 21 quality measures proposing our revised procedures,
• Blood culture performed before first
discussed below. However, we again designing the methods that hospitals
antibiotic received in hospital
note that many hospitals have been will use to report during FY 2007,
• Adult smoking cessation advice/
providing data on these additional establishing an anticipated set of
counseling
measures since they were first included • Appropriate initial antibiotic expanded measures based on the IOM
in the HQA set, although these measures selection report, and revising RHQDAPU
did not affect hospitals’ annual payment • Influenza vaccination (collected materials, we believe that we have met
adjustment under the RHQDAPU but not publicly reported—subject to the statutory requirements. We will
program implementing section 501(b) of change) continue to explore the feasibility of
Public Law 108–173. adopting additional measures for
• For the FY 2007 update, hospitals Surgical Infection Prevention (SIP) purpose of the FY 2008 update,
also will be required to complete and • Prophylactic antibiotic received including the HCAHPS and structure
return a written form on which they within 1 hour prior to surgical incision measures described in the IOM report
pledge to submit data on the following • Prophylactic antibiotics and other measures that reflect
set of expanded quality measures discontinued within 24 hours after consensus among affected parties, as
(anticipated 21 clinical quality surgery end time required by new section
measures), starting with discharges that Further, as recommended in the IOM 1886(b)(3)(B)(viii)(III) through (V) of the
occur in CY 2006. These expanded report, we will be implementing the Act.
quality measures are the HQA-released HCAHPS patient survey in October For the FY 2007 update, we specify
measures that the 2005 IOM report 2006, to measure patients’ perspectives that hospitals must submit these
recommended we use as expanded of care. HCAHPS is designed to make complete data in accordance with the
‘‘starter’’ measures. As discussed above, ‘‘apples to apples’’ comparisons of joint CMS/JCAHO sampling
new section 1886(b)(3)(B)(viii)(IV) of the patients’ perspectives on hospital care requirements located on the QualityNet
Act requires us to begin to adopt the including communications with Exchange Web site. These requirements
baseline set of performance measures set doctors, communications with nurses, specify that hospitals are required to
forth in the 2005 IOM report effective responsiveness of hospital staff, submit a random sample or complete
for payments beginning with FY 2007. cleanliness and quietness of the population of cases for each of three
Hospitals will be required to submit hospital, pain control, communication topics (acute myocardial infarction,
data on the expanded measures to the about medicines, and discharge heart failure, and pneumonia) covered
QIO Clinical Warehouse beginning with information. More information on this by the starter set of 10 quality measures.
discharges that occur in the first survey can be found on our Web site: These requirements include all
calendar quarter of 2006 (January www.cms.hhs.gov/HospitalQualityInits/ Medicare and non-Medicare patients
through March discharges). The downloads/HospitalHCAHPSFactSheet discharged from hospitals. Hospitals are
deadline for hospitals to submit their 200512.pdf. We intend to report the first expected to continuously meet these
data for first quarter 2006 is August 15, three quarters of these survey data in sampling requirements for the starter set
2006. late 2007 on the Web site: of 10 quality measures for discharges in
The expanded measures are: www.hospitalcompare.hhs.gov. each quarter.
Heart Attack (Acute Myocardial HCAHPS was endorsed by the NQF in We do not anticipate significant
Infarction) May 2005. However, at this time, we do additional burden on hospitals
not anticipate including HCAHPS as a regarding the starter set of 10 quality
• Aspirin at arrival part of the revised FY 2007 ‘‘Reporting measures or the anticipated 21 clinical
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• Aspirin prescribed at discharge Hospital Quality Data for Annual quality measures because all JCAHO-
• ACE inhibitor (ACE–I) or Payment Update Notice of accredited hospitals are currently
Angiotensin Receptor Blocker (ARBs) Participation’’ form. We believe that our required to adhere to these sampling
for left ventricular systolic dysfunction proposed procedure will meet the requirements in acute myocardial
• Beta blocker at arrival requirement of section infarction, heart failure, pneumonia,
• Beta blocker prescribed at discharge 1886(b)(3)(B)(viii)(IV) of the Act that, and surgical infection prevention for
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24094 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
accreditation and core measure treated as a stratum for variance five charts pulled each quarter and for
reporting purposes. estimation purposes. the entire year around the overall
For the FY 2007 update, hospitals We use a two-step process to hospital mean score (on all individual
may withdraw from the revised determine if a hospital is submitting data elements compared). The closer
RHQDAPU program at any time up to valid data. In the first step, we calculate each case’s reliability score is to the
August 1, 2006. If a hospital withdraws the percent agreement for all of the hospital mean score, the tighter the
from the program, it will receive a 2.0 variables submitted in all of the charts. confidence interval established for that
percentage point reduction in its If a hospital falls below the 80-percent hospital. A hospital may code each
payment update. cutoff, we restrict the comparison to chart equally inaccurately, achieve a
For the FY 2007 update, we will those variables associated with the tight confidence interval, and not pass,
continue to require that hospitals meet starter set of 10 quality measures. We even though its overall score is just
the chart validation requirements that recalculate the percent agreement and below the passing threshold (75 percent,
we implemented in the FY 2006 IPPS the estimated 95-percent confidence for example). A hospital with more
final rule. There were no chart-audit interval and again compare to the 80- variation among charts will achieve a
validation criteria in place for FY 2005. percent cutoff point. If a hospital passes broader confidence interval, which may
Based upon our experience with the FY under this restricted set of variables, the allow it to pass, even though some
2005 submissions and our requirement hospital is considered to be submitting charts score very low and others score
for reliable and valid data, in the FY valid data for purposes of the revised very high.
2006 IPPS final rule, we established RHQDAPU program. We believe we have adopted the most
additional requirements for the data that Under the standard appeal process, all suitable statistical tests for the hospital
hospitals were required to submit in hospitals are given the detailed results data we are trying to validate. We are
order to receive the full FY 2006 of the Clinical Data Abstraction Center particularly interested in comments
payment update (70 FR 47421 and (CDAC) reabstraction along with their from hospitals on this passing
estimated percent reliability and the threshold, the confidence interval, and
47422). These requirements, as well as
upper bound of the 95-percent the sampling approach. Based on
additional information on validation
confidence interval. If a hospital does analytical results from FY 2006, we
requirements, will continue and are
not meet the required 80-percent found confidence intervals using only
being placed on the QualityNet
threshold, the hospital has 10 working five charts widely varied in size. As a
Exchange Web site.
days to appeal these results to their QIO. result of these findings, we decided to
For the FY 2007 payment update, The QIO will review the appeal with the combine multiple quarters of validation
hospitals must pass our validation hospital and make a final determination samples into a single stratified sample
requirement of a minimum of 80 percent on the appeal. The QIO receives from to shrink and/or decrease the variation
reliability, based upon our chart-audit the hospital the element or elements and produce a more reliable estimate of
validation process, for the first three that are to be evaluated during the abstraction reliability to determine if
quarters of data from CY 2005. These appeal process, along with the hospital’s any changes in our methodology are
data were due to the QIO Clinical rationale for the difference between the required. We will make any necessary
Warehouse by July 15, 2005 (first hospital’s abstraction and the CDAC revisions to the sampling methodology
quarter CY 2005 discharges), November abstraction. In this validation appeal and the statistical approach through
15, 2005 (second quarter CY 2005 process, the QIO reviews the appeal manual issuances and other guidance to
discharges), and February 15, 2006 using the medical record to evaluate the hospitals.
(third quarter CY 2005 discharges). data elements that are being appealed. The CMS Quality Improvement Group
We use confidence intervals to This process allows for an independent will continue to study methods for
determine if a hospital has achieved an review and is designed to find coding improving the validation process for
80-percent reliability aggregated over errors on the part of abstractors. QIO hospital submission in regard to
the three quarters. The use of appeal decisions are based on the data completeness and adherence to
confidence intervals allows us to that the hospital submitted to the QIO sampling requirements. Current
establish an appropriate range below the Clinical Warehouse. The QIO has 20 validation sampling assesses abstraction
80-percent reliability threshold that calendar days to make a final decision. accuracy, but submission completeness
demonstrates a sufficient level of The QIO can either uphold or reverse and adherence to sampling
validity to allow the data to still be the CDAC validation decision. If the requirements are critical prerequisites to
considered valid. QIO does not agree with the hospital’s produce accurate hospital quality
We estimate the percent reliability appeal, the original results stand. measures.
based upon a review of five charts, and However, if the QIO agrees with the For the FY 2007 update, we plan to
then calculate the upper 95-percent hospital, new validation results are revise and post up-to-date confidence
confidence limit for that estimate. If this calculated and provided to the hospital interval information on the QualityNet
upper limit is above the required 80- through the usual processes. This Exchange Web site explaining the
percent reliability, the hospital data are validation appeal process is described application of the confidence interval to
considered validated. We are using the in detail at the QualityNet Exchange the overall validation results. The data
design-specific estimate of the variance Web site. are being validated at several levels.
for the confidence interval calculation, In reviewing the hospital data, we There are consistency and internal edit
which, in this case, is a stratified single plan to combine the samples for first checks to ensure the integrity of the
stage cluster sample, with unequal quarter, second quarter, and third submitted data; there are external edit
cluster sizes. (For reference, see quarter (15 cases) into a single stratified checks to verify expectations about the
wwhite on PROD1PC61 with PROPOSALS2
Cochran, William G.: Sampling sample to determine whether the 80- volume of the data received.
Techniques, John Wiley & Sons, New percent reliability level is met. This We are proposing that hospitals attest
York, chapter 3, section 3.12 (1977); and gives us the greatest accuracy when to the completeness and accuracy of the
Kish, Leslie: Survey Sampling, John estimating the reliability level. The data submitted to the QIO Clinical
Wiley & Sons, New York, chapter 3, confidence interval approach accounts Warehouse in order to improve aspects
section 3.3 (1964).) Each quarter is for the variation in coding among the of the validation checks. In order to
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24095
meet this requirement, for each quarter, such as a written request for efficiency of care delivered to Medicare
hospitals will have to sign off on the reconsideration specifically stating all beneficiaries. Currently, there are
volume of the data submitted. We plan reasons and factors, including specific several different fee-for-service payment
to provide additional information to data elements, why the hospital believes systems under Medicare that are used to
explain the data completeness it did meet the RHQDAPU program pay health professionals and other
requirement and as well as a form to be requirements; providers based on the number and
completed on the QualityNet Exchange • Specific CMS components that complexity of services provided to
Web site. would participate in the reconsideration patients. In general, all providers to
We will continue to display quality process; and which a specific Medicare payment
information for public viewing as • The timeframe, such as 60 days, for system applies receive the same amount
required by new section CMS to provide its reconsideration for a service, regardless of its quality or
1886(b)(3)(B)(viii)(VII) of the Act. Before decision to the hospital. efficiency. As a result, Medicare’s
we display this information, hospitals We are also soliciting comments on
payment systems can direct more
will be permitted to review their the reasons for not establishing such a
resources to hospitals that deliver care
information as we have it recorded. reconsideration process.
For hospitals that CMS has that is not of the highest quality or
determined do not meet the RHQDAPU 3. Electronic Medical Records include unnecessary services (for
program requirements for the applicable In the FY 2006 IPPS final rule, we example, duplicative tests and services
fiscal year who wish to appeal this encouraged hospitals to take steps or services to treat avoidable
determination, the appeals process set toward the adoption of electronic complications). Therefore, we are
forth in 42 CFR Part 405, Subpart R (a medical records (EMRs) that will allow examining the concept of ‘‘value-based
Provider Reimbursement Review Board for reporting of clinical quality data purchasing,’’ which may use a range of
(PRRB) appeal) applies. However, we from the EMRs directly to a CMS data incentives to achieve identified quality
believe it may be appropriate to repository (70 FR 47420). We intend to and efficiency goals, as a means of
establish a structured reconsideration begin working toward creating measures promoting better quality of care and
process to precede the PRRB appeal. specifications and a system or more effective resource use in the
Currently, hospitals submit letters mechanism, or both, that will accept the Medicare payment systems. In
detailing their reasons for requesting data directly without requiring the considering the concept of value-based
that CMS reconsider its decision that transfer of the raw data into an XML file purchasing, we are working closely with
the hospital did not meet the RHQDAPU as is currently done. The Department stakeholder partners, including health
program requirements. We are continues to work cooperatively with professionals and providers. In this
proposing to continue this process for other Federal agencies in the proposed rule, we are seeking public
FY 2007 RHQDAPU program decisions. development of Federal health comment on value-based purchasing as
However, we are proposing to establish architecture data standards. We related specifically to hospitals.
a deadline of November 1, 2006, for encourage hospitals that are developing In this section, we discuss CMS’ and
hospitals to make such requests related systems to conform them to both Congress’ initial steps toward hospital
to the FY 2007 RHQDAPU decisions, industry standards and, when value-based purchasing, which include
which will give hospitals a minimum of developed, the Federal Health the Premier Hospital Quality Incentive
30 days to submit reconsideration Architecture Data standards, and to Demonstration, the RHQDAPU program
requests from the dates that the ensure that the data necessary for authorized by section 501(b) of Public
decisions are made public. Further, we quality measures are captured. Ideally, Law 108–173 (MMA), and the extended
are proposing that the November 1, 2006 such systems will also provide point-of- and expanded RHQDAPU program
deadline also would apply to FY 2005 care decision support that enables high authorized by section 5001(a) of Public
and FY 2006 RHQDAPU program levels of performance on the measures. Law 109–171 (DRA). (The RHQDAPU
decisions and that a November 1 Hospitals using EMRs to produce data program is also discussed in section
deadline would apply in all future fiscal on quality measures will be held to the IV.A. of the preamble to this proposed
years. CMS will officially respond to the same performance expectations as rule.) In addition, we discuss the issues
letters submitted by hospitals. hospitals not using EMRs. that must be considered in developing
Further, we are seeking public Due to the low volume of comments
a plan to implement a value-based
comment specifically on the need for a we received on this issue in response to
purchasing plan beginning with FY
more structured reconsideration process the FY 2006 IPPS rule, in this proposed
2009 for Medicare payments for
to precede any PRRB appeal for FY 2008 rule for FY 2007, we again are inviting
subsection (d) hospitals. This plan is
and subsequent fiscal years. We also are comments on these requirements and
required by section 5001(b) of the DRA.
seeking comment on what such a options. In section IV.B.6. of the
For each of the required planning issues
process would entail. For example, we preamble to this proposed rule, we are
(measures, data infrastructure, payment
would expect that such a process, if also inviting comments on the potential
established, would include— methodology, and public reporting), we
role of effective, interoperable, health
• A limited time, such as 30 days discuss CMS’ activities to date and
information on technology in value-
from the public release of the decision, based purchasing. solicit comments on outstanding policy
for requesting a reconsideration; questions. Next, we discuss options for
• Who in a hospital organization can B. Value-Based Purchasing implementation of section 5001(c) of
request such a reconsideration and be (If you choose to comment on issues Public Law 109–171, which authorizes
notified of its outcome; in this section, please include the quality adjustment to DRG payments for
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• The specific factors that CMS will caption ‘‘Value-Based Purchasing’’ at certain conditions that were not present
consider in such a reconsideration, such the beginning of your comment.) on hospital admission. We are soliciting
as an inability to submit data timely due input about detailed design
to CMS systems failures; 1. Introduction considerations related to each of these
• Specific requirements for CMS has undertaken a number of issues and the advantages and
submitting a reconsideration request, activities to improve the quality and disadvantages of possible approaches to
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24096 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
planning and implementing hospital demonstration indicates that quality is b. Section 5001(a) of Public Law 109–
value-based purchasing. continuing to improve, particularly for 171 (DRA)
Finally, we discuss and invite the poorest performing hospitals. As discussed in section IV.A. of this
comments on how to encourage Additional information on the Premier preamble, for FY 2007 and each
hospitals to effectively use health Hospital Quality Incentive subsequent year, section 5001(a) of
information technology to improve Demonstration is available on the CMS Public Law 109–171 amended section
efficiency, processes, and health care Web site at: 1886(b)(3)(B) of the Act and made
outcomes, through, for example, http://www.cms.hhs.gov/ changes to the program established
adopting interoperable health HospitalQualityInits/ under section 501(b) of Public Law 108–
information technology. 35_HospitalPremier.asp. 173. These changes require us to expand
2. Premier Hospital Quality Incentive the number of measures for which data
3. RHQDAPU Program
Demonstration must be submitted, and to change the
One of the ways in which CMS is We believe that the acts of collecting percentage point reduction in the
testing innovative potential approaches and submitting performance data and of annual payment update from 0.4
to improving quality is through publicly reporting comparative percentage points to 2.0 percentage
demonstrations and pilot projects. The information about hospital performance points for subsection (d) hospitals that
demonstration most relevant to seems to be a strong incentive to do not report the required quality
encourage hospital accountability. measures in a form and manner, and at
hospitals is the Premier Hospital
Measurement and reporting can help a time, specified by the Secretary.
Quality Incentive Demonstration.
Effective for payments beginning with
Premier, Inc., a nationwide alliance of focus the attention of hospitals and
FY 2007, new section
not-for-profit hospitals, submitted an consumers on specific goals and on
1886(b)(3)(B)(viii)(IV) of the Act
unsolicited proposal for consideration hospitals’ performance relative to those
requires the Secretary to begin to adopt
by CMS.13 We have partnered with goals. the expanded set of performance
Premier to conduct a demonstration that
a. Section 501(b) of Public Law 108–173 measures set forth in the IOM’s 2005
is designed to test whether the quality
(MMA) report entitled, ‘‘Performance
of inpatient care for Medicare
Measurement: Accelerating
beneficiaries improves when financial Since 2003, we have operated the Improvement.’’ 15 Those measures
incentives are provided. Under the Hospital Quality Initiative,14 which is include the HQA measures, the
demonstration, about 270 hospitals are designed to stimulate improvements in HCAHPS patient perspective survey,
voluntarily providing data on 34 quality and three structural measures.16
hospital care by standardizing hospital
measures related to 5 clinical Effective for payments beginning with
performance measures and data
conditions: Heart attack, heart failure, FY 2008, the Secretary must add other
transmission to ensure that all payers,
pneumonia, coronary artery bypass measures that reflect consensus among
hospitals, and oversight and accrediting
graft, and hip and knee replacements. affected parties and may replace
Using the quality measures, CMS entities use the same measures when
publicly reporting on hospital existing measures as appropriate. New
identifies hospitals with the highest section 1886(b)(3)(B)(viii)(VII) of the Act
quality performance in each of the five performance. Section 501(b) of Public
Law 108–173 authorized us to link the requires the Secretary to post hospital
clinical areas. Hospitals scoring in the quality data on these measures on the
top 10 percent in each clinical area collection of data for an initial starter set
of 10 quality measures to the Medicare CMS Web site. Additional information
receive a 2-percent bonus payment in on the Hospital Quality Initiative is
addition to the regular Medicare DRG annual update of the standardized
payment amount for hospital inpatient available on the CMS Web site at: http://
payment for the measured condition. www.cms.hhs.gov/HospitalQualityInits.
Hospitals in the second highest 10 operating costs (also known as the
percent receive a 1-percent bonus RHQDAPU program). For FYs 2005 and 4. Plan for Implementing Hospital
payment. In the third year of the 2006, hospitals that met the RHQDAPU Value-Based Purchasing Beginning with
demonstration, hospitals that do not program’s requirements received the full FY 2009
achieve absolute improvements above annual payment update to their Section 5001(b) of Public Law 109–
the demonstration’s first year composite inpatient operating costs, while 171 requires us to develop a plan to
score baseline (the lowest 20 percent) hospitals that did not comply received implement hospital value-based
for that condition will have their DRG an update that was reduced by 0.4 purchasing beginning with FY 2009.
payments reduced by 1 or 2 percent, percentage points. For FY 2005, The plan must consider the following
depending on how far their performance virtually every hospital in the country issues: (a) The ongoing development,
is below the baseline. that was eligible to participate selection, and modification process for
Following the first year of the submitted data (98.3 percent), and measures of quality and efficiency in
demonstration (FY 2004), CMS awarded approximately 96 percent of all hospital inpatient settings; (b) the
a total of $8.85 million to participating participating hospitals met the reporting, collection, and validation of
hospitals in the top two deciles for each requirements to receive the full update. quality data; (c) the structure of
clinical area. In the aggregate, quality of The data regarding the starter set of 10 payment adjustments, including the
care improved in all five clinical areas quality measures as well as additional, determination of thresholds of
that were measured. Preliminary voluntarily-reported data on other improvements in quality that would
information from the second year of the quality measures, are available to the
public through the Hospital Compare
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certain types of demonstration projects that waive 14 For more information about CMS’ Hospital Computerized provider order entry; (2) intensive
compliance with the regular payment methods used Quality Initiative, see http://www.cms.hhs.gov/ care intensivists; and (3) evidence-based hospital
in the Medicare program. HospitalQualityInits/. referrals.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24097
substantiate a payment adjustment, the areas of care being measured should be performance. In section IV.A. of the
size of such payments, and the sources those needing improvement. preamble to this proposed rule, we list
of funding for the payments; and (d) the The IOM’s December 2005 report, these measures and propose to require
disclosure of information on hospital ‘‘Performance Measurement: hospital reporting on these measures
performance. Section 5001(b) of Public Accelerating Improvement’’ (previously under an expanded version of the
Law 109–171 also calls for us to consult cited under footnote #15) recommended RHQDAPU program authorized by
with affected parties and to consider that measure sets should build on the section 5001(a) of Pub. L. 109–171.
relevant demonstrations in developing work of key public- and private-sector These measures are discussed in more
the plan. Each of these issues (measure organizations; that national performance detail on the CMS Web site at: http://
development and refinement, data measures that have been approved www.cms.hhs.gov/HospitalQualityInits/
infrastructure, incentives, and public through ongoing consensus processes downloads/
reporting) is discussed below, along led by major stakeholder groups are an HospitalHQA2004_2007200512.pdf.
with our activities to date and appropriate starting point; that the An additional two outcome measures
outstanding policy questions. We are limited scope of current measures of 30-day mortality for heart attack and
seeking comments on these issue areas should be broadened to address heart failure have been endorsed by the
and outstanding policy questions. efficiency, equity, and patient- NQF for public reporting. Further, in
centeredness; that quality, costs, and October 2006, we will be implementing
a. Measure Development and outcomes of care should be measured the HCAHPS survey of inpatient
Refinement over longer time intervals; and that perceptions of their hospital care
measures be applicable to more than experiences, with the intention that an
As we explore the potential one setting so that providers can share aggregate HCAHPS measure will
connections between performance accountability for a patient’s care (pp. become a publicly reported performance
measurement and incentives, we would 8–11). measure. HCAHPS was endorsed by
like to better understand how to develop The plan for hospital value-based the NQF in May 2005. Beyond these, we
valid, meaningful, current performance purchasing mandated by Pub. L. 109– could also consider including measures
measures that are aligned with other 171 must address the ongoing from the Surgical Care Improvement
hospital measurement activities, and an development, selection, and Project, measures relating to a hospital’s
enterprise for development, validation, modification process for measures of use of information technology that
consensus building, and maintenance of quality and efficiency in hospital result in improved patient outcomes,
these measures. In addition, before inpatient settings. We have worked implementation of data standards, and
measures could be used to compare the collaboratively in defining consistent, preventable readmissions as quality
relative quality or cost of care provided meaningful performance measures for reporting measures under the
by hospitals, we believe that the hospitals and other providers for a RHQDAPU program or the hospital
information would need to be number of years. The efforts of CMS and value-based purchasing program.
appropriately adjusted to account for its stakeholder partners to develop
standardized performance measures b. Data Infrastructure
relevant differences among hospitals
and among their patients. The increase the likelihood that the Implementing measures on which to
availability of appropriate measures on measures will be valid, reliable, and base a value-based purchasing system
which consensus might be achieved widely accepted as viable indicators of would require an infrastructure that
depends on the state of the art of performance. Standardized measures could collect appropriate information
research on measure development. also reduce the burden for hospitals that from hospitals, store and aggregate it as
would otherwise have to report different necessary, and prepare it for use in
We believe that it is desirable for determining appropriate incentives.
measures to multiple entities, such as
performance measures to be based on Hospitals would likely need to be able
accrediting bodies and State agencies.
appropriate evidence, effectively related to generate appropriate data as input for
CMS and the HQA (which includes
to desired outcomes, derived in a representatives from consumers, calculation of the measures. For some
transparent fashion involving hospitals, health professionals, measures, data that hospitals already
consultation with experts and affected purchasers, and accreditation submit with claims for payment or for
hospitals, and routinely updated. organizations) collectively selected a some other administrative purpose may
MedPAC’s 2005 Report to Congress 17 starter set of 10 consensus-derived be sufficient. For other measures,
stated that measures should be quality measures for public reporting, hospitals might need to provide
evidence-based; that collecting and which was incorporated into the information regarding their structure
analyzing data should not be unduly RHQDAPU program authorized by and resources or about the specifics of
burdensome for the provider or for section 501(b) of Pub. L. 108–173. (See medical care provided to patients or the
CMS; that risk adjustment should be section IV.A. of this preamble for a outcomes of that care. For that
sufficient to deter providers from detailed discussion of the RHQDAPU information, hospitals may need special
avoiding patients who might lower program.) The measures were endorsed software to assist with data collection
performance scores; that most providers by the NQF, a nonprofit voluntary and secure channels by which they can
should be able to improve on the organization that represents a broad transmit data. We are interested in
measures; that measures should apply to range of health care stakeholders and receiving comments on how to develop
a broad range of care and providers; that endorses consensus-based national an infrastructure that would facilitate
measures should capture aspects of care performance standards. CMS has also the efficient transmission and storage of
that are under the control of the worked with the JCAHO to align data, and especially, as discussed in
wwhite on PROD1PC61 with PROPOSALS2
providers being measured; and that hospital performance measures that we sections IV.A.3. and IV.B.6. of the
share in common, thereby reducing preamble to this proposed rule, in
17 Medicare Payment Advisory Commission:
hospitals’ reporting burden. comments on how electronic medical
Report to Congress: Medicare Payment Policy,
March 2005, pp. 186–187, available at: http://www.
In April and September 2005, CMS and health record systems could help
medpac.gov/publications/generic_report_ and the HQA identified additional NQF- improve care and be integrated into or
display.cfm?report_type_id=1&sid=2&subid=0. endorsed measures of hospital facilitate the data collection process.
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24098 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
Implementation would require evidenced by the consistency between a the sample size per reporting period, the
communication channels and data hospital’s abstraction and reabstraction process of validating each month the
warehouses with sufficient capacity and by an independent party. same number of records that are
flexibility to acquire and store data from We are currently using a contractor, currently validated each quarter would
hospitals. We are considering how we the CDAC, to carry out the validation increase costs significantly. On the other
might validate the submitted data, process under the RHQDAPU program. hand, if we reduced the sample size per
determine incentives based on that data, Hospitals are required to submit certain reporting period, the monthly numbers
and transmit these values to Medicare’s quality data to the QIO Clinical might be too small to provide for
fiscal intermediaries. The potential Warehouse within 4.5 months of the adequate validation. Second, we could
infrastructure would need to be end of each quarterly reporting period. shorten the data submission period,
extremely secure and afford the most The steps in the validation process are: which is a significant source of lag time.
privacy protection permitted by law. It (1) Check for duplicates; (2) draw a This option would require hospitals to
would also need to minimize the burden sample; (3) obtain copies of medical submit information to the data
of data collection and transmission on records; (4) request and complete CDAC warehouse more quickly, which could
providers. It would need to be accurate, abstraction; (5) post results on increase the possibility that hospitals
efficient, and cost-effective for CMS to QualityNet Exchange for hospitals’ would submit less complete data. In
administer. review; and (6) resolve validation addition, this option would require
The plan for hospital value-based appeals. We are seeking comments on coordination with JCAHO to keep
purchasing mandated by Pub. L. 109– how the data submission and validation submission timelines congruent, which
171 must address the reporting, processes that we currently use for the reduces hospitals’ reporting burden.
collection, and validation of quality RHQDAPU program might be adaptable Third, we could eliminate the validation
data. Over the past few years, we have to a hospital value-based purchasing appeals process, which would reduce
developed a data collection and program. the lag time by up to 2 months. Fourth,
reporting infrastructure for the One of the key challenges we face in we could create an expanded role for
RHQDAPU program that can transmit considering implementation of hospital the third party vendors that assist
performance measurement data via value-based purchasing is minimizing hospitals with submitting quality data to
secure channels for its submission, the length of time between our receipt CMS and JCAHO. For example, CMS
storage, analysis, validation and of data and our ability to provide could certify third party vendors to also
reporting. Specifically, to facilitate data feedback to hospitals on the data. Some provide standardized validation services
collection, we have developed the of the hospitals that are participating in and quick performance feedback to their
CART software to assist hospitals in the the RHQDAPU program and the Premier hospital customers.
collection of clinical and administrative Hospital Quality Incentive
data used to measure performance Demonstration have asked for more c. Incentive Methodology
improvement. CART, which is provided timely feedback on their performance. While measurement of the quality of
to hospitals free of charge, is a powerful We recognize that a long delay between care and of resources use may be
application that hospitals and their the provision of services and feedback advantageous in itself, we are
designees can use to abstract clinical about the quality of those services may considering whether and what kind of
data needed for performance impede both improvement efforts and a incentives can further improve
measurement from medical records. hospital’s motivation to improve. The outcomes. The potential design of
This tool was designed and developed current lag time between the end of the incentives in a value-based purchasing
by CMS with input from the JCAHO and quarterly reporting period and the system presents many choices. The
the Medicare QIOs. We have also availability of performance feedback implementation plan for hospital value-
developed the QualityNet Exchange under the RHQDAPU program is based purchasing mandated by Pub. L.
system for secure transmission of data to approximately 9 months. Hospitals have 109–171 must address the structure of
the QIO Clinical Warehouse. 4.5 months to complete their paper payment adjustments, including the
QNetExchange.org is the CMS-approved medical records and to submit determination of thresholds of
Web site for secure communications and information to the QIO Clinical improvements in quality that would
data exchange between two or more of Warehouse, which roughly coincides substantiate a payment adjustment, the
the following: Hospitals, performance with JCAHO’s timeline for submission size of such payments, and the sources
measurement system vendors, end stage of data to their ORYX Core Measure of funding for the value-based
renal disease networks and facilities, Performance Measurement System. payments. We are interested in
QIOs, and CMS. Another 4.5 months are required to comments on the merits of and
For data warehousing, we have a accomplish the steps in the validation alternatives to all of the approaches to
claims warehouse for Medicare Part A process. the design of a value-based purchasing
data, which maintains the claims for the We are considering options to methodology that are discussed below.
most recent 42 months. We also have a decrease the overall length of time
QIO Clinical Warehouse that currently between our receipt of data and our (1) How Should Incentives Be
contains information on the starter set of ability to provide feedback to hospitals, Structured?
10 quality measures collected under the and we are interested in comments on A number of options exist for the
RHQDAPU program, as well as these options. First, we are considering structure of potential incentives. The
additional voluntarily reported whether more frequent data incentive methodology could include
measures. We must assess the validity of submissions, such as monthly differential incentives depending on
the RHQDAPU information because of submissions, would decrease the time whether hospitals exceed a particular
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its use for quality improvement, public between the provision of services and standard of performance. To reflect
reporting, and determining hospitals’ feedback about the quality of those expectations of continued improvement
annual payment updates under the services. We are aware that some among hospitals, the standard could be
RHQDAPU program. Validation hospitals and their vendors already raised in predictable steps over time.
activities assess the reliability of the submit quality data on a monthly basis Alternatively, incentives could be
data that a hospital has submitted, as to JCAHO. However, unless we reduced structured to reward hospitals that
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24099
improve from a baseline level of (4) What Should The Form Of missing data, and sensitivity to case
performance. These approaches could Incentives Be? volumes. For example, a hospital that
be combined to develop an incentive Potential approaches for incentives has few or no cases for a particular
methodology that includes both include making an add-on payment to dimension of care could receive a low
attaining benchmarks and improving the base payment for individual score, yet that measure is equally
care. inpatient hospital services or providing weighted with others in the composite.
(2) What Level of Incentive Is Needed? periodic, lump-sum payments on a Under the opportunity model, a
monthly, quarterly, or annual basis. composite may be developed for a
Value-based purchasing incentives Under the RHQDAPU program, disease category by dividing the total
should be targeted to that needed to hospitals that do not submit the number of successful interventions by
achieve a desired level of performance. required data receive a decrease in the the total number of opportunities for the
Our experience with implementing standardized payment amount made for same targeted interventions. Some of the
section 501(b) of Pub. L. 108–173 all inpatient operating costs for the advantages of the opportunity model are
(discussed in section IV.A. of this applicable fiscal year. In a hospital that individual measures are weighted
preamble) indicates that a targeted value-based purchasing system, per- by the volume of opportunities for the
incentive, coupled with active service payments might be made only in associated intervention for a particular
management by CMS, can encourage connection with the services directly hospital; missing values for a particular
reporting on quality measures. Nearly associated with the particular measure aspect of care provided by an individual
every eligible hospital has been willing for which the hospital achieved a good hospital would not prevent that hospital
and able to submit the required data in result. Alternatively, lump-sum from being represented in a public
order to receive the full payment update payments might be made on a periodic
under the RHQDAPU program. report; and composite measures may
basis to hospitals that achieve particular easily accommodate the addition of
Similarly, our experience with the performance targets. The preferable
Premier Hospital Quality Incentive individual measures.
approach may depend on operational
Demonstration indicates that a 1 or 2 concerns, the strength of incentive The ‘‘appropriate care measure’’
percent bonus, coupled with potential effects, and other aspects of the design. (ACM) is another composite scoring
reductions for poor performance, may We welcome comments on this issue. methodology, which we used in
stimulate improvement. Further connection with the QIOs. The ACM
experience in ascertaining how (5) What Should the Timing of
scoring methodology is patient-centric.
hospitals respond to incentives will be Incentives Be in Relation to
For a hospital to receive credit for
important for examining incentives over Performance?
treating a patient well, the hospital must
time. Any value-based purchasing system have met the standard for every measure
should seek a balance between applicable to that patient’s condition.
(3) What Should Be the Source of
rewarding desired performance close to There are also a number of proprietary
Incentives?
when it occurs and ensuring the composite measures, such as those used
The President’s FY 2007 Budget accuracy of both performance by Solucient, Healthgrades,
indicates support for identifying and measurement and incentives. Given the CareScience, and U.S. News & World
testing ‘‘budget-neutral incentives that lag times for collecting and reviewing Report. We are interested in comments
will stimulate Medicare providers to different types of data, some measures on the use of composite scoring for
improve performance on quality and may be calculated quickly after the hospital value-based purchasing and on
efficiency measures.’’ 18 We do not period of performance, while data lag
the various composite scoring
believe that providing additional times for other measures may be longer.
methodologies.
aggregate funding to finance For instance, structural measures could
performance-based incentives is either affect incentives soon after they are Value-based purchasing methods are
supportable or necessary. One approach collected. Other measures that are based still under development, and
might be to examine how we could on experience over a time interval may anticipating their potential effects on
identify and apply measurable savings require some time for measured events the health care system is difficult. We
achieved by reducing care that is to manifest. An example of this type of understand that unintended
unnecessary or otherwise inappropriate. measure would be the rate of mortality consequences may result from the
For example, we may examine within 30 days of hospitalization. implementation of these methods. We
possibilities of improving care believe that we will need to assess
(6) How Should We Develop Composite
coordination, whether this could incentives and evaluate their effects so
Scores?
produce measurable savings, and that we can revise them quickly as we
whether some of the savings generated Encouraging improved performance learn more about their impact on
in one payment system could be used could be facilitated by valid and reliable hospitals and on inpatient hospital
for incentives in another, as long as methods to aggregate performance data services provided to Medicare
these reforms do not provide into single composite scores. Composite beneficiaries.
inappropriate incentives to stop scoring may also improve consumer
providing necessary care. For instance, understanding of complex performance d. Public Reporting
appropriate quality of care and effective indicators by combining measures of
many dimensions of care into a single The plan for hospital value-based
resource use in hospitals and other purchasing mandated by Pub. L. 109–
institutional providers might generate score. One example of a composite
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scoring methodology that we used for 171 must address the public disclosure
savings that could be used for incentives of information on hospital performance.
for both physicians and facilities. the Premier Hospital Quality Incentive
Demonstration (discussed in detail CMS currently provides public
above) is a modification of the reporting of quality information through
18 Budget of the United States Government, Fiscal
year 2007, available at: http://www.whitehouse.gov/ ‘‘opportunity model,’’ which can be the ‘‘Compare’’ Web sites for hospitals,
omb/budget/fy2007/. used to address individual weighting, nursing homes, home health agencies,
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24100 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
and dialysis facilities.19 The Compare Second, there are about 121 sets of decision support tools for evidence-
Web sites provide comparative quality DRGs that split based on the presence or based medicine, and reminder
information to consumers and others to absence of a complication or mechanisms for screening and
help guide choices and drive comorbidity (CC). The CC DRG in each preventive care. Despite such large
improvements in the quality of care pair would generate a higher Medicare potential benefits, the study found that
delivered in these settings. Besides payment. If an infection acquired during only about 20 to 25 percent of hospitals
providing Medicare beneficiaries and the beneficiary’s hospital stay is one of have adopted HIT systems.
their health professionals with the conditions on the CC list, the result It is important to note the caveats to
information to assist them in making may be a higher payment to the hospital the RAND study. The projected savings
informed health care decisions, public under a CC DRG. (See section II.C. of are across the health care sector, and
reporting of comparative performance this preamble for a detailed discussion any Federal savings would be a reduced
data also provides information that is of proposed DRG reforms.) percentage. In addition, there are
useful to health care consumers who are Section 5001(c) of Pub. L. 109–171 significant assumptions made in the
not Medicare beneficiaries. For requires the Secretary to identify, by RAND study. National savings are
example, a consumer who has a Health October 1, 2007, at least two conditions projected in some cases based on one or
Savings Account can access CMS’ that are (a) high cost or high volume or two small studies. Also, the study
Hospital Compare Web site to gather both, (b) result in the assignment of a assumes patient compliance, in the form
comparative quality information to case to a DRG that has a higher payment of participation in disease management
assist in choosing a high quality when present as a secondary diagnosis, programs and following medical advice.
hospital. CMS is contributing to the and (c) could reasonably have been For these reasons, extreme caution
Administration’s Consumer-Directed prevented through the application of should be used in interpreting these
Health Care Initiative by working with evidence-based guidelines. For results.
our private- and public-sector partners discharges occurring on or after October In summary, there are mixed signals
to make health care information more 1, 2008, hospitals would not receive about the potential of HIT to reduce
transparent and available to consumers additional payment for cases in which costs. Some studies have indicated that
than ever before. (Refer to section IV.M. one of the selected conditions was not HIT adoption does not necessarily lead
of this preamble for more information.) present on admission. That is, the case to lower costs and improved quality. In
We are interested in comments on how would be paid as though the secondary addition, some industry experts have
we can further stimulate public diagnosis was not present. Section stated that factors such as an aging
reporting to increase the transparency 5001(c) provides that we can revise the population, medical advances, and
and meaningfulness of healthcare list of conditions from time to time, as increasing provider expenses would
performance information. long as it contains at least two make any projected savings impossible.
conditions. Section 5001(c) also requires In his 2004 State of the Union
5. Considerations Related to Certain hospitals to submit the secondary
Conditions, Including Hospital- Address, President Bush announced a
diagnoses that are present at admission plan to ensure that most Americans
Acquired Infections when reporting payment information for have electronic health records within 10
Medicare’s IPPS encourages hospitals discharges on or after October 1, 2007. years.21 One part of this plan involves
to treat patients efficiently. Hospitals We are interested in input about which developing voluntary standards and
receive the same DRG payment for stays conditions and which evidence-based promoting the adoption of interoperable
that vary in length. In many cases, guidelines should be selected. HIT systems that use these standards.
complications acquired in the hospital 6. Promoting Effective Use of Health The 2007 Budget states that ‘‘The
do not generate higher payments than Information Technology Administration supports the adoption of
the hospital would otherwise receive for health information technology (IT) as a
other cases in the same DRG. To this We recognize the potential for health
information technology (HIT) to normal cost of doing business to ensure
extent, the IPPS does encourage patients receive high quality care.’’
hospitals to manage their patients well facilitate improvements in the quality
and efficiency of health care services. Over the past several years, CMS has
and to avoid complications, when undertaken several activities to promote
possible. However, complications, such One recent RAND study found that
broad adoption of electronic health the adoption and effective use of HIT in
as infections, acquired in the hospital coordination with other Federal
can trigger higher payments in two records could save more than $81
billion annually and, at the same time, agencies and with the Office of the
ways. First, the treatment of National Coordinator for Health
complications can increase the cost of improve quality of care.20 The largest
potential savings that the study Information Technology. One of those
hospital stays enough to generate outlier activities is promotion of data standards
payments. However, the outlier identified was in the hospital setting
because of shorter hospital stays for clinical information, as well as for
payment methodology requires that claims and administrative data. In
hospitals experience large losses on promoted by better coordinated care;
less nursing time spent on addition, through our 8th Scope of Work
outlier cases (in FY 2006, hospitals must contract with the QIOs, we are offering
administrative tasks; better use of
lose $23,600 before a case qualifies for assistance to hospitals on how to adopt
medications in hospitals; and better
outlier payments, and the hospital and redesign care processes to
utilization of drugs, laboratory services,
would then only receive 80 percent of effectively use HIT to improve the
and radiology services in hospital
its costs above the outlier threshold). quality of care for Medicare
outpatient settings. The study also
identified potential quality gains beneficiaries, including computerized
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www.medicare.gov/HHCompare/Home.asp; Dialysis Billion Annually and Improve the Quality of Health Information Technology Plan, available at:
Facility Compare Web site, available at: http:// Medical Care, September 14, 2005, available at: http://www.whitehouse.gov/infocus/technology/
www.medicare.gov/Dialysis. http://rand.org/news/press.05/09.14.html. economic_policy200404/chap3.html.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24101
preamble to this proposed rule, we determined by the Secretary), or the payment options will yield the
again invite comments on streamlining historical designation by the Secretary highest rate of payment to the SCH.
the submission of clinical quality data as an essential access community Payments are automatically made at the
by using standards-based electronic hospital, is the sole source of inpatient highest rate using the best data available
medical records. (We use the term hospital services reasonably available to at the time the fiscal intermediary
‘‘electronic medical records’’ in section Medicare beneficiaries. The regulations makes the determination. However, it
IV.A.3. of the preamble to this proposed that set forth the criteria that a hospital may not be possible for the fiscal
rule instead of the term ‘‘electronic must meet to be classified as an SCH are intermediary to determine in advance
health records’’ that is used in this located in § 412.92. precisely which of the rates will yield
section in order to maintain consistency Under the IPPS, separate special the highest payment by year’s end. In
with our request for comments in the FY payment protections also are provided many instances, it is not possible to
2006 IPPS final rule.) Finally, our to a Medicare-dependent, small rural forecast the outlier payments, the
Premier Hospital Quality Incentive hospital (MDH). Section amount of the DSH adjustment, or the
Demonstration provides additional 1886(d)(5)(G)(iv) of the Act defines an IME adjustment, all of which are
financial payments for hospitals that MDH as a hospital that is located in a applicable only to payments based on
achieve improvements in quality, which rural area, has not more than 100 beds, the Federal rate. The fiscal intermediary
effective HIT systems can facilitate. is not an SCH, and that has a high makes a final adjustment at the close of
We are considering the role of percentage of Medicare discharges (not the cost reporting period after it
interoperable HIT systems in increasing less than 60 percent in its 1987 cost determines precisely which of the
the quality of hospital services while reporting year or in 2 of its most recent payment rates would yield the highest
avoiding unnecessary costs. As noted 3 audited and settled Medicare cost payment to the hospital.
above, the Administration supports the reporting years). The regulations that set If an SCH disagrees with the fiscal
adoption of HIT as a normal cost of forth the criteria that a hospital must intermediary’s determination regarding
doing business. While payments under meet to be classified as an MDH are the final amount of program payment to
the IPPS do not vary depending on the located in § 412.108. which it is entitled, it has the right to
adoption and use of HIT, hospitals that Although SCHs and MDHs are paid appeal the fiscal intermediary’s decision
leverage HIT to provide better quality under special payment methodologies, in accordance with the procedures set
services may more efficiently reap the they are section 1886(d) hospitals. Like forth in Subpart R of Part 405, which
reward of any resulting cost savings. In all section 1886(d) IPPS hospitals, SCHs concern provider payment
addition, the adoption and use of HIT and MDHs are paid for their discharges determinations and appeals.
may contribute to improved processes based on the DRG weights calculated Through and including FY 2006,
and outcomes of care, including under section 1886(d)(4) of the Act. under section 1886(d)(5)(G) of the Act,
shortened hospital stays and the Effective with hospital cost reporting MDHs are paid based on the Federal
avoidance of adverse drug reactions. We periods beginning on or after October 1, national rate or, if higher, the Federal
are seeking comments on our statutory 2000, section 1886(d)(5)(D)(i) of the Act national rate plus 50 percent of the
authority to encourage the adoption and (as amended by section 6003(e) of Pub. difference between the Federal national
use of HIT. We also are seeking L. 101–239) and section 1886(b)(3)(I) of rate and the updated hospital-specific
comments on the appropriate role of the Act (as added by section 405 of Pub. rate based on FY 1982 or FY 1987 costs
HIT in any value-based purchasing L. 106–113 and further amended by per discharge, whichever is higher.
program, beyond the intrinsic incentives section 213 of Pub. L. 106–554), provide However, section 5003 of Pub. L. 109–
of the IPPS, to provide efficient care, that SCHs are paid based on whichever 171 (DRA) modified these rules for
encourage the avoidance of unnecessary of the following rates yields the greatest discharges occurring on or after October
costs, and increase quality of care. In aggregate payment to the hospital for the 1, 2006. Section 5003(c) changed the 50-
addition, we are seeking comments on cost reporting period: percent adjustment to 75 percent.
promotion of the use of effective HIT • The Federal rate applicable to the Section 5003(b) requires that an MDH
through hospital conditions of hospital; use the 2002 cost reporting year as its
participation, perhaps by adding a • The updated hospital-specific rate base year (that is, the FY 2002 hospital-
requirement that hospitals use HIT that based on FY 1982 costs per discharge; specific rate), if that use results in a
• The updated hospital-specific rate higher payment. An MDH does not have
is compliant with and certified in its use
based on FY 1987 costs per discharge; the option to use its FY 1996 hospital-
of the HIT standards adopted by the
or specific rate. We discuss our proposed
Secretary. We anticipate that the • The updated hospital-specific rate
American Health Information changes to implement section 5003 of
based on FY 1996 costs per discharge. the DRA in section IV.C.4 of this
Community will provide advice to the For purposes of payment to SCHs for
Secretary on these issues. preamble.
which the FY 1996 hospital-specific rate
C. Sole Community Hospitals (SCHs) yields the greatest aggregate payment, 2. Volume Decrease Adjustment for
(§ 412.92) and Medicare-Dependent, payments for discharges during FYs SCHs and MDHs
Small Rural Hospitals (MDHs) 2001, 2002, and 2003 were based on a (If you choose to comment on the
(§ 412.108) blend of the FY 1996 hospital-specific issues in this section, please include the
rate and the greater of the Federal rate caption (‘‘SCH/MDH Volume Decrease
1. Background or the updated FY 1982 or FY 1987 Adjustment’’ at the beginning of your
Under the IPPS, special payment hospital-specific rate. For discharges comment.)
protections are provided to a sole during FY 2004 and subsequent fiscal Section 1886(d)(5)(D)(ii) of the Act
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community hospital (SCH). Section years, payments based on the FY 1996 requires that the Secretary make a
1886(d)(5)(D)(iii) of the Act defines an hospital-specific rate are 100 percent of payment adjustment to an SCH that
SCH as a hospital that, by reason of the updated FY 1996 hospital-specific experiences a decrease of more than 5
factors such as isolated location, rate. percent in its total number of inpatient
weather conditions, travel conditions, For each cost reporting period, the discharges from one cost reporting
absence of other like hospitals (as fiscal intermediary determines which of period to the next, if the circumstances
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24102 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
leading to the decline in discharges routine acute care area (excluding more beds. The census regions include:
were beyond the SCH’s control. Section intensive care unit areas) excess staff (1) New England (Connecticut, Maine,
1886(d)(5)(G)(iii) of the Act requires that adjustment and the intensive care unit Massachusetts, New Hampshire, Rhode
the Secretary make a payment excess staff adjustment. (For purposes of Island, and Vermont); (2) Middle
adjustment to an MDH that experiences this section of the preamble, any Atlantic (New Jersey, New York, and
a decrease of more than 5 percent in its subsequent references to the routine Pennsylvania); (3) South Atlantic
total number of inpatient discharges acute care area of an SCH or MDH refer (Delaware, District of Columbia, Florida,
from one cost reporting period to the to the routine acute care area excluding Georgia, Maryland, North Carolina,
next, if the circumstances leading to the any intensive care unit areas.) In order South Carolina, Virginia, and West
decline in discharges were beyond the to determine whether or not the hospital Virginia); (4) East North Central
MDH’s control. These adjustments were is appropriately staffing its routine acute (Illinois, Indiana, Michigan, Ohio, and
designed to compensate an SCH or MDH care and its intensive care unit area, the Wisconsin); (5) East South Central
for the fixed costs it incurs in the year fiscal intermediary compares the (Alabama, Kentucky, Mississippi, and
following the reduction in discharges hospital’s actual number of nursing staff Tennessee); (6) West North Central
(this is, the second year), which it may in each area with the staffing of like-size (Iowa, Kansas, Minnesota, Missouri,
be unable to reduce. Such costs include hospitals in the same census region. Nebraska, North Dakota, and South
the maintenance of necessary core staff Currently, fiscal intermediaries obtain Dakota); (7) West South Central
and services. average nurse staffing data from the (Arkansas, Louisiana, Oklahoma, and
However, we believe that not all staff American Hospital Association’s HAS/ Texas); (8) Mountain (Arizona,
costs can be considered fixed costs. Monitrend Data Book. (More Colorado, Idaho, Montana, Nevada, New
Using a standardized formula specified information on the HAS/Monitrend Data Mexico, Utah, and Wyoming); and (9)
by us, the SCH or MDH must Book follows.) If a hospital employs Pacific (Alaska, California, Hawaii,
demonstrate that it appropriately more than the reported average number Oregon, and Washington).
adjusted the number of staff in inpatient of nurses in the routine acute care or The survey collected data on nearly
areas of the hospital based on the intensive care unit area for hospitals of
400 items pertaining to utilization,
decrease in the number of inpatient its size and census region, the fiscal
resource allocation, departmental
days. This formula examines nursing intermediary reduces the amount of the
productivity, departmental direct
staff in particular. If an SCH or MDH has adjustment by the cost of maintaining
expenses, and staffing. In order for
an excess number of nursing staff, the the additional staff. The amount of the
aggregate data to be published for a
cost of maintaining those staff members reduction is calculated by multiplying
category, at least three hospitals in the
is deducted from the total adjustment. the actual number of nursing staff above
same census region and bed-size group
One exception to this policy is that no the reported average by the average
had to have responded to the survey.
SCH or MDH may reduce its number of nurse salary for that hospital as reported
For the final 1989 publication, 996 acute
staff to a level below what is required on the Medicare cost report. The
by State or local law. In other words, an complete process for determining the care hospitals completed the survey.
SCH or MDH will not be penalized for amount of the adjustment can be found CMS has used the HAS/Monitrend Data
maintaining a level of staff that is at section 2810.1 of the Provider Book since 1984 to determine the
consistent with State or local Reimbursement Manual. volume decrease adjustment for SCHs;
requirements. Representatives from several SCH and the data also have been used for the
The process for determining the MDH hospitals have contacted CMS volume decrease adjustment for MDHs
amount of the volume decrease with concerns regarding the current use since 1990. In particular, CMS has used
adjustment can be found in section of the HAS/Monitrend data for the HAS/Monitrend data on the number
2810.1 of the Provider Reimbursement determining the volume decrease of paid nursing hours per patient day
Manual. Fiscal intermediaries are adjustment for SCHs and MDHs. (‘‘paid hours/patient day’’) in both the
responsible for establishing whether an Because the most recent HAS/ general acute care area (‘‘Medical and
SCH or MDH is eligible for a volume Monitrend Data Book was published in Surgical Units’’) and the intensive care
decrease adjustment and, if so, the 1989 and is no longer updated, the unit (‘‘Med & Surg Intensive Care
amount of the adjustment. To qualify for hospitals expressed concern that the Unit’’). More information on the HAS/
this adjustment, the SCH or MDH must information in the publication is too Monitrend Data Book is available from
demonstrate that: (a) A 5 percent or outdated for current use. Therefore, in the American Hospital Association, 840
more decrease of total discharges has this proposed rule, we are presenting for North Lake Shore Drive, Chicago,
occurred; and (b) the circumstance that public comment a new methodology for Illinois 60611.
caused the decrease in discharges was calculating the adjustment for excess b. HAS/Monitrend Data Book
beyond the control of the hospital. Once staff under section IV.C.2.b. of this Replacement Alternative
the fiscal intermediary has established preamble.
that the SCH or MDH satisfies these two Below, we are proposing an
requirements, it will calculate the a. HAS/Monitrend Data alternative method for determining an
adjustment. The adjustment amount is From the mid-1960’s to 1989, the SCH’s or MDH’s target number of core
determined by subtracting the second Healthcare Administrative Services staff using data from the Medicare cost
year’s DRG payment from the lesser of: Division of the American Hospital report and the occupational mix survey.
(a) The second year’s costs minus any Association (AHA) published However, this methodology would only
adjustment for excess staff; or (b) the biannually the HAS/Monitrend Data establish one combined average number
previous year’s costs multiplied by the Book, a collection of aggregate hospital of nursing hours per patient day for both
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appropriate IPPS update factor minus statistics. Hospitals completed surveys the inpatient routine care and the
any adjustment for excess staff. The based on 6 months of data; these data intensive care unit areas. We are
SCH or MDH receives the difference in were categorized into one of five bed- proposing to use the Medicare cost
a lump-sum payment. size groups and into one of nine census report and occupational mix survey data
The adjustment for excess staff is regions. The bed size groups were 0–49, beginning with requests for adjustments
currently broken into two parts: The 50–99, 100–199, 200–399, and 400 or for FY 2008 cost reports. We welcome
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24103
comments from the public on this the HAS/Monitrend data: the fiscal it is used in these adjustments, and will
proposal. intermediary would multiply the SCH’s allow us to compare the data from the
or MDH’s number of inpatient days by FY 2006 occupational mix survey with
(1) Occupational Mix Survey
the applicable published hours per the data reported in the 2003 survey, if
As discussed in section III.C. of the patient day. This figure would be necessary. However, for purposes of
preamble to this proposed rule, the CMS divided by the average number of describing how we would implement
occupational mix survey collects from worked hours per year per nurse (for this methodology, we have applied the
each hospital data on the mix of example, 2,080 for a standard 40-hour proposed calculation to the FY 2003
employees in the areas of the hospital week). The result would be the target occupational mix survey data. While we
payable under the IPPS for a limited number of core nursing staff for the are not proposing to use the FY 2003
number of hospital occupational particular SCH or MDH. If necessary, data, we believe that it is the best data
categories. These categories (nursing, the cost of any excess staff (number of available at this time to help explain our
therapy, medical and clinical laboratory, FTEs that exceed the published number) proposed methodology.
dietary, and pharmacy) each include would be removed from the second To calculate the results below, we
several SOCs, as defined by the BLS, year’s costs or, if applicable, the merged the FY 2003 occupational mix
that may be used by hospitals with previous year’s costs multiplied by the survey results into the FY 2003 cost
different mixes to provide specific IPPS update factor when determining report file. We eliminated all
aspects of patient care. For example, the volume decrease adjustment. observations for non-IPPS providers,
hospitals may choose to employ Because we are considering registered providers who failed to complete the
different combinations of registered nurses, licensed practical nurses, and occupational mix survey, and providers
nurses, licensed practical nurses, and nursing aides, the fiscal intermediary for which provider numbers, bed counts
nurses’ aides for the purpose of would calculate the excess staff and/or day counts were missing. We
providing nursing care to their patients. adjustment by multiplying the number also only included providers with 12
The varying labor costs associated with of excess staff by the average salary months’ worth of data. This resulted in
these choices reflect hospital among the three groups, taking into a pool of approximately 3,541 providers.
management decisions rather than account how many registered nurses,
licensed practical nurses, and nursing For each provider in this pool, we
geographic differences in the costs of
aides work at the facility. (For instance, calculated the number of nursing hours
labor. The data collected on the survey
if the hospital’s average salary for a by adding the number of registered
are used to adjust hospitals’ wage data
registered nurse is $50,000 and the nurse, license practical nurse, and
to account for each hospital’s SOC mix
hospital’s average salary for a licensed nursing aide hours reported on the
within the general occupational
practical nurse is $30,000 and the occupational mix survey. We divided
categories. Hospitals completed the first
hospital employs 5 registered nurses, 3 the result of this calculation by the total
occupational mix survey using FY 2003
licensed practical nurses, and no number of inpatient days reported on
data. A second survey will be completed
nursing aides, the calculated average the cost report to determine the number
this year (FY 2006).
Under this proposed method, we salary would be $42,500 for one FTE (((5 of nursing hours per patient day.
would calculate the nursing hours per × $50,000) + (3 × $30,000))/8 = $42,500). For purposes of calculating the census
inpatient day for each SCH or MDH by We are proposing to use the results of regional averages for the various bed-
dividing the number of paid nursing the FY 2006 occupational mix survey size groups, we are proposing to only
hours (for registered nurses, licensed and begin applying the proposed include observations that fall within 3
practical nurses, and nursing aides) methodology for adjustments resulting standard deviations of the mean of all
reported on the occupational mix survey from a decrease in discharges between observations, thus removing potential
by the number of inpatient days FYs 2007 to 2008. Because the outliers in the data. Below are the
reported on the Medicare cost report. occupational mix survey is conducted results of this calculation.
The results would be grouped into the once every 3 years, we would update We realize that, in the chart, some
same bed-size groups and census the data set every 3 years. We are results may appear to be anomalous (for
regions as the HAS/Monitrend Data proposing to use the FY 2006 survey example, 0–49 beds for census regions
Book. CMS would publish the mean results and not to utilize the FY 2003 4, 6, and 8). We believe a small number
number of nursing hours per patient day survey results to take into account of outlier data may have skewed the
for each census region and bed-size comments we received in response to mean, which was the basis for
group in the Federal Register. (We are the first set of results from the identifying data within 3 standard
proposing to include licensed practical occupational mix survey, and to ensure deviations to include in the
nurse and nursing aide hours as well as that hospitals have had some experience calculations. Therefore, we are soliciting
registered nurse hours to reflect the with the occupational mix survey before comments on whether we should
various levels of nursing staff employed it is used in determining these consider another method for
by hospitals to provide direct patient adjustments. Because we have used the determining the appropriateness of
care.) HAS/Monitrend data for so many years, using available data in calculating the
The results that would be published we believe it is appropriate to continue average number of nursing hours per
in the Federal Register would be the to use these data for one more year and patient day. For instance, in this case,
target number of core nursing hours per wait for the results of the FY 2006 the results are based on the inclusion of
patient day. For purposes of the volume survey. This will give hospitals an data within 3 standard deviations of the
decrease adjustment, the published data opportunity to have some experience mean. Alternatively, we could use
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would be utilized in the same way as with the occupational mix survey before another measure of central tendency.
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24104 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
0–49 ............................................. 16.38 8.33 19.26 30.76 11.72 26.70 20.50 31.00 17.39
50–99 ........................................... 13.71 11.07 15.66 17.37 13.69 15.53 12.51 16.63 16.11
100–199 ....................................... 11.98 10.99 14.38 13.44 11.93 17.03 13.91 14.33 13.32
200–399 ....................................... 12.40 12.19 14.19 13.00 10.57 16.20 11.35 14.06 15.33
400 or more ................................. 13.32 9.42 12.77 15.39 9.51 19.70 12.36 17.64 13.32
(2) American Hospital Association current regulations for MDHs do not hospital must: (1) Be located in a rural
Annual Hospital Survey contain an explicit requirement that an area (as defined in 42 CFR Part 412,
In the process of evaluating different MDH report to CMS a change in the Subpart D); (2) have 100 or fewer beds
sources of data to replace the HAS/ circumstances affecting its MDH status. (as defined at § 412.105(b)) during the
Monitrend Data Book, we considered However, the fiscal intermediary is cost reporting period; (3) must not be
using the results of the AHA’s Annual required to evaluate on an ongoing basis classified as an SCH (as defined in
Hospital Survey. This survey includes whether a hospital continues to qualify § 412.92); and (4) have no less than 60
over 700 data fields that cover facilities for MDH status. percent of its inpatient days or
and services, utilization, finances, and We have become aware of several discharges attributable to inpatients
staffing. On average, 6,000 hospitals hospitals that have maintained SCH or receiving Medicare Part A benefits
complete the survey each year. Section MDH status after the original during either its cost reporting period
E of the Annual Survey Database circumstances that led to the respective beginning in FY 1987, or in two of the
classification changed. We are last three of its audited cost reports that
includes total facility staffing data. FTE
proposing to amend § 412.92(b)(3) for have been settled.
counts are available for registered
SCHs and § 412.108(b)(4) for MDHs to MDHs have been eligible for a series
nurses, practical and vocational nurses,
require an SCH or MDH to report to its of special payment rates under the IPPS.
nursing assistive personnel, and other
appropriate CMS Regional Office when Section 6003(f) of Pub. L. 101–239
personnel. However, FTEs in outpatient
the circumstances under which the created the first IPPS special payment
areas, excluded units, and nursing home
hospital was approved for SCH or MDH methodology for MDHs. Effective for
units within the hospital are also
status have changed. At that time, the cost reporting periods beginning on or
included in the aggregated FTE counts.
CMS Regional Office will determine after April 1, 1990, and ending on or
It is not possible to separately identify
whether the SCH or MDH continues to before March 31, 1993, an MDH was
how many of the total reported nursing meet the criteria for classification under
FTEs are attributable to the general paid based on whichever of the
§ 412.92 or § 412.108. If an SCH or MDH following rates yielded the greatest
acute care facility and how many to a no longer meets these criteria, the CMS
distinct part unit or outpatient facility. aggregate payment for the cost reporting
Regional Office will issue a letter period:
Due to varying staffing needs in distinct canceling the classification within 30
part units and outpatient areas, we • The Federal payment rate
days of its determination. If the applicable to the MDH;
believe that any calculation of average circumstances affecting a hospital’s SCH
staffing for the inpatient acute care area • The MDH’s updated hospital-
or MDH classification change and the specific rate based on its FY 1982 base
should consist of data solely from this hospital does not disclose the
area of the hospital. Nevertheless, we period costs per discharge; or
information to the CMS Regional Office, • The MDH’s updated hospital-
are requesting comments on this CMS will cancel the hospital’s SCH or
alternative, and possible means for specific rate based on its FY 1987 base
MDH designation effective on the period costs per discharge.
addressing the issue of staffing outside earliest discernable date on which the
the inpatient acute care area. Section 13501(e)(1) Pub. L. 103–66
fiscal intermediary can determine that extended the MDH payment provisions
3. Mandatory Reporting Requirements the hospital no longer met the criteria through 1994 and provided that, for
for Any Changes in the Circumstances for classification. discharges occurring after March 31,
Under Which a Hospital Was For MDHs, this reporting requirement
1993, if an MDH’s applicable hospital-
Designated as an SCH or MDH is in addition to the fiscal
specific rate exceeded the Federal
intermediary’s ongoing evaluations of
(If you choose to comment on the payment rate, the additional payment
whether a hospital continues to qualify
issues in this section, please include the was limited to 50 percent of the amount
for MDH status as set out in our existing
caption (‘‘SCH/MDH Changes in by which the applicable updated
regulations at § 412.108(b)(5).
Qualification Status’’ at the beginning of hospital-specific rate exceeded the
your comment.) 4. Proposed Payment Changes for MDHs Federal rate. These provisions expired
Under § 412.92(b)(3) and Under the DRA of 2005 (Proposed effective for cost reporting periods
§ 412.108(b)(4) respectively, once a § 412.79 and Existing §§ 412.90(j) and beginning on or after October 1, 1994.
facility has been designated as an SCH 412.108) Section 4204(a)(3) of Pub. L. 105–33
or MDH, the classification remains in (If you choose to comment on this amended sections 1886(d)(5)(G)(i) and
effect without need for reapproval section, please include the caption (d)(5)(G)(ii)(II) of the Act to reinstate
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unless there is a change in the hospital’s ‘‘Payments to MDHs’’ at the beginning these special MDH payment provisions,
circumstances. Currently, the of your comment.) including the 50-percent limitation, for
regulations do not contain an explicit cost reporting periods ‘‘beginning on or
requirement that an SCH report to CMS a. Background after October 1, 1997, and before
a change in circumstances that would Under § 412.108(a) of our regulations, October 1, 2001.’’ Section 321(b)(1) of
affect its status as an SCH. Likewise, the in order to be classified as an MDH, a Pub. L. 106–113 made a technical
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24105
amendment to these provisions of the limited to 75 percent (as opposed to the 5. Proposed Technical Change
Act (which describes the time periods previous 50 percent) of the amount by In paragraph (b)(2)(iv) of § 412.92, we
for which some of the special payment which the applicable updated hospital- are proposing to correct the spelling of
provisions apply and the time periods specific rate exceeded the Federal rate. the word ‘‘adjustment’’ by changing it to
during which a hospital may be Section 5003(d) of Pub. L. 109–171 ‘‘adjustment’’.
considered an MDH under section enhances the DSH adjustment for MDHs
1886(d)(1)(G)(iv) of the Act) by striking for discharges occurring on or after D. Rural Referral Centers (§ 412.96)
the language ‘‘beginning on or after October 1, 2006. We discuss our (If you choose to comment on issues
October 1, 1997, and before October 1, proposals to implement this provision in this section, please include the
2001’’ and replacing it with ‘‘discharges in section IV.F.4. of this preamble. caption ‘‘Rural Referral Centers’’ at the
occurring on or after October 1, 1997, beginning of your comment.)
and before October 1, 2001’’. This b. Proposed Regulation Changes Under the authority of section
change was made effective as if 1886(d)(5)(C)(i) of the Act, the
included in Pub. L. 105–33. Pub. L. We are proposing to amend our
regulations to implement section regulations at § 412.96 set forth the
106–113 also provided for a 5-year criteria that a hospital must meet in
extension of the MDH special payment 5003(a) through (c) of Pub. L. 109–171.
We are proposing to add a new § 412.79 order to qualify under the IPPS as a
provisions. Section 404(a) of that law rural referral center. For discharges
further amended sections that describes how we would compute
and update the MDH hospital-specific occurring before October 1, 1994, rural
1886(d)(1)(G)(i) and (d)(1)(G)(ii)(II) of referral centers received the benefit of
the Act by striking the phrase ‘‘and rate based on its FY 2002 base period.
In addition, we are proposing to revise payment based on the other urban
before October 1, 2001’’ and inserting standardized amount rather than the
the phrase ‘‘and before October 1, § 412.90(j) to reflect the extension of the
MDH special payment provisions to rural standardized amount. Although
2006’’.
discharges occurring before October 1, the other urban and rural standardized
Section 5003(a) of Pub. L. 109–171
2011. We also are proposing to amend amounts are the same for discharges
(DRA of 2005) amended the MDH
special payment provisions in the Act. § 412.108 by revising paragraph (a) and occurring on or after October 1, 1994,
It amended section 1886(d)(5)(G) of the adding a new paragraph (c)(2)(iii) to rural referral centers continue to receive
Act and made a conforming amendment reflect the changes to the special special treatment under both the DSH
under section 1886(b)(3)(D) of the Act to payment methodology effective for payment adjustment and the criteria for
provide for another 5-year extension of discharges occurring on or after October geographic reclassification.
the special MDH payment methodology. 1, 2006, and before October 1, 2011. Section 402 of Pub. L. 108–173 raised
Under this extension, a revised special the DSH adjustment for other rural
As a part of our proposed hospitals with less than 500 beds and
MDH payment methodology will apply amendments to § 412.90(j) and
for discharges occurring on or after rural referral centers. Other rural
§ 412.108(a), we are making two hospitals with less than 500 beds are
October 1, 2006, and before October 1, technical corrections. Section 412.90(j)
2011. subject to a 12 percent cap on DSH
describes when an MDH may receive a payments. Rural referral centers are not
As stated earlier, currently, MDHs are special payment adjustments, while
paid using whichever rate yields the subject to the 12 percent cap on DSH
§ 412.108(a) discusses the definition of payments that is applicable to other
greatest aggregate payment: The Federal an MDH. Each of these sections now
payment rate or, if higher, the Federal rural hospitals (with the exception of
refers to ‘‘cost reporting periods rural hospitals with 500 or more beds).
payment rate plus 50 percent of the beginning on or after April 1, 1990 and
difference between the Federal payment Rural referral centers are not subject to
before October 1, 1994, or beginning on the proximity criteria when applying for
rate and the updated hospital-specific or after October 1, 1997 and before
rate based on FY 1982 or FY 1987 base geographic reclassification, and they do
October 1, 2006’’. However, as noted not have to meet the requirement that a
period costs per discharge.
above, sections 1886(d)(5)(G)(i) and hospital’s average hourly wage must
Section 5003(b) of Pub. L. 109–171
(d)(5)(G)(ii)(II) of the Act, the provisions exceed 106 percent of the average
provides that, for discharges occurring
on or after October 1, 2006, and before of the Act from which these time hourly wage of the labor market area
October 1, 2011, an MDH’s updated periods were drawn, were amended by where the hospital is located.
hospital-specific rate will be the FY Pub. L. 106–113. Sections 321(b)(1) and Section 4202(b) of Pub. L. 105–33
2002 base period costs per discharges if 404(a) of Pub. L. 106–113 amended states, in part, ‘‘[a]ny hospital classified
the FY 2002 based hospital-specific rate sections 1886(d)(5)(G)(i) and (d)(5)(ii)(II) as a rural referral center by the Secretary
results in a payment increase. In cases of the Act so that the phrase in each * * * for fiscal year 1991 shall be
where no payment increase results from section ‘‘beginning on or after October 1, classified as such a rural referral center
using FY 2002 hospital-specific rate, an 1997, and before October 1, 2001’’ was for fiscal year 1998 and each subsequent
MDH will continue to be paid based on replaced with the phrase ‘‘discharges year.’’ In the August 29, 1997 final rule
the higher of its updated FY 1982 or FY occurring on or after October 1, 1997, with comment period (62 FR 45999), we
1987 hospital-specific rates, if using one and before October 1, 2006’’. (Section also reinstated rural referral center
of those rates results in a payment 5003(a)(1) of Pub. L. 109–171 changed status for all hospitals that lost the
higher than that under the Federal the ending date in these provisions from status due to triennial review or MGCRB
payment rate. (Unlike an SCH, an MDH ‘‘before October 1, 2006’’ to ‘‘before reclassification, but not to hospitals that
does not have the option of using its October 1, 2011’’.) lost rural referral center status because
updated FY 1996 hospital-specific rate.) Therefore, we are removing the they were now urban for all purposes
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Under section 5003(c) of Pub. L. 109– incorrect phrase ‘‘beginning on or after because of the OMB designation of their
171, for discharges occurring on or after October 1, 1997’’ from each of these geographic area as urban. However,
October 1, 2006, and before October 1, regulations and inserting the phrase, subsequently, in the August 1, 2000
2011, if an MDH’s applicable hospital- ‘‘discharges occurring on or after final rule (65 FR 47089), we indicated
specific rate exceeded the Federal October 1, 1997’’, to conform the that we were revisiting that decision.
payment rate, the additional payment is regulations to the statute. Specifically, we stated that we would
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24106 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
permit hospitals that previously • The hospital’s CMI is at least equal census region, excluding those hospitals
qualified as a rural referral center and to the lower of the median CMI for with approved teaching programs (that
lost their status due to OMB urban hospitals in its census region, is, those hospitals receiving indirect
redesignation of the county in which excluding hospitals with approved medical education payments as
they are located from rural to urban to teaching programs, or the median CMI provided in § 412.105). These proposed
be reinstated as a rural referral center. for all urban hospitals nationally; and values are based on discharges
Otherwise, a hospital seeking rural • The hospital’s number of discharges occurring during FY 2005 (October 1,
referral center status must satisfy the is at least 5,000 per year, or, if fewer, the 2004 through September 30, 2005) and
applicable criteria. We used the median number of discharges for urban include bills posted to CMS’ records
definitions of ‘‘urban’’ and ‘‘rural’’ hospitals in the census region in which through December 2005.
specified in Subpart D of 42 CFR Part the hospital is located. (The number of
412. discharges criterion for an osteopathic We are proposing that, in addition to
One of the criteria under which a hospital is at least 3,000 discharges per meeting other criteria, if they are to
hospital may qualify as a rural referral year, as specified in section qualify for initial rural referral center
center is to have 275 or more beds 1886(d)(5)(C)(i) of the Act.) status for cost reporting periods
available for use (§ 412.96(b)(1)(ii)). A beginning on or after October 1, 2006,
1. Case-Mix Index rural hospitals with fewer than 275 beds
rural hospital that does not meet the bed
size requirement can qualify as a rural Section 412.96(c)(1) provides that must have a CMI value for FY 2005 that
referral center if the hospital meets two CMS will establish updated national is at least—
mandatory prerequisites (a minimum and regional CMI values in each year’s • 1.3365; or
CMI and a minimum number of annual notice of prospective payment
rates for purposes of determining rural • The median CMI value (not
discharges) and at least one of three
referral center status. The methodology transfer-adjusted) for urban hospitals
optional criteria (relating to specialty
we use to determine the national and (excluding hospitals with approved
composition of medical staff, source of
inpatients, or referral volume) regional CMI values is set forth in teaching programs as identified in
(§ 412.96(c)(1) through (c)(5)). (See also regulations at § 412.96(c)(1)(ii). The § 412.105) calculated by CMS for the
the September 30, 1988 Federal Register proposed national median CMI value for census region in which the hospital is
(53 FR 38513).) With respect to the two FY 2007 includes all urban hospitals located.
mandatory prerequisites, a hospital may nationwide, and the proposed regional The proposed median CMI values by
be classified as a rural referral center values for FY 2007 are the median region are set forth in the following
if— values of urban hospitals within each table:
Case-mix index
Region value
1. New England (CT, ME, MA, NH, RI, VT) .................................................................................................................................. 1.2678
2. Middle Atlantic (PA, NJ, NY) ..................................................................................................................................................... 1.2701
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ......................................................................................................... 1.1781
4. East North Central (IL, IN, MI, OH, WI) .................................................................................................................................... 1.3156
5. East South Central (AL, KY, MS, TN) ....................................................................................................................................... 1.2009
6. West North Central (IA, KS, MN, MO, NE, ND, SD) ................................................................................................................ 1.2856
7. West South Central (AR, LA, OK, TX) ...................................................................................................................................... 1.2445
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ......................................................................................................................... 1.3024
9. Pacific (AK, CA, HI, OR, WA) ................................................................................................................................................... 1.3620
The preceding numbers will be patient discharges subject to DRG-based available cost report data we had at that
revised in the final rule to the extent payment. time.
required to reflect the updated FY 2005 2. Discharges Therefore, we are proposing that, in
MedPAR file, which will contain data addition to meeting other criteria, a
from additional bills received through Section 412.96(c)(2)(i) provides that hospital, if it is to qualify for initial
March 2006. CMS will set forth the national and
rural referral center status for cost
regional numbers of discharges in each
Hospitals seeking to qualify as rural reporting periods beginning on or after
year’s annual notice of prospective
referral centers or those wishing to October 1, 2006, must have as the
payment rates for purposes of
know how their CMI value compares to number of discharges for its cost
determining rural referral center status.
the criteria should obtain hospital- reporting period that began during FY
As specified in section 1886(d)(5)(C)(ii)
specific CMI values (not transfer- 2003 a figure that is at least—
of the Act, the national standard is set
adjusted) from their fiscal at 5,000 discharges. We are proposing to • 5,000 (3,000 for an osteopathic
intermediaries. Data are available on the update the regional standards based on hospital); or
Provider Statistical and Reimbursement discharges for urban hospitals’ cost • The median number of discharges
(PS&R) System. In keeping with our reporting periods that began during FY for urban hospitals in the census region
policy on discharges, these CMI values 2003 (that is, October 1, 2002 through in which the hospital is located, as
are computed based on all Medicare September 30, 2003), which is the latest indicated in the following table:
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Number of
Region discharges
1. New England (CT, ME, MA, NH, RI, VT) .................................................................................................................................. 7,360
2. Middle Atlantic (PA, NJ, NY) ..................................................................................................................................................... 10,170
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24107
Number of
Region discharges
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) ......................................................................................................... 10,117
4. East North Central (IL, IN, MI, OH, WI) .................................................................................................................................... 8,983
5. East South Central (AL, KY, MS, TN) ....................................................................................................................................... 7,427
6. West North Central (IA, KS, MN, MO, NE, ND, SD) ................................................................................................................ 7,346
7. West South Central (AR, LA, OK, TX) ...................................................................................................................................... 7,060
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) ......................................................................................................................... 9,832
9. Pacific (AK, CA, HI, OR, WA) ................................................................................................................................................... 7,680
These numbers will be revised in the cost reporting periods beginning on or provisions of § 413.78(e), which state
final rule based on the latest available after October 1, 1997. that the time residents spend in
cost report data. nonprovider settings such as
2. IME Adjustment Factor for FY 2007
We note that the median number of freestanding clinics, nursing homes, and
discharges for hospitals in each census The IME adjustment to the DRG physicians’ offices in connection with
region is greater than the national payment is based in part on the approved programs may be included in
standard of 5,000 discharges. Therefore, applicable IME adjustment factor. The determining the number of FTE
5,000 discharges is the minimum IME adjustment factor is calculated residents in the calculation of a
criterion for all hospitals. using a hospital’s ratio of residents to hospital’s resident count if other
beds, which is represented as r, and a applicable conditions specified in
We reiterate that if an osteopathic
formula multiplier, which is paragraph (e) are met.
hospital is to qualify for rural referral
represented as c, in the following We note that in sections IV.H.2., 3., 4.,
center status for cost reporting periods
equation: c × [{1 + r} .405 ¥1]. The and 5. of the preamble of this proposed
beginning on or after October 1, 2006,
formula is traditionally described in rule, we discuss other proposed policy
the hospital would be required to have
terms of a certain percentage increase in changes and clarifications to the
at least 3,000 discharges for its cost
payment for every 10-percent increase methodology for counting FTE residents
reporting period that began during FY
in the resident-to-bed ratio. for the purposes of direct GME
2003.
Section 502(a) of Public Law 108–173 payments, which would be applicable to
E. Indirect Medical Education (IME) modified the formula multiplier (c) to be IME payments also.
Adjustment (§ 412.105) used in the calculation of the IME
adjustment. Prior to the enactment of F. Payment Adjustment for
(If you choose to comment on issues Public Law 108–173, the formula Disproportionate Share Hospitals
in this section, please include the multiplier was fixed at 1.35 for (DSHs) (§ 412.106)
caption ‘‘IME Adjustment’’ at the discharges occurring during FY 2003 (If you choose to comment on issues
beginning of your comment.) and thereafter. Section 502(a) modified in this section, please include the
1. Background the formula multiplier beginning caption ‘‘DSH Adjustment’’ at the
midway through FY 2004 and provided beginning of your comment.)
Section 1886(d)(5)(B) of the Act for a new schedule of formula
provides that prospective payment 1. Background
multipliers for FY 2005 and thereafter.
hospitals that have residents in an In the FY 2005 IPPS rule, we announced Section 1886(d)(5)(F) of the Act
approved graduate medical education the schedule of formula multiplier to be provides for additional payments to
(GME) program receive an additional used in the calculation of the IME subsection (d) hospitals that serve a
payment to reflect the higher indirect adjustment and incorporated the disproportionate share of low-income
patient care costs of teaching hospitals schedule in our regulations at patients. The Act specifies two methods
relative to nonteaching hospitals. The § 412.105(d)(3)(viii) through (d)(3)(xii). for a hospital to qualify for the Medicare
regulations regarding the calculation of In this proposed rule, we are disproportionate share hospital (DSH)
this additional payment, known as the specifying that for any discharges adjustment. Under the first method,
indirect medical education (IME) occurring during FY 2007, the formula hospitals that are located in an urban
adjustment, are located at § 412.105. multiplier is 1.32. We estimate that area and have 100 or more beds may
The Balanced Budget Act of 1997 application of the mandated formula receive a DSH payment adjustment if
(Pub. L. 105–33) established a limit on multiplier for FY 2007 will result in an the hospital can demonstrate that,
the number of allopathic and increase of 5.38 percent in IME payment during its cost reporting period, more
osteopathic residents that a hospital for every approximately 10-percent than 30 percent of its net inpatient care
may include in its full-time equivalent increase in the resident-to-bed ratio revenues are derived from State and
(FTE) resident count for direct GME and from FY 2006 to FY 2007. local government payments for care
IME payment purposes. Under section furnished to indigent patients. These
1886(h)(4)(F) of the Act, a hospital’s 3. Technical Change To Revise Cross- hospitals are commonly known as
unweighted FTE count of residents may Reference ‘‘Pickle hospitals.’’ The second method,
not exceed the hospital’s unweighted We are proposing to revise the cross- which is also the most commonly used
FTE count for its most recent cost references included in paragraph method for a hospital to qualify, is
reporting period ending on or before (f)(1)(ii)(C) of § 412.105 that specify the based on a complex statutory formula
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December 31, 1996. Under section criteria for counting FTE residents who under which payment adjustments are
1886(d)(5)(B)(v) of the Act, the limit on spend time in nonprovider settings for based on the level of the hospital’s DSH
the FTE resident count for IME purposes IME payment adjustment purposes. patient percentage, which is the sum of
is effective for discharges occurring on Currently, this paragraph only cites the two fractions: The ‘‘Medicare fraction’’
or after October 1, 1997. A similar limit criteria set forth in §§ 413.78(c) or and the ‘‘Medicaid fraction.’’ The
is effective for direct GME purposes for 413.78(d). We should have also cited the Medicare fraction is computed by
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24108 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
dividing the number of patient days that days furnished to patients entitled to days, were eligible for Medicaid but
are furnished to patients who were benefits under Medicare Part A. The were not entitled to benefits under
entitled to both Medicare Part A and Medicaid fraction is computed by Medicare Part A by the number of total
Supplemental Security Income (SSI) dividing the number of patient days hospital patient days in the same
benefits by the total number of patient furnished to patients who, for those period.
2. Technical Corrections adjustment factors for hospitals that Law 108–7, section 402 of Public Law
meet the criteria under § 412.106(c)(2). 108–89, and section 401 of Public Law
We are proposing to make a technical
108–173, the standardized amount
correction to § 412.106(a)(1)(iii) to 4. Enhanced DSH Adjustment for MDHs
reclassification criterion for large urban
reflect the statutory requirement at The DSH adjustment factor for most and other areas is no longer necessary
section 1886(d)(8)(E) of the Act that categories of hospitals is capped at 12 or appropriate and has been removed
hospitals reclassified under § 412.103 percent. Urban hospitals with more than from our reclassification policy. We
are considered rural for purposes of this 100 beds, rural hospitals with more than implemented this policy in the FY 2005
DSH regulation. We are also proposing 500 beds, and rural referral centers, are IPPS final rule (69 FR 49103). As a
to correct the regulation to eliminate the exempt from this cap. result, hospitals can request
reference to § 412.62(f). These Section 5003(d) of Public Law 109– reclassification for the purposes of the
corrections reflect current policy and 171 (DRA of 2005) amended section wage index only and not the
already-existing statutory requirements. 1886(d)(5)(F) of the Act to revise the standardized amount. Implementing
3. Proposed Reinstatement of DSH payment adjustment factor for regulations in Subpart L of 42 CFR part
Inadvertently Deleted Provisions on MDHs, effective for discharges occurring 412 (§§ 412.230 et seq.) set forth criteria
DSH Payment Adjustment Factors on or after October 1, 2006. Specifically, and conditions for reclassifications for
section 5003(d) amended section purposes of the wage index from rural
In an interim final rule published in 1886(d)(5)(F)(xiv)(II) of the Act to to urban, rural to rural, or from an urban
the Federal Register on June 13, 2001 exclude MDHs from the 12-percent DSH area to another urban area, with special
(66 FR 32174 and 32194) (which was adjustment factor cap. rules for SCHs and rural referral centers.
finalized in the Federal Register on For all discharges occurring on or Under section 1886(d)(8)(E) of the
August 1, 2001 (66 FR 39827)), we after October 1, 2006, the fiscal Act, an urban hospital may file an
incorporated into our regulations at intermediary will not apply the cap application to be treated as being
§ 412.106(d)(2) the provisions of section when calculating the DSH payments. located in a rural area if certain
211(b) of Public Law 106–554. Section These payments will be subject to conditions are met. The regulations
211(b) amended section 1886(d)(5)(F) of revision upon final settlement of the implementing this provision are located
the Act to revise the calculation of the cost reporting period. We note that this under § 412.103.
disproportionate share percentage change will not affect the calculation of Effective with reclassifications for FY
adjustment for hospitals affected by the the disproportionate patient percentage. 2003, section 1886(d)(10)(D)(vi)(II) of
revised DSH qualifying threshold We are proposing to amend the the Act provides that the MGCRB must
percentages specified in section 211(a) regulations at § 412.106 to include this use the average of the 3 years of hourly
of Public Law 106–554. When the provision under proposed new wage data from the most recently
section 211 changes were incorporated paragraph (d)(2)(iv)(D). published data for the hospital when
into the Code of Federal Regulations at evaluating a hospital’s request for
§ 412.106(d)(2), the regulation text at G. Geographic Reclassifications
reclassification. The regulations at
§ 412.106(d)(2)(v) was inadvertently (§§ 412.103, 412.230, and 412.234)
§ 412.230(d)(2)(ii) stipulate that the
deleted during the transcribing of the (If you choose to comment on issues wage data are taken from the CMS
new text into the existing regulations. in this section, please include the hospital wage survey used to construct
Section 412.106(d)(2)(v) specifies the caption ‘‘Geographic Reclassifications’’ the wage index in effect for prospective
payment adjustment factors for at the beginning of your comment.) payment purposes. To evaluate
hospitals that meet the following criteria applications for wage index
under § 412.106(c)(2) for discharges 1. Background
reclassifications for FY 2007, the
occurring on or after April 1, 1990, and With the creation of the MGCRB, MGCRB used the 3-year average hourly
before October 1, 1991, and on or after beginning in FY 1991, under section wages published in Table 2 of the
October 1, 1991: Hospitals located in an 1886(d)(10) of the Act, hospitals could August 12, 2005 IPPS final rule (70 FR
urban area, that have 100 or more beds, request reclassification from one 47508). These average hourly wages are
and that can demonstrate that, during geographic location to another for the taken from data used to calculate the
their cost reporting period, more than 30 purpose of using the other area’s wage indexes for FY 2004, FY 2005, and
percent of their net inpatient care standardized amount for inpatient FY 2006, based on cost reporting
revenues are derived from State and operating costs or the wage index value, periods beginning during FY 2000, FY
local government payments for care or both (September 6, 1990 interim final 2001, and FY 2002, respectively.
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proposing to change the payment changes under section 402(b) of Public section 508 of Public Law 108–173, a
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24109
qualifying hospital could appeal the 2006, the criteria for a hospital being geographic reclassification precede the
wage index classification otherwise reclassified to another wage area by the payment year by 5 years (that is, FY
applicable to the hospital and apply for MGCRB did not address the 2003 cost report data will be used to
reclassification to another area of the circumstances under which a single determine the FY 2008 geographic
State in which the hospital is located campus of a multicampus hospital may reclassifications).
(or, at the discretion of the Secretary, to seek reclassification. The regulations To our knowledge, only one hospital
an area within a contiguous State). Such require that a hospital provide data from has used the special rule for
reclassifications are applicable to the CMS hospital wage survey for the multicampus hospitals. This hospital
discharges occurring during the 3-year average hourly wage comparison that is has since joined a successful FY 2007
period beginning April 1, 2004, and used to support a request for urban county group reclassification
ending March 31, 2007. Under section reclassification. Because a multicampus application to the same area to which it
508(b), reclassifications under this hospital is required to report data for the was approved under the multicampus
process do not affect the wage index entire hospital on a single cost report, hospital rule. Thus, this hospital is no
computation for any area or for any there is no wage survey data for the longer required to meet the
other hospital and cannot be achieved individual hospital campus that can be multicampus hospital rule. Given that
in a budget neutral manner. used in a reclassification application. there is only one hospital that has used
Some hospitals currently receiving a In the FY 2006 IPPS final rule (70 FR this rule and this hospital was able to
section 508 reclassification are eligible 47444 through 47446 and 47487), we reclassify under the normal
to reclassify to that same area under the modified the reclassification rules at reclassification rules, we believe the
standard reclassification process as a § 412.230(d)(2)(iii) to allow campuses of special reclassification rule that applies
result of the new labor market multicampus hospitals located in to multicampus hospitals is no longer
definitions that we adopted for FY 2005. separate wage index areas to support a needed. Therefore, we are proposing not
In applying for a 3-year MGCRB reclassification application to an area to extend the special rule beyond FY
reclassification beginning in FY 2007, where another campus is located using 2008. For reclassification requests for
hospitals that are already reclassified to the average hourly (composite) wage FY 2009 and thereafter, a campus of a
the same area under section 508 should data submitted on the cost report for the multicampus hospital would be
have indicated in their MGCRB entire multicampus hospital as its required to obtain a separate provider
reclassification requests that if they hospital-specific data. This special rule number in order to provide the required
receive the MGCRB reclassification, applies for reclassification applications wage data from the CMS hospital wage
they would forfeit the section 508 for FY 2006, FY 2007, and FY 2008 and survey for the average hourly wage
reclassification for the first 6 months of will not be in effect for FY 2009 comparison in its MGCRB
FY 2007. reclassification requests. Because reclassification application.
We refer readers to section III.H.5. of reclassification applications to the
the preamble of this proposed rule for 4. Urban Group Hospital
MGCRB for FY 2009 must be filed in
a discussion of our updated procedural Reclassifications (§ 412.234(a)(3)(iii))
September 2007, or 1 month before the
rules established under section effective date of the FY 2008 IPPS rule, Section 412.234(a)(3)(iii) of the
1886(d)(10)(D)(v) of the Act in which a we are addressing whether to propose to regulations sets forth criteria for urban
section 508 hospital may retain its extend the special rule for multicampus hospitals to be reclassified as a group for
section 508 reclassification through its hospitals beyond FY 2008 in this FY FY 2007 and thereafter. Under these
expiration on March 31, 2007, and 2007 proposed rule. In the FY 2006 IPPS criteria, ‘‘hospitals located in counties
accept a reclassification approved by the final rule, we indicated that we would that are in the same Combined
MGCRB for the second half of FY 2007 continue to explore options that would Statistical Area (CSA) (under the MSA
(April 1, 2007, through September 30, allow individual campuses of definitions announced by the OMB on
2007). We also clarify the procedural multicampus hospitals to submit wage June 6, 2003) as the urban area to which
rules for an already individually data necessary for geographic they seek redesignation qualify as
reclassified hospital that is part of a reclassification and also monitor the meeting the proximity requirement for
group that includes a section 508 number of multicampus hospitals reclassification to the urban area to
hospital. affected by this provision (70 FR 47445 which they seek redesignation.’’
and 47446). Last year, several commenters brought
3. Multicampus Hospitals to our attention that, while the CSA
After reviewing this situation further,
(§ 412.230(d)(2)(iii)) standard allows for urban county group
we believe that if a campus of a
Subsequent to the publication of the multicampus hospital applies for reclassifications in large urban areas
FY 2005 IPPS final rule, we became reclassification, it should be required to throughout the United States (including
aware of a situation in which, as a result support its application with campus 10 of the 11 CBSAs containing
of the new labor market areas specific data. Because a cost report is Metropolitan Divisions), the CSA
implemented in FY 2005 for the IPPS, filed for an entire hospital, the campus standard precludes urban county group
a multicampus hospital previously would have to obtain a separate reclassifications between three
located in a single MSA is now located provider number and be treated for Metropolitan Divisions within one
in more than one CBSA. Under our Medicare payment purposes as an CBSA in Florida. They urged us to
existing policy, a multicampus hospital independent entity in order to be able modify our policy to also allow
with campuses located in the same labor to provide wage data for the specific hospitals located in counties that are in
market area receives a single wage campus. If a hospital were to make a the same CBSA (in the case of
index. However, if the campuses are change in FY 2007 to its organizational Metropolitan Divisions) as the area to
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located in more than one labor market structure to provide campus specific which they seek redesignation to be
area, payment for each discharge is data to support a reclassification considered to have met the proximity
determined using the wage index value application, the earliest fiscal year that requirement. We agree with the
for the MSA (or Metropolitan Divisions, the campus would be eligible to commenter’s proposed modification.
where applicable) in which the campus reclassify would be FY 2012 because the The proximity standard for group
of the hospital is located. Prior to FY cost report data that are used for reclassifications is intended to allow all
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24110 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
of a county’s hospitals to reclassify to an ownership has changed for other commenter emphasized that this
adjacent area where there is sufficient Medicare payment purposes. The concern is especially significant given
economic integration that there can be regulations also state that once a new the fact that an isolated hospital in a
an expectation that both areas are hospital has accumulated at least 1 year single hospital MSA is the only hospital
competing in a similar labor market of wage data using survey data from the in its urban area, and, therefore, has an
area. We believe there is sufficient CMS hospital wage survey used to even greater obligation to the
economic integration between determine the wage index, it is eligible communities it serves.
Metropolitan Divisions within a CBSA to apply for reclassification on the basis
that urban county reclassifications of those data. The commenter advocated a change to
within a CBSA or a CSA should be While the regulations preclude a new the urban county group reclassification
permitted. A CBSA, as defined by the provider from individually reclassifying regulations whereby a hospital in a
OMB, is a ‘‘geographic entity associated until the hospital accumulates at least 1 single hospital MSA surrounded by
with at least one core of 10,000 or more year of wage data from the CMS hospital rural counties would be able to
population, plus adjacent territory that wage survey used to determine the wage reclassify to the closest urban area that
has a high degree of social and index, a new provider may join a group is part of a CSA located in the same
economic integration with the core as reclassification under § 412.234. Under State as the hospital. We did not adopt
measured by commuting ties.’’ § 412.234, all hospitals in an urban this suggested policy under the IPPS for
Therefore, we are proposing to revise county must apply for redesignation as FY 2006 because we did not believe it
§ 412.234(a)(3) by adding a new a group. If we did not permit a new would be prudent to adopt the
paragraph (iv) to expand the proximity hospital to join group reclassifications, suggested policy in a final rule without
criteria to allow urban county groups to all hospitals in the county would not be first soliciting public comment.
apply for reclassification to another area part of the reclassification application
The commenter’s suggestion presents
within the same CBSA. We are and the urban county group would be
a number of issues on which we seek
proposing to require that, beginning precluded from reclassifying for 3 years
comment. First a single hospital in an
with FY 2008, hospitals must be located until the new hospital accumulated at
in counties that are in the same CSA or least 1 year of wage data. We believe it urban area receives a wage index value
CBSA (under the MSA definitions would be inequitable to preclude a that directly reflects the wages it pays,
announced by OMB on June 6, 2003) as group reclassification merely because undiluted by those of any other
the urban area to which they seek there was one newly constructed hospital. Thus, it would appear that in
redesignation to qualify as meeting the hospital or one hospital in the county such cases, the wage index is operating
proximity requirement for changed ownership and did not accept with substantial precision in adjusting
reclassification to the urban area to the prior owner’s provider agreement. the wage-related portion of the payment
which they seek redesignation. Alternatively, we believe that allowing to accord with the actual wage
group applications without a new experience of the hospital in question.
5. Effect of Change of Ownership on We have sought comment on the
hospital would be inconsistent with our
Urban County Group Reclassifications
regulations and unfair to new hospitals circumstances facing single hospitals in
(§§ 412.230, 412.234, and 489.18)
because it would put them at a urban areas in past rulemaking. The
We have received questions asking for competitive disadvantage with other justification for reclassifying a hospital
clarification of our policy regarding hospitals in the county. Because such that is receiving a wage index reflecting
whether newly constructed hospitals reclassifications are effective for 3 years, its own wages in this way is not readily
and hospitals that do not accept a new hospital that was not allowed to apparent. Second, it is open to question
assignment of the previous owner’s join a group reclassification would have why this hospital’s situation provides
provider agreement can join an urban to accept a lower wage index than all justification for special treatment under
county group reclassification. other hospitals in the county with the wage index. We understand it is one
The Medicare regulations at § 412.230 which it competes for labor for up to 3 of two 1886(d) hospitals located in an
require that, for individual hospital years. urban county entirely surrounded by
reclassifications, a hospital must
provide a weighted 3-year average of its 6. Requested Reclassification for rural counties and that it is within a
average hourly wages using data from Hospitals Located in a Single Hospital modest distance of a number of
the CMS hospital wage survey used to MSA Surrounded by Rural Counties hospitals that have received one form or
construct the wage index in effect for In the FY 2006 IPPS final rule (70 FR another of special payment status
prospective payment purposes. Section 47448), we presented a commenter’s relating to their rural locations. We are
489.18(c) of the regulations provides concern about the special circumstances interested in receiving comment on
that, when there is a change of of a hospital located in a single hospital whether these aspects indicate the need
ownership, the existing provider MSA surrounded by rural counties in for a special wage index reclassification
agreement will automatically be relation to the wage index and the rules provision. Third, the commenter’s
assigned to the new owner when there governing geographic reclassification. suggested policy would allow a hospital
is a change of ownership as defined in The commenter stated that an isolated to reclassify to a labor market area that
the rules. Section 412.230(d)(2)(iv) of hospital in a single hospital MSA is at is further away than other, closer urban
the regulations specifies that, in a competitive disadvantage because the labor market areas. We are concerned
situations where a hospital becomes a rural hospitals that surround the that such a reclassification would be
new provider and the existing hospital’s hospital have been reclassified to higher inconsistent with the proximity
provider agreement is not assigned wage index areas or have been standard we have generally used to
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under § 489.18, the wage data associated designated as rural referral centers, reflect local labor markets. Each of these
with the previous hospital’s provider SCHs, MDHs, or CAHs. The urban aspects of the suggested policy might
number will not be used in calculating hospital is ineligible for reclassification affect a significant number of other
the new hospital’s 3-year average hourly to a higher wage index area either as an hospitals and thus be viewed as having
wage. This policy is consistent with individual hospital or as part of a group widespread precedent that we invite
how we treat hospitals whose under the existing regulations. The comment upon.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24111
H. Payment for Direct Graduate Medical the PRA exceeded 140 percent of the teaching hospitals that subsequently
Education locality-adjusted national average PRA. merge.
Section 511 of Pub. L. 106–554 Our policy has always been that when
1. Background two or more teaching hospitals merge,
increased the ‘‘floor’’ established by
(If you choose to comment on issues Pub. L. 106–113 to equal 85 percent of we determine a weighted PRA for the
in this section, please include the the locality-adjusted national average surviving merged hospital using direct
caption ‘‘GME Payments’’ at the PRA for PRAs in existence in FY 2002. GME costs and resident data from the
beginning of your comment.) Existing regulations at § 413.77(d)(2)(iii) base year cost report for each teaching
Section 1886(h) of the Act, as added specify that, for purposes of calculating hospital involved in the merger. This
by section 9202 of the Consolidated direct GME payments, each hospital- policy was detailed in Questions and
Omnibus Budget Reconciliation Act specific PRA is compared to the floor Answers on Medicare GME Payments
(COBRA) of 1985 (Pub. L. 99–272) and (for FY 2001 and FY 2002) and the Issued on November 8, 1990: ‘‘[When]
implemented in regulations at existing ceiling (for FY 2001 through 2013) to two hospitals merge * * * the merged
§§ 413.75 through 413.83, establishes a determine whether a hospital-specific hospital’s per resident amount * * *
methodology for determining payments PRA should be revised. We note that, [is] based on the weighted average of the
to hospitals for the costs of approved under existing regulations at § 413.77(c), per resident amounts of both hospitals.’’
graduate medical education (GME) if a hospital-specific PRA for FY 2001 or We believe this is an equitable way to
programs. Section 1886(h)(2) of the Act, FY 2002 is revised due to application of determine a PRA for the surviving
as added by COBRA, sets forth a the floor PRA, the revised PRA is the merged hospital because it is based on
methodology for the determination of a starting point for the PRA in future the relative costs and sizes of the GME
hospital-specific, base-period per years, subject to the annual inflation training programs in the respective
resident amount (PRA) that is calculated adjustment and any other applicable facilities. Moreover, we believe this
by dividing a hospital’s allowable costs policy minimizes the role Medicare
adjustments.
of GME for a base period by its number GME payments play in the choice of the
of residents in the base period. The base Section 1886(h)(4)(F) of the Act
established caps on the number of surviving hospital entity. For example,
period is, for most hospitals, the there is no incentive to choose the
hospital’s cost reporting period allopathic and osteopathic residents that
hospitals may count for purposes of surviving hospital based in part on the
beginning in FY 1984 (that is, the period hospitals’ relative PRAs.
beginning between October 1, 1983, calculating direct GME payments. For
To calculate the weighted average
through September 30, 1984). Medicare most hospitals, the caps were the
PRA for the merged entity, the fiscal
direct GME payments are calculated by number of allopathic and osteopathic
intermediary begins by determining the
multiplying the PRA times the weighted FTE residents training in the hospital’s base year PRAs and the base year FTE
number of full-time equivalent (FTE) most recent cost reporting period ending resident counts of the hospitals that
residents working in all areas of the on or before December 31, 1996. Section merge. The weighted average PRA is
hospital (and nonhospital sites, when 422 of Pub. L. 108–173 amended section calculated by adding the product of
applicable), and the hospital’s Medicare 1886(h)(7) of the Act and provided for each hospital’s base year PRA and its
share of total inpatient days. The base reductions to the resident caps of base year FTE resident count, and
year PRA is updated each year for teaching hospitals that were training a dividing that number by the total
inflation. However, as specified in number of FTE residents below their number of the base year FTE residents
section 1886(h)(2)(D)(ii) of the Act, for cap in a reference period, and for those hospitals.
cost reporting periods beginning on or authorized a ‘‘redistribution’’ of FTE When our current methodology was
after October 1, 1993, through resident slots to hospitals that could first established for calculating the new
September 30, 1995, each hospital- demonstrate a likelihood of using the PRA for a merged hospital, we adopted
specific PRA for the previous cost additional resident slots within the first a policy to use base year PRAs and FTE
reporting period is not updated for three cost reporting periods beginning resident counts. It was appropriate and
inflation for any FTE residents who are on or after July 1, 2005. workable to use data from the PRA base
not either a primary care or an obstetrics 2. Determination of Weighted Average year because the base year data (usually
and gynecology resident. As a result, Per Resident Amounts (PRAs) for for the 1984 fiscal year) associated with
hospitals that train primary care and Merged Teaching Hospitals (§ 413.77) the hospital-specific PRAs were easily
obstetrics and gynecology residents, as accessible. However, these data are now
well as nonprimary care residents in FY (If you choose to comment on issues often over 20 years old and it has
1994 or FY 1995, have two separate in this section, please include the become administratively burdensome
PRAs: One for primary care and caption ‘‘GME: PRA for Merged for both CMS and the fiscal
obstetrics and gynecology residents and Hospitals’’ at the beginning of your intermediaries to access base year
one for nonprimary care residents. comment.) information in calculating the weighted
Pub. L. 106–113 amended section As stated in the background section average of the PRAs for merged
1886(h)(2) of the Act, effective October above, in accordance with section hospitals.
1, 2000, to establish a methodology for 1886(h) of the Act, Medicare pays In addition to it being
the use of a national average PRA in teaching hospitals for the direct costs of administratively burdensome to use
computing direct GME payments for GME based on the per resident direct base year cost report data, where a
cost reporting periods beginning on or GME costs in a base year. For most hospital has two PRAs—one for primary
after October 1, 2000. Specifically, Pub. hospitals, the base year is FY 1984 (cost care and obstetrics and gynecology
L. 106–113 established a ‘‘floor’’ for FY reporting periods beginning between residents and another for nonprimary
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2001 such that a hospital-specific PRA October 1, 1983, and September 30, care residents, these two PRAs are not
should not be less than 70 percent of the 1984). Although section 1886(h) of the being taken into account in developing
locality-adjusted national average PRA. Act provides for the establishment of a the weighted average PRA for the
In addition, it established a ‘‘ceiling’’ PRA for a hospital that trained residents merged hospital. As discussed earlier,
that froze or limited the annual inflation in the 1984 base year, the statute does hospitals that were training nonprimary
adjustment to a hospital-specific PRA if not address how to treat the PRA(s) of care residents in FYs 1994 and 1995
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24112 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
have a separate nonprimary care PRA discussed in the August 1, 2002 IPPS (c) For hospitals with a single PRA,
because there was no update for final rule (67 FR 50067) effective multiple the single PRA by the
inflation applied to the PRA for October 1, 2002, we revised our policy hospital’s total number of FTE residents.
nonprimary care residents in those years to use PRAs and FTE resident data from (d) Add the products from applicable
(§ 413.77(c)(2)). Accordingly, many the most recently settled cost reports of Steps 3(a), (b), and (c) for all teaching
teaching hospitals currently have two teaching hospitals in the same CBSA as hospitals that merged.
PRAs: One for primary care and the new teaching hospitals, rather than (e) Add the number of FTE residents
obstetrics and gynecology residents and data from the 1984 base year (existing from Step 1 for all hospitals.
one for all other residents. (Hospitals § 413.77(e)(1)(ii)(B)). We revised this (f) Divide the sum from Step 3(d) by
that first train residents after FY 1995 policy for establishing PRAs for new the sum from Step 3(e). The result is the
would only have a single PRA, even if teaching hospitals because it is less weighted average PRA for the merged
they train both primary care residents administratively burdensome to use hospital.
and nonprimary care residents.) Because data from the hospitals’ most recently As mentioned above, many hospitals
the current methodology for calculating settled cost reports and because the currently have two PRAs, one for
the weighted average PRA for a merged more recent data takes into account that primary care residents and another for
teaching hospital is based solely on data hospitals have a primary care PRA and nonprimary care residents. An
from the PRA base year (which is a nonprimary care PRA. In this advantage to using data from the most
usually prior to the years during which recently settled cost reports of the
proposed rule, we are proposing a
the PRAs were not adjusted for inflation hospitals involved in a merger is that
similar policy revision for establishing a
to reflect nonprimary care residents), the two PRAs are taken into account in
merged teaching hospital’s PRA.
this methodology does not take into determining the weighted average PRA
We are proposing that the fiscal for the merged hospital. Because two
account that the merged hospitals may intermediaries would use the following
currently have more than one PRA. PRAs would be taken into account
steps to calculate the weighted average under this proposal, we considered
Effective for cost reporting periods
PRA for the merged teaching hospital: whether a primary care PRA and a
beginning on or after October 1, 2006,
rather than use direct GME count of Step 1: Identify the primary care and nonprimary care PRA should therefore
residents and PRA from hospitals’ base obstetrics and gynecology FTE resident be determined for the merged hospital.
year cost reports, we are proposing to count, the nonprimary care FTE resident Although it would be possible to
simplify and revise the weighted count for hospitals with two PRAs, or determine and retain two PRAs for a
average PRA methodology for the single FTE resident count for merged hospital when one or more
determining a merged teaching hospitals with a single PRA, for each hospitals involved in the merger had
hospital’s PRA by using FTE resident teaching hospital involved in the two PRAs, we are not proposing to do
data and PRA data from the most merger. (Use the sum of the FTE so. We are proposing that a single PRA
recently settled cost reports of the resident counts from line 3.07, line 3.08, also be determined for the merged
merging hospitals. It is less and line 3.11 of the hospital’s most hospital in this situation because it is
administratively burdensome to use recently settled Medicare cost report, more administratively straightforward
these data, since these data are more CMS 2552–96, Worksheet E–3, Part IV.) for the fiscal intermediaries and the
recent and, therefore, more accessible. Step 2: Identify the PRAs (either a merged hospitals and since the merged
In addition, these data would reflect hospital’s primary care and obstetrics hospital itself was not in existence in
both a primary care and obstetrics and and gynecology PRA and nonprimary the years that the two PRAs were
gynecology PRA and, if applicable, a care PRA or, if applicable, a hospital’s established (FY 1994 and FY 1995), we
nonprimary care resident PRA. single PRA) from the most recently do not believe it is necessary to retain
We note that prior to FY 2003, our settled cost report for each hospital the two PRAs. Furthermore, because the
policy for calculating the PRA for a new involved in the merger, and update the two existing PRAs are taken into
teaching hospital was to calculate the PRAs using the CPI–U inflation factor to account when establishing the single
PRA based on the lower of the new coincide with the fiscal year end of the PRA for the merged hospital, and the
teaching hospital’s actual cost per surviving teaching hospital. For statutory provision that resulted in the
resident in its base period or a weighted example, if the surviving teaching creation of two PRAs has no continuing
average of all the PRAs of existing hospital’s fiscal year end is December effect (because the updates were
teaching hospitals in the same 31, 2006, and the most recently settled prohibited only for FY 1994 and FY
geographic wage area, as that term is cost report of the teaching hospital(s) 1995), we see no compelling reason to
used under the prospective payment involved in the merger is June 30, 2003, continue to carry two PRAs for a merged
system (existing § 413.77(e)(1)). (For the PRAs from this cost report would be hospital.
ease of discussion, we refer to a hospital updated for inflation to December 31, The following is an example of how
that did not participate in Medicare or 2006. to calculate a weighted average PRA
that did not have any approved medical under this proposed revised
Step 3: Calculate the weighted average
residency training programs during the methodology:
PRA for the single merged hospital Example: Assume that Hospital A,
period beginning between October 1,
using the PRAs and FTE resident counts Hospital B, and Hospital C merge and
1983, through September 30, 1984, and
from Step 1 and Step 2. For each Hospital B with a fiscal year end of
has since commenced participating in
teaching hospital in the merger: December 31, 2006, is the surviving
Medicare and begun training residents
in an approved program, as a ‘‘new (a) For hospitals with two PRAs, hospital. In their respective most
teaching hospital.’’) The weighted multiply the primary care PRA by the recently settled cost reports, Hospital A
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average PRA of teaching hospitals number of primary care and obstetrics has 200 primary care and obstetrics and
within a particular geographic wage area and gynecology FTE residents. gynecology FTE residents and 150
was determined using the base year PRA (b) For hospitals with two PRAs, nonprimary care FTE residents, and
and the base year FTE resident count of multiply the nonprimary care PRA by Hospital B has 50 primary care and
each respective teaching hospital within the number of nonprimary care FTE obstetrics and gynecology FTE residents
the geographic wage area. However, as residents. and 60 nonprimary care FTE residents.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24113
Hospital C became a teaching hospital by using the lower of its hospital- as long as no residents are on duty at the
in 2000 and has 25 FTE residents. After specific PRA based on the actual new teaching hospital in the first month
updating the primary care and allowable direct GME costs and FTE of the subsequent cost reporting
nonprimary care PRAs for inflation by residents during a base period as period(s). We believe this scenario is
the CPI–U to December 31, 2006, defined in § 413.77(e) or the updated contrary to the statutory intent of
Hospital A has a primary care PRA of weighted mean value of PRAs of other section 1886(h) of the Act, which
$120,000 and a nonprimary care PRA of teaching hospitals in the same instructs that instead of payment on a
$115,000, Hospital B has a primary care geographic area. reasonable cost basis, the Secretary is to
PRA of $100,000 and a nonprimary care Existing regulations at § 413.77(e) determine and base direct GME
PRA of $97,000, and Hospital C has a specify that the base year for payments on a PRA for each hospital
single PRA of $90,000. establishing a PRA for a new teaching with a residency program. For that
(a) Primary care: hospital is the first cost reporting period reason, we are proposing to revise
Hospital A: $120,000 × 200 FTEs = in which the new teaching hospital § 413.77(e)(1) and (e)(1)(i) to provide
$24,000,000 participates in Medicare and the that we will make a PRA determination
Hospital B: $100,000 × 50 FTEs = residents are on duty during the first even where residents are not on duty in
$5,000,000 month of that period. If the new the first month of a cost reporting period
(b) Nonprimary care: teaching hospital begins training but where residents began training at
Hospital A: $115,000 × 150 FTEs = residents but does not have residents on the hospital in the prior cost reporting
$17,250,000 duty during the first month of the first period. Effective for cost reporting
Hospital B: $97,000 × 60 FTEs = cost reporting period in which training periods beginning on or after October 1,
$5,820,000 occurs, the new teaching hospital is 2006, if a new teaching hospital begins
(c) Single PRA: Hospital C: $90,000 × paid on a reasonable cost basis under training residents in a cost reporting
25 FTEs = $2,250,000 § 413.77(e) for any GME costs incurred period beginning on or after October 1,
(d) $24,000,000 + $5,000,000 + by that hospital during that period. The 2006, and no residents are on duty
$17,250,000 + $5,820,000 + $2,250,000 intent of this policy for new teaching during the first month of that period, the
= $54,320,000 hospitals is to make a more accurate fiscal intermediary establishes a PRA for
(e) 200 + 50 + 150 + 60 + 25 = 485 determination of a PRA based on the the hospital using: (1) The cost and
total FTEs hospital’s per resident direct GME costs resident data from the cost reporting
(f) $54,320,000/485 FTEs = $112,000, in a cost reporting period in which GME period immediately following the one
the weighted average of the hospitals costs have been incurred for that entire for which GME training at the hospital
involved in the merger for fiscal year period. As we noted in a response to was first reported (that is, the base
end December 31, 2006. comments in a final rule published in period); or (2) the updated weighted
3. Determination of Per Resident the Federal Register on September 29, mean value of PRAs of all hospitals
Amounts (PRAs) for New Teaching 1989 (54 FR 40310), we believe that located in the same geographic wage
Hospitals (§ 413.77(e)) where the new teaching hospital’s cost area. We note that, as with existing
reporting period begins on a date other policy, the proposed base year need not
(If you choose to comment on issues than July 1 (the beginning of the be a full cost reporting year. Even where
in this section, please include the academic year), for example, October 1 that cost reporting period may be a short
caption GME: PRA for New Teaching or January 1, the cost reporting period (less than 12 months) cost reporting
Hospitals’’ at the beginning of your that includes costs and resident counts period, we believe an appropriate PRA
comment.) from the first year of the training will be determined since the number of
As we discussed earlier in the program may not be reflective of the FTEs will be commensurate with the
background portion of this section, the actual average costs per resident of the costs incurred in this short cost
hospital-specific, base-period PRA used program because the full complement of reporting period.
in the payment methodology for residents might not be on duty, and
determining Medicare direct GME those that are on duty might be 4. Requirements for Counting and
payments is calculated by dividing a receiving a salary for as few as 1 or 2 Appropriate Documentation of FTE
hospital’s allowable direct costs of GME months of the cost reporting period. In Residents: Clarification (§§ 413.75(d),
in a base period by its number of the usual case, training in the program 413.78(b) and (e), 413.80, and 413.81)
residents in that base period. In the case would continue into the following cost (If you choose to comment on issues
of a hospital that did not train residents reporting period and residents would in this section, please include the
in its FY 1984 cost reporting period, a thus be on duty in the first month of this caption ‘‘FTE Resident Count and
PRA is determined by comparing and next cost reporting period. Documentation’’ at the beginning of
taking the lower of a PRA based on Consequently, our existing regulations your comment.)
direct GME costs and FTE residents in at § 413.77(e)(1) specify that the PRA is Despite the fact that current policies
a base year or the updated weighted to be determined by using the cost and concerning the counting of FTE
mean value of PRAs of all hospitals resident data from the first cost residents for IME and direct GME
located in the same geographic wage reporting period during which residents payment purposes have been in effect
area. For ease of discussion, we refer to are training in the first month of the cost since October 1985, we continue to
a hospital that did not participate in reporting period. receive questions on the proper
Medicare or have any approved medical It has come to our attention that, in counting and appropriate
residency training programs during the rare instances, it is possible for a new documentation for FTE residents for
base period beginning between October teaching hospital, either through IME and direct GME payment purposes.
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1, 1983, through September 30, 1984, happenstance or by purposeful gaming As a result of these continuing
and has since commenced participating of the policy, to continue to be questions, we are clarifying in this
in Medicare and begun training reimbursed for direct GME costs on a proposed rule the policies that apply in
residents in an approved program, as a reasonable cost basis even beyond the determining hospitals’ FTE resident
‘‘new teaching hospital.’’ A new first cost reporting period during which counts for Medicare GME payment
teaching hospital’s PRA is established residents begin training at the hospital purposes.
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24114 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
In the existing regulations at hospitals. Hospitals are not permitted to resident is a foreign medical graduate,
§ 413.78(b) for direct GME payments, we decide among themselves how their including documentation concerning
specify that no individual may be FTEs will be counted. A hospital may whether the resident has satisfied the
counted as more than one FTE, and that not count a greater number of FTE regulatory requirements for foreign
a hospital cannot claim the time spent residents than is actually training at the medical graduates at § 413.80. The
by residents training at another hospital. hospital (or its nonhospital sites) during information must be certified by an
Therefore, if a resident spends time the year. Each hospital must maintain official of the hospital and, if different,
training in more than one hospital or its own records which demonstrate, for an official responsible for administering
except as provided at § 413.78(e) in a the entire cost reporting period, the the residency program. Again, proper
nonprovider setting, the resident counts amount of time that the resident trained documentation on where and when a
as a partial FTE based on the proportion at the hospital and, if applicable, a FTE resident is training during a cost
of time the resident trains at the hospital nonhospital site. Furthermore, to the reporting period is essential in order for
or nonprovider setting to the resident’s extent that residents train in the hospital to receive direct GME and
total time worked. (The same provisions nonhospital sites, the hospital claiming IME payments based on the proper
apply to part-time residents as specified the FTEs in the nonhospital site must number of FTE resident(s). Inaccurate,
in § 413.78(b).) A similar policy exists at meet the requirements at § 413.78(e). incomplete, or inappropriate
§ 412.105(f)(1)(ii) and (iii) for purposes Situations such as the one described documentation will lead to Medicare
of counting FTE residents for IME above involving Hospital C and Hospital disallowing certain FTE residents from
payment purposes. As we have D are particularly harmful when one or being counted for purposes of direct
explained in previous Federal Register more of the hospitals involved GME and IME payments. We note that
documents (55 FR 36064, September 4, incorrectly report FTEs in the cost we are not expanding or making any
1990 and 67 FR 50077, August 1, 2002), reporting period used to establish one or changes to current policy for proper
these policies apply even when a more of the hospitals’ FTE resident documentation of FTEs. Rather, we are
hospital actually incurs the cost of caps, and as a result, the caps are clarifying the existing regulations
training the resident(s) at another incorrectly established. Unless the concerning proper counting and
hospital(s). For example, during a cost incorrect caps are revised pursuant to documentation of FTEs.
reporting year, a full-time resident trains our regulations regarding review and
revision of agency determinations, those 5. Resident Time Spent in Nonpatient
at Hospital A for 6 months and trains at Care Activities as Part of Approved
Hospital B for 6 months. Hospital A is caps will be applied to the hospital(s) in
future years. For instance, we have Residency Programs (§§ 413.9 and
paying the salary and fringe benefits of 413.78(a))
the resident for the entire year. In this learned of situations where a hospital’s
FTE resident caps were established In section IV.H.4. of this preamble, we
case, each hospital would only count
incorrectly a number of years earlier discussed the importance of properly
0.5 of an FTE for that resident. Hospital
and, due to administrative finality of documenting where and when residents
A would not be able to count the entire
settled cost reports, can no longer be are training in a particular hospital or
FTE for that resident, regardless of the
adjusted. However, going forward, the nonhospital site, in order for that
fact that it incurred all of the training
hospital’s count of FTEs must be based hospital to count those FTE residents for
costs for the resident during that
on where the residents are training and purposes of direct GME and IME
training year. payment. In addition, it is important for
can only reflect the number of residents
We also have become aware of issues actually training in the hospital (or its hospitals to be able to document the
that have arisen due to a hospital’s nonhospital sites). activities in which residents are engaged
failure to document the number of FTE In order to ensure that FTEs are being because there are certain activities that
residents claimed on its cost report. properly counted, hospitals are required are not allowable for direct GME or IME
Proper documentation is required so to furnish specific documentation to payment purposes, even though those
that Medicare fiscal intermediaries can support the number of FTE residents activities may be performed as part of an
determine where and when a resident(s) included in the hospital’s FTE count. approved residency program.
is training and to allow the fiscal Section 413.75(d) specifies the Specifically, it has come to our attention
intermediary to make payment to the requirements concerning documentation that there may be some confusion in the
hospital based on the percentage of time of FTE residents. Proper documentation provider community as to whether the
the resident(s) spends at each training must include the following information: time that residents spend in nonpatient
facility to the total time trained. A The name and social security number of care activities that are part of the
rotation schedule is the primary the resident; the type of residency approved residency program may be
documentation that can support the program in which the individual counted for the purpose of direct GME
direct GME and IME resident counts but participates and the number of years the and IME payments. We have most
other similar documentation may be resident has completed in all types of recently received questions as to
acceptable. The following is a situation residency programs; the dates the whether the time residents spend in
of which we learned that illustrates how resident is assigned to the hospital and nonhospital sites in didactic activities
inadequate documentation resulted in any hospital-based providers (similar to such as journal clubs or classroom
inappropriate counting of FTEs. Two the rotation schedule); the dates the lectures may be included in determining
hospitals, Hospital C and D, were resident is assigned to other hospitals, the allowable FTE resident counts. To
‘‘associated’’ with each other, with or other freestanding providers, and any respond to these inquiries and to resolve
residents training at both hospitals. nonprovider setting during the cost any confusion, we are clarifying our
However, instead of differentiating reporting period, if any; and the name policy concerning the counting of time
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between the number of FTEs and the of the employer paying the resident’s spent in nonpatient care activities for
actual amount of time spent at each salary. In addition, the documentation the purpose of direct GME and IME
hospital, Hospitals C and D totaled their should include the name of the medical, payments in both hospital and
respective FTEs and split them 50/50. osteopathic, dental, or podiatric school nonhospital settings.
Splitting the FTE count 50/50 resulted from which the resident graduated and With respect to training in
in inappropriate payment to both the date of graduation, and whether the nonhospital settings, the time that
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24115
residents spend in nonpatient care the resident is involved in patient care’’ 40286), the hospital complex consist of
activities as part of an approved (63 FR 40986, July 31, 1998). While we the hospital and the hospital-based
program, including didactic activities, have not explicitly defined in providers and subproviders. Therefore,
cannot be included in a hospital’s direct regulations ‘‘patient care activities,’’ we the distinction between patient care
GME or IME FTE resident count. This have applied the plain meaning of that activities and nonpatient care activities
longstanding policy is based on the term. In addition, we note that the scope is not relevant to direct GME FTE count
statutory requirements for counting FTE of the term ‘‘patient care’’ had been determinations when the residents are
residents training in nonhospital sites. well-established in the Medicare training in the hospital complex.
For the purpose of direct GME program even prior to issuance of the However, for IME payment purposes,
payments, providers have been allowed first rules on counting FTE residents for consistent with the regulations at
since July 1, 1987, to count the time purposes of direct GME and IME § 413.9, only time spent in patient care
residents spend training in nonhospital payments. For example, prior to the activities in the hospital may be
sites under certain conditions. Section IPPS, acute care hospitals were paid by counted. It has been our longstanding
1886(h)(4)(E) of the Act specifies that Medicare for inpatient services based on policy that, regardless of the site of
the implementing regulations their reasonable operating costs, or costs training, ‘‘* * * we do not include
concerning computation of direct GME relating to the provision of reasonable residents in the IME count to the extent
for training in nonhospital sites ‘‘shall and necessary ‘‘patient care.’’ The that the residents are not involved in
provide that only time spent in activities longstanding regulation at 42 CFR 413.9, furnishing patient care * * *’’ (66 FR
relating to patient care shall be counted entitled ‘‘Costs related to patient care,’’ 39897, August 1, 2001).
and that all the time so spent by a states that ‘‘all payments to providers of 6. Medicare GME Affiliated Groups:
resident under an approved medical services must be based on the Technical Changes to Regulations
residency training program shall be reasonable cost of services covered
counted towards the determination of under Medicare and related to the care (If you choose to comment on issues
full-time equivalency, without regard to of beneficiaries.’’ Thus, the scope of in this section, please include the
the setting in which the activities are costs recognized as reasonable under caption ‘‘GME Affiliated Group
performed, if the hospital incurs all, or Medicare had been limited to those Technical Changes’’ at the beginning of
substantially all, of the costs for the relating to ‘‘patient care,’’ or to those your comment.)
training program in that setting’’ In the FY 2005 IPPS final rule (69 FR
relating to covered services for the care
(emphasis added). 49112 and 49254 through 49265), we
of beneficiaries. Although the agency
For IME payment purposes, hospitals redesignated the contents of § 413.86
appears to have made a conflicting
were first allowed to count the time (which contained the regulations
statement in a letter directed to a governing Medicare payment for direct
residents spend training in nonhospital particular individual implying that
sites for discharges occurring on or after GME) as §§ 413.75 through 413.83 and
didactic time spent in nonhospital made corresponding cross-reference
October 1, 1997. Section settings could be counted for direct
1886(d)(5)(B)(iv) of the Act was changes in the text of these regulations.
GME and IME, that statement was We have discovered that under the
amended by Pub. L. 105–33 in 1997 to inaccurate. We have applied and
provide that ‘‘all the time spent by an definition of ‘‘Medicare GME affiliated
continue to apply the plain meaning of group’’ under § 413.75(b), we incorrectly
intern or resident in patient care the statutory terms ‘‘patient care
activities under an approved medical cited the cross-reference to the rotation
activities’’ and ‘‘activities relating to requirements for GME affiliated groups
residency program at an entity in a
patient care’’ in the context of approved in paragraphs (1), (2), and (3), as
nonhospital setting shall be counted
GME programs. That is, the plain ‘‘§ 413.79(g)(2)’’. In this proposed rule,
towards the determination of full-time
meaning of patient care activities would we are proposing to correct the cross-
equivalency if the hospital incurs all, or
certainly not encompass didactic reference for the rotation requirements
substantially all, of the costs for the
activities. Rather, the plain meaning in paragraphs (2) and (3) of the
training program in that setting’’
refers to the care and treatment of definition to read ‘‘§ 413.79(f)(2)’’.
(emphasis added).
We understand that, as part of an particular patients, or to services for In the FY 2006 IPPS final rule (70 FR
approved medical residency program, which a physician or other practitioner 47457 and 47489), we made additional
residents are often required to may bill. Time spent by residents in changes in certain sections of the GME
participate in didactic and ‘‘scholarly’’ such patient care activities may be redesignated regulations to correct
activities such as educational counted for direct GME and IME cross-references to other parts of 42 CFR
conferences, journal clubs, and payment purposes in the nonhospital Chapter IV relating to the definitions of
seminars. Some of these activities may site. Time spent by residents in other the ‘‘urban’’ and ‘‘rural’’ location of a
take place in nonhospital sites, such as activities in the nonhospital site that do hospital. In one of the corrections, in
freestanding clinics or physicians’ not involve the care and treatment of paragraph (1) under the definition of
offices, or in conference rooms at particular patients, such as didactic or ‘‘Medicare GME affiliated group’’ under
nonhospital settings. In implementing ‘‘scholarly’’ activities, is not allowable § 413.75(b), we inadvertently dropped
section 1886(h)(4)(E) of the Act for for direct GME and IME payment the language in that paragraph relating
direct GME payment purposes, we purposes. to the rotational requirements for these
specifically stated that ‘‘only time spent We note that there is a difference in groups, including the incorrect cross-
in activities relating to patient care may the rules for counting FTE resident time reference to § 413.79(g)(2). We are
be counted [in nonhospital sites]’’ (54 for IME and direct GME payments when proposing to correct the language of
FR 40292, September 29, 1989). In 1998, residents are training in a hospital. For paragraph (1) under the definition of
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when we implemented the statute direct GME payment purposes, under ‘‘Medicare GME affiliated group’’ under
allowing FTE residents to be counted in § 413.78(a), ‘‘residents in an approved § 413.75(b) by adding the dropped
nonhospital sites for IME, we reiterated program working in all areas of the language and correcting the cross-
that a hospital may only count resident hospital complex may be counted.’’ As reference to read ‘‘§ 413.79(f)(2).’’
training time ‘‘in nonhospital sites for explained in the September 29, 1989 In the FY 2006 IPPS final rule (70 FR
indirect and direct GME, respectively, if Federal Register document (54 FR 47454 and 47489), we revised
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24116 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
§ 413.79(e)(1)(iv) to provide that a new the IPPS, the IRF PPS, or the LTCH PPS participating hospitals and CAHs.
urban teaching hospital that qualifies for and the prospective per diem payment (Throughout this section of this
an adjustment to its FTE cap for a newly amount for facilities under the IPF PPS. proposed rule, when we reference the
approved program may enter into a Similarly, these costs are considered to obligation of a ‘‘hospital’’ under these
Medicare GME affiliation agreement, but be part of the hospitals’ normal sections of the Act and in our
only if the resulting adjustments to its operating costs and are included as regulations, we mean to include CAHs
direct GME and IME caps are ‘‘positive reasonable costs that are subject to the as well.) These obligations concern
adjustments.’’ We specified in the TEFRA rate-of-increase limits applicable individuals who come to a hospital
preamble of that final rule that this to hospitals that continue to receive emergency department and request
provision is effective for affiliation payments subject to those limits, examination or treatment for medical
agreements entered into on or after including cancer and children’s conditions, and apply to all of these
October 1, 2005. However, we hospitals. individuals, regardless of whether they
inadvertently did not include this Regulations governing payment for are beneficiaries of any program under
effective date in the regulation text. We the costs of approved and allied health the Act.
are proposing to revise § 413.79(e)(1)(iv) education activities are located at 42
to include the effective date as part of CFR 413.85. The statutory provisions cited above
the text of that section. In the FY 2004 IPPS final rule (68 FR are frequently referred to as the
In addition, we are proposing to 45429), we revised the regulations at Emergency Medical Treatment and
correct a cross-reference in the § 413.85(h)(3) to further clarify the Labor Act (EMTALA), also known as the
introductory text of paragraph (f) of difference between provider-operated patient antidumping statute. EMTALA
§ 413.79 relating to Medicare GME and continuing education programs. We was passed in 1986 as part of the
affiliated groups. The cross-reference to revised the regulations to state that, Consolidated Omnibus Budget
‘‘paragraph (e)(3)’’ of § 413.79 should effective October 1, 2003, programs in Reconciliation Act of 1985 (COBRA),
read ‘‘paragraph (d)’’ of that section. which employees participate that do not Pub. L. 99–272. Congress enacted these
This proposed change is necessary to lead to the ability to practice and begin antidumping provisions in the Social
accurately cite the reference to our rules employment in a nursing or allied Security Act to ensure that individuals
regarding the 3-year rolling average. health specialty are also treated as with emergency medical conditions are
normal operating costs. We now realize not denied essential lifesaving services
I. Payment for the Costs of Nursing and that when we revised § 413.85(h)(3) to because of a perceived inability to pay.
Allied Health Education Activities:
include this clarification, we Under section 1866(a)(1)(I)(i) of the
Clarification (§ 413.85)
inadvertently did not specify that the Act, a hospital that fails to fulfill its
(If you choose to comment on issues provision was applicable to trainees as EMTALA obligations under these
in this section, please include the well as employees. In the preamble of provisions may be liable for termination
caption ‘‘Nursing and Allied Health the FY 2004 IPPS final rule, we stated of its Medicare provider agreement,
Education Activities’’ at the beginning that because § 413.85(h)(3) refers to which would result in loss of all
of your comment.) education that will not lead to the
In addition to direct GME and IME Medicare and Medicaid payments.
ability to practice and begin
payments to hospitals for the direct and employment, we intended the In general, section 1867 of the Act sets
indirect costs incurred for their graduate provisions to apply not only to forth requirements for medical
medical education programs in employees but to trainees as well. screening examinations for individuals
medicine, osteopathy, dentistry, and Therefore, in this proposed rule, we are who come to the hospital and request
podiatry, Medicare makes payments to proposing to make a technical change to examination or treatment for a medical
hospitals for two other categories of § 413.85(h)(3) to make it applicable to condition. The section further provides
education-related costs for which both employees and trainees. This that if a hospital finds that such an
different payment policies apply: proposed technical change would individual has an emergency condition,
• Approved nursing and allied health clarify that the educational activities in it is obligated to provide that individual
education programs operated by the which employees or trainees participate, with either necessary stabilizing
hospital. The costs of these programs are but that do not lead to the ability to treatment or an appropriate transfer to
excluded from the definition of practice and begin employment in a another medical facility where
inpatient hospital operating costs and nursing or allied health specialty, are stabilization can occur.
are not included in the calculation of treated as normal operating costs. We The EMTALA statute also outlines the
the per discharge payment rates for note that we are not proposing to obligation of hospitals to receive
hospitals paid under the IPPS, or in the expand or make any changes to the appropriate transfers from other
calculation of payments to hospitals and current payment policy for nursing and hospitals. Section 1867(g) of the Act
hospital units excluded from the IPPS allied health education activities; rather, states that a participating hospital that
that are subject to the rate-of-increase we are merely proposing to clarify the has specialized capabilities or facilities
ceiling. These costs are separately language of the existing regulations. (such as burn units, shock-trauma units,
identified and ‘‘passed through’’ (that is,
J. Hospital Emergency Services Under neonatal intensive care units or (with
paid separately on a reasonable cost
EMTALA (§ 489.24) respect to rural areas) regional referral
basis).
• All other costs that can be centers as identified by the Secretary in
(If you choose to comment on issues regulation) shall not refuse to accept an
categorized as educational programs and in this section, please include the
activities (for example, continuing appropriate transfer of an individual
caption ‘‘EMTALA’’ at the beginning of
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24117
2. Role of the EMTALA Technical functions; or serious dysfunction of any of Participating Hospitals in Emergency
Advisory Group (TAG) bodily organ or part; or with respect to Cases, TAG A–406.)
a pregnant woman who is having At its meeting held on June 15–17,
Section 945 of Pub. L. 108–173
contractions, that there is inadequate 2005, the EMTALA TAG heard
(MMA) required the Secretary to
time to effect a safe transfer to another testimony from representatives of both
establish a Technical Advisory Group
hospital before delivery; or that transfer physician and nonphysician
(TAG) to provide the Secretary with
may pose a threat to the health and professional societies regarding the
advice concerning issues related to
safety of the woman or the unborn competence of practitioners other than
EMTALA regulations and
child.’’ physicians to certify false labor. In
implementation. Section 945 of Pub. L.
This definition is identical to the particular, a representative of the
108–173 further requires that the American College of Nurse-Midwives
EMTALA TAG be composed of 19 definition of ‘‘emergency medical
condition’’ in section 1867(e)(1) of the stated that the current requirement that
members, including the Administrator allows only a physician to certify false
of CMS, the Inspector General of HHS, Act. In recognition of the fact that this
definition gives special consideration to labor is overly restrictive and does not
hospital representatives and physicians adequately recognize the training and
representing various specialties, patient women in labor, the term ‘‘labor’’ is
itself defined, in paragraph (b) of competence of certified nurse-
representatives, and representatives of midwives. Testimony was also
organizations involved in EMTALA § 489.24, to mean ‘‘the process of
childbirth beginning with the latent or presented by the American College of
enforcement. Obstetricians and Gynecologists, which
The EMTALA TAG was first early phases of labor and continuing
through the delivery of the placenta.’’ recommended amending the EMTALA
established in 2005 and held three regulations to allow certified nurse-
meetings during that year. At each of its The definition further states: ‘‘A woman
experiencing contractions is in true midwives and other qualified medical
meetings, the EMTALA TAG heard persons to determine whether a woman
testimony from representatives of labor unless a physician certifies that,
after a reasonable period of observation, is in false labor.
physician groups, hospital associations, After extensive consideration of the
and others regarding EMTALA issues the woman is in false labor.’’ A woman
issue, the members of the EMTALA
and concerns. As explained more fully found to be in false labor is considered
TAG voted to recommend to the
below in sections IV.K.3. and 4. of this not to have an emergency medical
Secretary that the definition of ‘‘labor’’
preamble, we are proposing to revise the condition and that finding thus means
at § 489.24(b) be amended to permit
EMTALA regulations at § 489.24 based that the hospital has no further
certified nurse-midwives and other
on the recommendations adopted and EMTALA obligation to her.
qualified medical personnel to certify
forwarded to the Secretary by the The CMS interpretative guidelines false labor. The TAG recommended
EMTALA TAG. used by State surveyors in EMTALA deleting the second sentence, which
investigations provide that once an states that a woman experiencing
3. Definition of ‘‘Labor’’ individual has presented to a hospital contractions is in true labor unless a
As noted in the background portion of seeking emergency care, the physician certifies that, after a
this section, the EMTALA statute and determination as to whether an reasonable time of observation, the
regulations require that if an individual emergency medical condition exists is woman is in false labor.
comes to a hospital emergency made by the examining physician(s) or We agree with the TAG’s
department and a request is made on the other qualified medical person actually recommendation that other health care
individual’s behalf for examination or caring for the individual at the treating practitioners besides physicians should
treatment for a medical condition, the facility. The guidelines further provide be allowed to certify false labor, and
hospital is obligated to provide that that the medical screening examination believe that the recommendation is
individual with an appropriate medical must be conducted by one or more consistent with CMS’ current policy
screening examination within the individuals who are determined to be regarding who may conduct medical
capability of the hospital. If the qualified by the hospital bylaws or rules screening examinations. However, we
individual is found to have an and regulations and who meet the do not believe such a change can be best
emergency medical condition, the hospital condition of participation in 42 accomplished by simply deleting the
hospital is obligated by EMTALA to CFR 482.55 regarding emergency second sentence of the current
provide either necessary stabilizing services personnel and direction. (Of definition of ‘‘labor’’ in the existing
treatment or an appropriate transfer to course, these individuals would not be regulations because doing so would also
another medical facility where expected or permitted to perform any remove the explicit statement that a
stabilization can occur. screening functions other than those woman experiencing contractions is in
Section 489.24(b) of the regulations which they are allowed to perform labor unless she has been found to be
defines the key terms used in the under State scope of practice laws.) in false labor. To achieve the principal
section. The term ‘‘emergency medical However, consistent with the definition objective of the EMTALA TAG
condition’’ is defined as— of ‘‘labor’’ at § 489.24(b), the guidelines recommendation without compromising
‘‘A medical condition manifesting also state that if a qualified medical the protections of EMTALA for women
itself by acute symptoms of sufficient person other than a physician having contractions, we are proposing to
severity (including severe pain, determines that a woman is in false modify the definition of ‘‘labor’’ in
psychiatric disturbances and/or labor, a physician must certify the § 489.24(b) by revising the second
symptoms of substance abuse) such that diagnosis. The guidelines permit this sentence of that definition to state that
the absence of immediate medical certification to be made based either on a woman experiencing contractions is in
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attention could reasonably be expected actual examination of the patient or on true labor unless a physician, certified
to result in placing the health of the a telephone consultation with the nurse-midwife, or other qualified
individual (or, with respect to a qualified medical person who actually medical person acting within his or her
pregnant woman, the health of the examined the patient. (Medicare State scope of practice as defined in hospital
woman or her unborn child) in serious Operations Manual, Appendix V— medical staff bylaws and State law,
jeopardy; serious impairment to bodily Interpretive Guidelines—Responsibility certifies that, after a reasonable time of
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24118 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
observation, the woman is in false labor. We agree with the EMTALA TAG’s K. Other Proposed Technical Changes
The effect of this change would be to assessment. We believe that the
1. Proposed Cross-Reference Correction
have a single, uniform policy on the recommendation is consistent with in Regulations on Limitations on
personnel who are authorized to make CMS’ current policy and highlights the Beneficiary Charges (§ 412.42)
a determination as to whether an need to clarify CMS’ policy regarding
individual has an emergency medical hospitals with specialized capabilities. (If you choose to comment on issues
condition. Therefore, in this proposed rule, we are in this section, please include the
caption ‘‘Cross-Reference § 412.42’’ at
4. Application of EMTALA proposing to modify the regulations at
the beginning of your comment.)
Requirements to Hospitals Without § 489.24(f) to specifically indicate that We are proposing to amend § 412.42
Dedicated Emergency Departments any participating hospital with to correct an obsolete cross-reference.
specialized capabilities or facilities, Paragraph (d) of § 412.42 contains a
Section 489.24(b) of the regulations even if it does not have a dedicated
outlines when a hospital will be cross-reference to ‘‘§ 405.310(k).’’ This
emergency department, may not refuse section was redesignated as § 411.15(k)
considered to be a hospital with a
to accept an appropriate transfer if the in 1989 (54 FR 41737, October 11,
‘‘dedicated emergency department’’ and
makes it clear that only a hospital with hospital has the capacity to treat the 1989). We are proposing to amend
a dedicated emergency department has individual. We note that this proposed paragraph (d) of § 412.42 to delete the
an EMTALA responsibility with respect revision does not reflect any change in obsolete cross-reference and insert the
to an individual for whom no current CMS policy. We further note correct cross-reference.
appropriate transfer is sought but who that the revision would not require
2. Proposed Cross-Reference Corrections
comes to the hospital seeking hospitals without dedicated emergency
in Regulations on Payment Denials
examination or treatment for a medical departments to open dedicated
Based on Admissions and Quality
condition. However, it has come to emergency departments nor would it Reviews (§ 412.48)
CMS’ attention that our policy regarding impose any EMTALA obligation on
the application of EMTALA to hospitals those hospitals with respect to (If you choose to comment on issues
that have specialized capabilities but are individuals who come to the hospital as in this section, please include the
without dedicated emergency their initial point of entry into the caption ‘‘Cross-Reference § 412.48’’ at
departments may be less well the beginning of your comment.)
medical system seeking a medical
We are proposing to amend § 412.48
understood as it relates to individuals screening examination or treatment for to correct an obsolete cross-reference.
for whom an appropriate transfer is a medical condition. Although this Paragraph (b) of § 412.48 contains a
sought. proposed revision seeks only to clarify, cross-reference to ‘‘§§ 405.330 through
It has been CMS’ longstanding policy rather than change, current policy, we 405.332’’. Section 405.330 was
that any Medicare-participating hospital nevertheless, welcome comments on redesignated as § 411.400, and § 405.332
with a specialized capability must, in what effect, if any, commenters believe was redesignated as § 411.402 in 1989
accordance with section 1867(g) of the this proposed clarification may have on (54 FR 41746, October 11, 1989). (There
Act, accept, within the capacity of the EMTALA compliance and patient health was no § 405.331.) We are proposing to
hospital, an appropriate transfer from a and safety. amend paragraph (b) of § 412.48 to
requesting hospital. This policy has delete the obsolete cross-references and
been applied to hospitals without regard 5. Clarification of Reference to ‘‘Referral
to insert the correct cross-references.
to whether they have dedicated Centers’’
emergency departments. In fact, in the 3. Proposed Cross-Reference Correction
past, CMS has taken enforcement The language of the existing in Regulations on Outlier Payments
actions against hospitals with regulations at § 489.24(f) duplicates the (§ 412.84)
specialized capabilities that failed to language of section 1867(g) of the Act in
(If you choose to comment on issues
accept appropriate transfers under that it identifies, as an example of a
in this section, please include the
EMTALA when the hospitals had the hospital with specialized capabilities, caption ‘‘Technical Correction:
capacity to treat the transferred ‘‘(with respect to rural areas) regional Outliers’’ at the beginning of your
individuals. referral centers identified by the comment.)
At its meeting held on October 26–28, Secretary in regulation)’’. Because the On June 9, 2003, we published a final
2005, the EMTALA TAG heard term ‘‘regional referral centers’’ is not rule in the Federal Register (68 FR
testimony from representatives of used elsewhere in the Medicare 34494) that amended the portion of the
physician groups, hospital associations, regulations, it is unclear whether the hospital IPPS regulations that sets out
and others regarding EMTALA reference is to referral centers as defined the methodology for determining
compliance by specialty hospitals that in 42 CFR 412.96, which must be payments for extraordinarily high-cost
typically do not have dedicated located in rural areas and meet other cases (outliers). We changed the
emergency departments. After extensive criteria spelled out in that section, or to methodology because we concluded
consideration and discussion of the any facilities that are located in rural that, in certain cases, hospitals were
issues raised and views presented, the areas and accept patients on referral. To dramatically and inappropriately
members of the EMTALA TAG voted to maintain consistency in the Medicare increasing charges, thereby inflating
recommend to the Secretary that regulations and avoid confusion as to CCRs, resulting in overestimation of
hospitals with specialized capabilities which facilities are considered to have these hospitals’ costs per case, a critical
(as defined in § 489.24(f) of the factor in determining outlier payments.
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meant that there would be some delay which also may be used to claim period beginning on or after October 1,
in computing the final outlier payment. payment for these services. We have 2004) to test the feasibility and
To address this issue, we added encouraged suppliers to submit their advisability of establishing ‘‘rural
§ 412.84(m), which provided that paper claims using the Form CMS–1500. community hospitals’’ for Medicare
reconciled outlier payments would be Unlike Form CMS–1500, Form CMS– payment purposes for covered inpatient
adjusted to account for the time value of 1490U cannot accommodate an hospital services furnished to Medicare
any underpayments or overpayments. additional reporting requirement, the beneficiaries. A rural community
We inadvertently included in National Provider Identifier (NPI), hospital, as defined in section
paragraph (m) of § 412.84 a cross- without an expensive redesign. Finally, 410A(f)(1), is a hospital that:
reference to paragraph (h)(3) of § 412.84. according to our records, relatively few • Is located in a rural area (as defined
The cross-reference should be to suppliers currently use the form. The in section 1886(d)(2)(D) of the Act) or is
paragraph (i)(4), which sets out the CMS component that supplies blank treated as being located in a rural area
requirement for reconciling outlier copies of this form for users reported under section 1886(d)(8)(E) of the Act;
payments when the cost report for the that, between 2002 and 2005, only 2,550 • Has fewer than 51 beds (excluding
year in which the discharge occurred is copies of Form CMS–1490U were beds in a distinct part psychiatric or
settled. We are proposing to amend ordered by carriers. A 2005 survey of rehabilitation unit) as reported in its
paragraph (m) of § 412.84 to correct the Part B carriers indicated that requests most recent cost report;
cross-reference to read ‘‘paragraph for the form are very low and that • Provides 24-hour emergency care
(i)(4)’’ of § 412.84. receipts of the form vary from very few services; and
to none. • Is not designated or eligible for
4. Removing References to Two Paper designation as a CAH.
Form CMS–1491 is a paper claim
Claims Forms As we indicated in the FY 2005 IPPS
form used by ambulance suppliers to
(If you choose to comment of the apply for payment for ambulance final rule (69 FR 49078), in accordance
issues in this section, please include the services. We concluded that this form with sections 410A(a)(2) and (a)(4) of
caption ‘‘Claims Forms References’’ at should no longer be used for several Pub. L.108–173 and using 2002 data
the beginning of your comment.) reasons. It also is duplicative of Form from the U.S. Census Bureau, we
Section 1862(a)(22) of the Act CMS–1500, which also may be used to identified 10 States with the lowest
generally requires electronic submission claim payment for ambulance services. population density from which to select
of initial Medicare claims requesting In addition, we have encouraged hospitals: Alaska, Idaho, Montana,
payment for items and services. Section suppliers to submit their paper Nebraska, Nevada, New Mexico, North
1862(h) of the Act provides for limited ambulance claims using the Form CMS– Dakota, South Dakota, Utah, and
exceptions when paper claims still may 1500. Unlike Form CMS–1500, Form Wyoming (Source: U.S. Census Bureau
be used. Our existing regulations at 42 CMS–1491 cannot accommodate the Statistical Abstract of the United States:
CFR 424.32 set out the requirements for NPI without an expensive redesign and 2003). Nine rural community hospitals
submitting electronic and paper claims usage of this form is low. A recent located within these States are currently
for payment, as well as when the survey of carriers, initiated by Joint participating in the demonstration
exceptions apply and paper forms still Signature Memorandum RO–2324, program for FY 2007. (Of the 13
may be used. Our existing regulations at Request for Information Concerning the hospitals that participated in the first 2
paragraph (b) of § 424.32 list six forms CMS–1491, issued October 30, 2003, years of the demonstration program, 4
that are to be used for submitting paper from the Centers for Medicare hospitals located in Nebraska have
claims. Management, was conducted to withdrawn from the program; they have
We have evaluated the use of two of ascertain the usage of Form CMS–1491. become CAHs.)
these forms, Form CMS–1490U (Request The results of the survey showed that Under the demonstration program,
for Medicare Payment by Organization) fewer than 2 percent (1.71 percent) of all participating hospitals are paid the
and Form CMS–1491 (Request for suppliers of ambulance services reasonable costs of providing covered
Medicare Payment—Ambulance). We currently use the Form CMS–1491. CMS inpatient hospital services (other than
found that these forms have limited use, received approximately 240,000 services furnished by a psychiatric or
we would incur expensive costs in ambulance claims using Form CMS– rehabilitation unit of a hospital that is
redesigning these forms to comply with 1491 during the period from October 1, a distinct part), applicable for
other reporting requirements, and that 2002, to September 30, 2003. These data discharges occurring in the first cost
an alternate form is available to claim were used for the most recent OMB reporting period beginning on or after
payments. For these reasons, we intend renewal under the Paperwork Reduction the October 1, 2004, implementation
to no longer use these forms. Therefore, Act. Since the last OMB renewal date of the demonstration program.
we are proposing to remove the approval in 2001, CMS has printed a Payments to the participating hospitals
references to these forms from total of 1,620,000 forms at a cost of will be the lesser amount of the
paragraph (b) of § 424.32. $42,890. reasonable cost or a target amount in
Form CMS–1490U is a paper claim subsequent cost reporting periods. The
form used by employers, unions, L. Rural Community Hospital target amount in the second cost
employer-employee organizations that Demonstration Program reporting period is defined as the
pay physicians and suppliers for their (If you choose to comment on issues reasonable costs of providing covered
services to employees, group practice in this section, please include the inpatient hospital services in the first
prepayment plans, and health caption ‘‘Rural Community Hospital cost reporting period, increased by the
maintenance organizations. Form CMS– Demonstration Program’’ at the inpatient prospective payment update
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1490U is used to claim payment from beginning of your comment.) factor (as defined in section
carriers for bills already paid by these In accordance with the requirements 1886(b)(3)(B) of the Act) for that
entities. We concluded that this form of section 410A(a) of Pub. L. 108–173, particular cost reporting period. The
should no longer be used for several the Secretary has established a 5-year target amount in subsequent cost
reasons. It is duplicative of Form CMS– demonstration program (beginning with reporting periods is defined as the
1500 (Health Insurance Claim Form), selected hospitals’ first cost reporting preceding cost reporting period’s target
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24120 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
amount, increased by the inpatient system as a whole rather than merely individuals who are unable to afford
prospective payment update factor (as across the participants in this health insurance. Part of the President’s
defined in section 1886(b)(3)(B) of the demonstration program. As we health care agenda is to expand Health
Act) for that particular cost reporting discussed in the FY 2005 and FY 2006 Savings Accounts (HSAs), which would
period. IPPS final rules (69 FR 49183 and 70 FR provide consumers with greater
Covered inpatient hospital services 47462), we believe that the language of financial incentives to compare
are inpatient hospital services (defined the statutory budget neutrality providers in terms of price and quality,
in section 1861(b) of the Act), and requirements permits the agency to and choose those that offer the best
include extended care services implement the budget neutrality value.
furnished under an agreement under provision in this manner. For FY 2007, In order to exercise such choices,
section 1883 of the Act. using the most recent cost report data consumers must have accessible and
Section 410A of Pub. L. 108–173 (that is, data for FY 2004), adjusted to useful information on price and quality
requires that ‘‘in conducting the account for the increased estimated of health care items and services.
demonstration program under this costs for the remaining nine Typically, health care providers do not
section, the Secretary shall ensure that participating hospitals, we estimate that publicly quote or publish their prices.
the aggregate payments made by the the proposed adjusted amount would be Moreover, list prices, or charges,
Secretary do not exceed the amount $9,197,870. This proposed estimated generally differ from the actual prices
which the Secretary would have paid if adjusted amount reflects the estimated negotiated and paid by different health
the demonstration program under this difference between the participating plans. Thus, even if consumers were
section was not implemented.’’ hospitals’ costs and the IPPS payment financially motivated to shop for the
Generally, when CMS implements a based on data from the hospitals’ cost best price, it would be very difficult at
demonstration program on a budget reports. We discuss the proposed the current time for them to access
neutral basis, the demonstration payment rate adjustment that would be usable information.
program is budget neutral in its own required to ensure the budget neutrality Similarly, individuals have very little
terms; in other words, the aggregate of the demonstration program for FY information available to them about the
payments to the participating providers 2007 in section II.A.4. of the Addendum quality of care that they receive.
do not exceed the amount that would be to this proposed rule. Although there are preliminary steps
paid to those same providers in the underway to rectify that fact, including
absence of the demonstration program. M. Health Care Information the hospital quality reporting initiative
This form of budget neutrality is viable Transparency Initiative in which a significant number of acute
when, by changing payments or aligning (If you choose to comment of issues care hospitals are participating (see
incentives to improve overall efficiency, in this section, please include the sections IV.A and IV.B of this
or both, a demonstration program may caption ‘‘Transparency of Health Care preamble), those data are nascent and
reduce the use of some services or Information’’ at the beginning of your consumers lack sufficient information
eliminate the need for others, resulting comment.) on which to base a judgment about
in reduced expenditures for the The United States faces a dilemma in where to receive care based on quality
demonstration program’s participants. health care. Although the rate of of care.
These reduced expenditures offset increase in health care spending slowed For these reasons, the Department
increased payments elsewhere under last year, costs are still growing at an intends to launch a major health care
the demonstration program, thus unsustainable rate. The United States information transparency initiative in
ensuring that the demonstration spends $1.9 trillion on health care, or 16 2006. This effort will build on steps
program as a whole is budget neutral or percent of the gross domestic product already taken by CMS to make quality
yields savings. However, the small scale (GDP). By 2015, projections are that and price information available. For
of this demonstration program, in health care will consume 20 percent of example, we currently collect quality
conjunction with the payment GDP. The Medicare program alone information and publish it through the
methodology, makes it extremely consumes 3.4 percent of the GDP; by CMS Hospital Compare Web site, which
unlikely that this demonstration 2040, it will consume 8.1 percent of the we reference in other parts of this
program could be viable under the usual GDP and by 2070, 14 percent of the proposed rule. We also make available
form of budget neutrality. Specifically, GDP. unprecedented information on the
cost-based payments to the nine Part of the reason health care costs are prices of drugs to beneficiaries in the
participating small rural hospitals are rising so quickly is that most consumers Medicare prescription drug plan for
likely to increase Medicare outlays of health care—the patients—are each pharmacy in the United States.
without producing any offsetting frequently not aware of the actual cost We intend to take further steps to
reduction in Medicare expenditures of their care. Health insurance shields collect and publish useful information
elsewhere. Therefore, a rural them from the full cost of services, and on quality and cost. The Department
community hospital’s participation in they do have only limited information intends to identify several regions in the
this demonstration program is unlikely about the quality and costs of their care. United States where health care costs
to yield benefits to the participant if Consequently, consumers do not have are high, and where there is significant
budget neutrality were to be the incentive or means to carefully shop interest in reducing health care costs
implemented by reducing other for providers offering the best value. and improving health care quality. The
payments for these providers. Thus, providers of care are not subject Department will use its leadership role
In order to achieve budget neutrality to the competitive pressures that exist in in health care policy to help lead change
for this demonstration program for FY other markets for offering quality in those areas.
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2007, we are proposing to adjust the services at the best possible price. The Secretary also has significant
national inpatient PPS rates by an Reducing the rate of increase in health regulatory authority as well. In this
amount sufficient to account for the care prices and avoiding health services proposed rule, we are soliciting
added costs of this demonstration of little value could help to stem the comments on several proposals that the
program. We are proposing to apply growth in health care spending, and Secretary might adopt to increase the
budget neutrality across the payment potentially translate into fewer transparency of quality and pricing
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24121
information, and how this can be used We are seeking comment on any ways (Standard Federal Rate) x (DRG
to attenuate the growth in health care in which the Department can encourage Weight) x (Geographic Adjustment
costs. In addition, we are soliciting transparency in health care quality and Factor (GAF)) x (Large Urban Add-on, if
comments from the public on additional pricing whether through its leadership applicable) x (COLA for hospitals
ways that we could use our regulatory on voluntary initiative or through located in Alaska and Hawaii) x (1 +
authority to enhance transparency of regulatory requirements. We also are Capital DSH Adjustment Factor +
quality and pricing information. seeking comment on the Department’s Capital IME Adjustment Factor, if
Several possibilities exist. First, we statutory authority to impose such applicable).
could publish a list of hospital charges requirements. Discussion of particular Hospitals also may receive outlier
either for every region of the country or options in this proposed rule should not payments for those cases that qualify
for selected regions of the country. In be taken as an indication that the under the threshold established for each
addition, we could publish the rates that Department will adopt any of these fiscal year as specified in § 412.312(c) of
Medicare actually pays to a particular proposals. Rather, the proposals are the regulations.
hospital for every DRG or for selected included here to foster comment on The regulations at § 412.348(f)
DRGs that could be adjusted to take into possible options to promote the aims of provide that a hospital may request an
account the hospital’s labor market area, transparency of quality and pricing additional payment if the hospital
teaching hospital status, and DSH information and the Department’s incurs unanticipated capital
status. Some might argue that authority and ability potentially to expenditures in excess of $5 million due
publishing these payment rates does not implement these options. The to extraordinary circumstances beyond
provide meaningful information to Department is anxious to receive the hospital’s control. This policy was
consumers because Medicare payment comments on any of these proposals, or originally established for hospitals
rates are not set by the market, but on other options that may be available during the 10-year transition period, but
rather by a statutory payment formula. that the Department could adopt either as we discussed in the August 1, 2002
In addition, providing information on through voluntary initiatives or through IPPS final rule (67 FR 50102), we
its regulatory authority. revised the regulations at § 412.312 to
hospital payments only does not
specify that payments for extraordinary
disclose the true cost of an episode of V. Proposed Changes to the PPS for circumstances are also made for cost
care because it would not take into Capital-Related Costs reporting periods after the transition
account the cost of physician services,
period (that is, cost reporting periods
laboratory tests, and other procedures (If you choose to comment on issues
beginning on or after October 1, 2001).
that go along with hospital charges. On in this section, please include the
Additional information on the exception
the other hand, Medicare payment rates caption ‘‘Capital PPS’’ at the beginning
payment for extraordinary
may provide a helpful benchmark, of your comment.)
circumstances in § 412.348(f) can be
especially for uninsured individuals, to
A. Background found in the FY 2005 IPPS final rule (69
determine whether the charges they see FR 49185 and 49186).
on a hospital bill bear any relationship Section 1886(g) of the Act requires the During the transition period, under
to what third-party fee-for-service Secretary to pay for the capital-related §§ 412.348(b) through (e), eligible
payors pay to the hospital. costs of inpatient acute hospital services hospitals could receive regular
A second option would be for the ‘‘in accordance with a PPS established exception payments. These exception
Secretary to use his authority to by the Secretary.’’ Under the statute, the payments guaranteed a hospital a
establish conditions of participation for Secretary has broad authority in minimum payment percentage of its
hospitals to propose a rule that relates establishing and implementing the PPS Medicare allowable capital-related costs
to charges for uninsured patients. For for hospital inpatient capital-related depending on the class of hospital
example, the conditions of participation costs. We initially implemented the PPS (§ 412.348(c)), but were available only
could include a requirement that for capital-related costs in the August during the 10-year transition period.
hospitals post their prices and/or post 30, 1991 IPPS final rule (56 FR 43358), After the end of the transition period,
their policies regarding discounts or in which we established a 10-year eligible hospitals can no longer receive
other assistance for uninsured patients. transition period to change the payment this exception payment. However, even
Yet another alternative to posting methodology for Medicare hospital after the transition period, eligible
Medicare DRG payment rates would be inpatient capital-related costs from a hospitals receive additional payments
to make publicly available the total reasonable cost-based methodology to a under the special exceptions provisions
Medicare payments for an episode of prospective methodology (based fully at § 412.348(g), which guarantees all
care. For example, one of the most on the Federal rate). eligible hospitals a minimum payment
common inpatient hospital procedures Federal fiscal year (FFY) 2001 was the of 70 percent of its Medicare allowable
under the Medicare program (based on last year of the 10-year transition period capital-related costs provided that
total dollars spent) is hip replacement established to phase in the PPS for special exceptions payments do not
surgery. Under this proposal, we could hospital inpatient capital-related costs. exceed 10 percent of total capital IPPS
make publicly available the expected For cost reporting periods beginning in payments. Special exceptions payments
total payment for an episode of care for FY 2002, capital PPS payments are may be made only for the 10 years from
hip replacement surgery, including the based solely on the Federal rate for most the cost reporting year in which the
inpatient hospital stay, physician acute care hospitals (other than certain hospital completes its qualifying
payments (including the surgeon and new hospitals and hospitals receiving project, and the hospital must have
the anesthesiologist), and payments for certain exception payments). The basic completed the project no later than the
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post-acute care services such as services methodology for determining capital hospital’s cost reporting period
provided in an IRF, SNF, or LTCH. We prospective payments using the Federal beginning before October 1, 2001. Thus,
are currently assessing methods for rate is set forth in § 412.312. For the an eligible hospital may receive special
making such information available and purpose of calculating payments for exceptions payments for up to 10 years
are seeking comments on how to do so each discharge, the standard Federal beyond the end of the capital PPS
as quickly and effectively as possible. rate is adjusted as follows: transition period. Hospitals eligible for
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24122 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
special exceptions payments were rate. However, effective October 1, 1997 operating PPS the same for purposes of
required to submit documentation to the (FY 1998), in conjunction with the the capital PPS. Therefore, we are
intermediary indicating the completion change to the operating PPS blend proposing to specify under
date of their project. (For more detailed percentage for Puerto Rico hospitals §§ 412.316(b)(2) and (b)(3) and
information regarding the special required by section 4406 of Pub. L. 105– 412.320(a)(1)(ii) and (a)(1)(iii) that, for
exceptions policy under § 412.348(g), 33, we revised the methodology for discharges on or after October 1, 2006,
refer to the August 1, 2001 IPPS final computing capital PPS payments to hospitals that are reclassified from
rule (66 FR 39911 through 39914) and hospitals in Puerto Rico to be based on urban to rural under § 412.103 would be
the August 1, 2002 IPPS final rule (67 a blend of 50 percent of the capital PPS considered rural.
FR 50102).) Puerto Rico rate and 50 percent of the
Under the PPS for capital-related C. Other Technical Corrections Relating
capital PPS Federal rate. Similarly, in
costs, § 412.300(b) of the regulations to the Capital PPS Geographic
conjunction with the change in
defines a new hospital as a hospital that Adjustment Factors
operating PPS payments to hospitals in
has operated (under current or previous Puerto Rico for FY 2005 required by We are proposing to make technical
ownership) for less than 2 years. (For section 504 of Pub. L. 108–173, we again corrections to the regulations under
more detailed information, see the revised the methodology for computing paragraphs (a) and (c) of § 412.316.
August 30, 1991 final rule (56 FR capital PPS payments to hospitals in Specifically, we are proposing to make
43418).) During the 10-year transition Puerto Rico to be based on a blend of a technical change under § 412.316(a) to
period, a new hospital was exempt from 25 percent of the capital PPS Puerto correct the cross-reference to
the capital PPS for its first 2 years of Rico rate and 75 percent of the capital ‘‘§ 412.63(k)’’ to clarify that the same
operation and was paid 85 percent of its PPS Federal rate effective for discharges wage index that applies to hospitals
reasonable costs during that period. occurring on or after October 1, 2004. under the operating PPS is used to
Originally, this provision was effective determine the geographic adjustment
only through the transition period and, B. Treatment of Certain Urban Hospitals factor (GAF) under the capital PPS. We
therefore, ended with cost reporting Reclassified as Rural Hospitals Under would cross-refer instead to subpart D of
periods beginning in FY 2002. Because § 412.103 Part 412 to capture the applicable
we believe that special protection to We are proposing technical changes to requirements in their entirety. This
new hospitals is also appropriate even §§ 412.316(b) and 412.320(a)(1) to technical correction does not change
after the transition period, as discussed clarify that hospitals reclassified as rural any current payment policies because
in the August 1, 2002 IPPS final rule (67 under § 412.103 are not eligible for the the regulation, as written, makes clear
FR 50101), we revised the regulations at large urban add-on payment or for the that the GAF adjustment for local cost
§ 412.304(c)(2) to provide that, for cost capital DSH adjustment. These variation under the capital PPS is based
reporting periods beginning on or after proposed changes would reflect our on a hospital’s operating PPS wage
October 1, 2002, a new hospital (defined historic policy that hospitals reclassified index value. Thus, the same payment
under § 412.300(b)) is paid 85 percent of as rural under § 412.103 also will be policies that are in effect prior to FY
its Medicare allowable capital-related considered rural under the capital PPS. 2007 (that is, the GAF is based on a
costs through its first 2 years of Since the genesis of the capital PPS in hospital’s operating PPS wage index
operation, unless the new hospital FY 1992, the same geographic value) would continue in effect for FY
elects to receive fully prospective classifications used under the operating 2007 and beyond; the only change in the
payment based on 100 percent of the PPS also have been used under the regulation would be a correction of the
Federal rate. (Refer to the August 1, capital PPS. erroneous cross-reference.
2001 IPPS final rule (66 FR 39910) for These proposed changes and In addition, we are proposing to make
a detailed discussion of the statutory clarifications are necessary because we a technical correction under
basis for the system, the development inadvertently made an error when we § 412.316(c) to correct the cross-
and evolution of the system, the updated our capital PPS regulations to reference to ‘‘§ 412.115’’ to clarify that,
methodology used to determine capital- incorporate OMB’s new CBSA for hospitals located in Alaska and
related payments to hospitals both definitions for IPPS hospital labor Hawaii, the same COLA factor that
during and after the transition period, market areas beginning in FY 2005. In applies to these hospitals under the
and the policy for providing exception the FY 2005 IPPS final rule (69 FR operating PPS is used to determine the
payments.) 49187 through 49188), in order to COLA factor under the capital PPS. The
Section 412.374 provides for the use incorporate the new CBSA designations existing regulation erroneously
of a blended payment amount for and the provisions of the newly references the COLA factor used to
prospective payments for capital-related established § 412.64, which determine payment under § 412.115,
costs to hospitals located in Puerto Rico. incorporated the CBSA-based which is not related to the operating
Accordingly, under the capital PPS, we geographic classifications, we revised PPS COLA factor or any other payment
compute a separate payment rate § 412.316(b) and § 412.320 to specify factors. Again, we would cross-refer
specific to Puerto Rico hospitals using that, effective for discharges occurring instead to subpart D of Part 412 to
the same methodology used to compute on or after October 1, 2004, the capital capture the applicable requirements in
the national Federal rate for capital- PPS payment adjustments are based on their entirety. This proposed technical
related costs. In general, hospitals the geographic classifications under correction would not change any
located in Puerto Rico are paid a blend § 412.64. However, § 412.64 does not current payment policy; rather it would
of the applicable capital PPS Puerto reference the provisions of § 412.103 make clear that the capital PPS COLA
Rico rate and the applicable capital PPS regarding the urban-to-rural factor is based on the hospital’s COLA
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Federal rate. reclassifications, as was previously factor under the operating PPS. This
Prior to FY 1998, hospitals in Puerto found in § 412.63(b)(1). proposed technical correction reflects
Rico were paid a blended capital PPS We believe that this error must be our historic policy that the COLA factor
rate that consisted of 75 percent of the corrected in order to maintain our under the capital PPS is based on the
capital PPS Puerto Rico specific rate and historic policy for treating urban-to- hospital’s operating PPS COLA factor,
25 percent of the capital PPS Federal rural hospital reclassifications under the which is how the capital PPS COLA
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24123
factor has been determined since the hospitals and hospital units excluded established under section 1886(b)(7) of
implementation of the capital PPS in FY from the IPPS. Section 413.40(c)(4)(iii) the Act. The law was applicable for
1992. Thus, the same payment policy of the implementing regulations states three classes of excluded providers—
that has been in effect prior to FY 2007 that ‘‘In the case of a psychiatric IRFs, IPFs, and LTCHs—with a first cost
(that is, the use of the operating PPS hospital or unit, rehabilitation hospital reporting period beginning on or after
COLA factor as shown in the table in or unit, or long-term care hospital, the October 1, 1997. For the first two cost
section II.B.2 of the Addendum of this target amount is the lower of amounts reporting periods, these ‘‘new’’
proposed rule in determining a specified in paragraph (c)(4)(iii)(A) or excluded providers would be paid the
hospital’s capital PPS COLA factor) (c)(4)(iii)(B) of this section.’’ lesser of their net inpatient operating
would continue to be in effect for FY Accordingly, in general, for ‘‘existing’’ costs or 110 percent of the national
2007 and beyond; the only change in the IPFs, IRFs, or LTCHs for the applicable median of target amounts for its class of
regulation would be a correction of the 5-year period, the target amount is the hospitals for cost reporting periods
erroneous cross-reference. lower of: the hospital-specific target ending during FY 1996. This amount
amount (§ 413.40(c)(4)(iii)(A)) or the was updated to the first cost reporting
VI. Proposed Changes for Hospitals and 75th percentile cap period the hospital received payment,
Hospital Units Excluded From the IPPS (§ 413.40(c)(4)(iii)(B)). and adjusted for differences in area
(If you choose to comment on issues For cost reporting periods beginning wage levels, as implemented in the
in this section, please include the on or after October 1, 2002, all IRFs are regulations at § 413.40(f)(2)(ii). For the
caption ‘‘Excluded Hospitals and Units’’ paid 100 percent of the adjusted Federal third and subsequent cost reporting
at the beginning of your comment.) rate under the IRF PPS. Therefore, an periods, § 413.40(c)(4)(v) applies.
IRF, considered existing under section The 110 percent of the national
A. Payments to Excluded Hospitals and 1886(b)(3)(H) of the Act would have no median payment limits for new
Hospital Units (§ 413.40) portion of its payment subject to providers under TEFRA
1. Payments to Existing and New § 413.40(c)(4)(ii) of the regulations for (§ 413.40(f)(2)(ii)) do not apply to those
Excluded Hospitals and Hospital Units cost reporting periods beginning on or LTCHs or IPFs whose first cost reporting
after October 1, 2002. period begins on or after the date the
Historically, hospitals and hospital For cost reporting periods beginning particular class of hospitals
units excluded from the prospective on or after October 1, 2002, to the extent implemented their respective PPS
payment system received payment for an IPF or LTCH has all or a portion of because they are paid 100 percent of
inpatient hospital services they its payment determined under their Federal PPS rate. IRFs are paid 100
furnished on the basis of reasonable reasonable cost principles, the target percent of the Federal rate under the IRF
costs, subject to a rate-of-increase amounts for the reasonable cost-based PPS for cost reporting periods beginning
ceiling. An annual per discharge limit portion of the payment are determined on or after October 1, 2002. Therefore,
(the target amount as defined in in accordance with section the 110 percent of the median payment
§ 413.40(a)) was set for each hospital or 1886(b)(3)(A)(ii) of the Act and the limitations are not applicable to IRFs for
hospital unit based on the hospital’s regulations at § 413.40(c)(4)(ii). Section cost reporting periods beginning on or
own cost experience in its base year. 413.40(c)(4)(ii) states, ‘‘Subject to the after that date.
The target amount was multiplied by provisions of [§ 413.40] paragraph
the Medicare discharges and applied as (c)(4)(iii) of this section, for subsequent 2. Separate PPS for IRFs
an aggregate upper limit (the ceiling as cost reporting periods, the target amount Section 1886(j) of the Act, as added by
defined in § 413.40(a)) on total inpatient equals the hospital’s target amount for section 4421(a) of Pub. L. 105–33,
operating costs for a hospital’s cost the previous cost reporting period provided for the phase-in of a case-mix
reporting period. Prior to October 1, increased by the update factor for the adjusted PPS for inpatient hospital
1997, these payment provisions applied subject cost reporting period unless the services furnished by IRFs for cost
consistently to all categories of excluded provisions of [§ 413.40] paragraph reporting periods beginning on or after
providers (rehabilitation hospitals and (c)(5)(ii) of this section apply.’’ Thus, October 1, 2000, and before October 1,
units (now referred to as IRFs), because § 413.40(c)(4)(ii) indicates that 2002, with payments based entirely on
psychiatric hospitals and units (now the provisions of that paragraph are the adjusted Federal prospective
referred to as IPFs), LTCHs, children’s subject to the provisions of payment for cost reporting periods
hospitals, and cancer hospitals). § 413.40(c)(4)(iii), which are applicable beginning on or after October 1, 2002.
Payment for children’s hospitals and only for cost reporting periods Section 1886(j) of the Act was amended
cancer hospitals that are excluded from beginning on or after October 1, 1997, by section 125 of Pub. L. 106–113 to
the IPPS continues to be subject to the through September 30, 2002, the target require the Secretary to use a discharge
rate-of-increase ceiling based on the amount for FY 2003 is determined by as the payment unit under the PPS for
hospital’s own historical cost updating the target amount for FY 2002 inpatient hospital services furnished by
experience. (We note that, in accordance by the applicable update factor. For IRFs and to establish classes of patient
with § 403.752(a) of the regulations, example, if a provider was paid the cap discharges by functional-related groups.
RNHCIs are also subject to the rate-of- amount in FY 2002, the target amount Section 305 of Pub. L. 106–554 further
increase limits established under for FY 2003 would be the amount paid amended section 1886(j) of the Act to
§ 413.40 of the regulations.) For IPFs, in FY 2002, updated to FY 2003 (that is, allow IRFs, subject to the blend
IRFs, and LTCHs, reasonable cost the target amount from the previous methodology, to elect to be paid the full
payment provisions changed year increased by the applicable update Federal prospective payment rather than
significantly for cost reporting periods factor). As discussed below, IPFs, IRFs, the transitional period payments
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beginning on or after October 1, 1997. and LTCHs are now paid under separate specified in the Act.
Section 1886(b)(3)(H) of the Act PPSs, although some are subject to On August 7, 2001, we issued a final
established caps on the target amounts transition payment provisions. rule in the Federal Register (66 FR
for cost reporting periods beginning on In addition, a new method of 41316) establishing the PPS for IRFs,
or after October 1, 1997, through determining the payment amount for effective for cost reporting periods
September 30, 2002, for certain existing ‘‘new’’ excluded providers was beginning on or after January 1, 2002.
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24124 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
There was a transition period for cost DRGs, selected high-cost comorbidities, Regarding HwHs and satellite facilities,
reporting periods beginning on or after days of the stay, and certain facility particularly LTCH HwHs and satellite
January 1, 2002, and ending before characteristics, including a wage index facilities of LTCHs, which were the
October 1, 2002. For cost reporting adjustment, rural location, indirect original entities that we regulated
periods beginning on or after October 1, teaching costs, the presence of a full- beginning with FY 1995, we have
2002, payments are based entirely on service emergency department, and repeatedly expressed our concerns (for
the adjusted Federal prospective COLAs for IPFs located in Alaska and example, in the FY 2005 IPPS final rule
payment rate determined under the IRF Hawaii. We have established a 3-year (69 FR 49191)) that a HwH’s or a
PPS. transition period during which IPFs satellite facility’s ‘‘configuration could
whose first cost reporting periods began result in patient admission, treatment,
3. Separate PPS for LTCHs
before January 1, 2005, will be paid and discharge patterns that are guided
In accordance with the requirements based on a blend of reasonable cost- more by attempts to maximize Medicare
of section 123 of Pub. L. 106–113, as based payment and IPF PPS payments. payments than by patient welfare.’’ (69
modified by section 307(b) of Pub. L. For cost reporting periods beginning on FR 48916 and 49191). We further
106–554, we established a per or after January 1, 2008, all IPFs will be believe that ‘‘the unregulated linking of
discharge, DRG-based PPS for LTCHs as paid 100 percent of the Federal per an IPPS hospital and a hospital
described in section 1886(d)(1)(B)(iv) of diem payment amount. excluded from the IPPS could lead to
the Act for cost reporting periods two Medicare payments for what was
beginning on or after October 1, 2002, in 5. Grandfathering of Hospitals-Within-
Hospitals (HwHs) and Satellite Facilities essentially one episode of patient care.’’
a final rule issued on August 30, 2002 (69 FR 48916 and 49191). Therefore, we
(67 FR 55954). The LTCH PPS uses (If you choose to comment on this established ‘‘separateness and control’’
information from LTCH hospital patient section, please include the caption criteria to govern these relationships
records to classify patients into distinct ‘‘Hospitals-Within-Hospitals’’ at the with host hospitals, at § 412.22(e) for
LTC–DRGs based on clinical beginning of your comment.) HwHs, and at §§ 412.22(h) and 412.25(e)
characteristics and expected resource Existing regulations at 42 CFR
for satellite facilities of excluded
needs. Separate payments are calculated 412.22(e) define a hospital-within-a-
hospitals and satellite facilities of
for each LTC–DRG with additional hospital (HwH) as a hospital that
hospital units, respectively. Moreover,
adjustments applied. occupies space in a building also used
for each type of entity, we provided for
On May 7, 2004, we issued in the by another hospital, or in one or more
the ‘‘grandfathering’’ of existing
Federal Register a final rule (69 FR separate buildings located on the same
facilities, thereby exempting those that
25673) that updated the payment rates campus as buildings used by another
were in existence prior to the
for the LTCH PPS and made policy hospital. In order to be paid outside of
changes effective for a new LTCH PPS the IPPS as an excluded hospital, a establishment of the ‘‘separateness and
rate year of July 1, 2004 through June HwH is required to demonstrate control’’ requirements from compliance
30, 2005. For the LTCH PPS rate year of compliance with requirements at with the criteria. At § 412.22(f), we
July 1, 2005 through June 30, 2006, we § 412.22(e)(1) through (e)(3), as provided for the grandfathering of
issued in the Federal Register a final applicable, which were established to HwHs that were in existence on or
rule (70 FR 24168) that further updated create operational and organizational before September 30, 1995 or for HwHs
the payment rates and made policy separateness between the HwH and the that changed the terms and conditions
changes. The 5-year period for LTCHs to host hospital with which it is co- under which they operated between
transition from reasonable cost-based located. September 30, 1995 and before October
reimbursement to the fully Federal The existing regulations at 1, 2003, and continued to operate under
prospective rate will end with cost § 412.22(h), relating to satellite facilities the terms and conditions in effect on
reporting periods beginning on or after of hospitals excluded from the IPPS, September 30, 2003. At § 412.22(h)(3)
October 1, 2005, and before October 1, define a satellite facility as a part of a and (h)(4) we grandfathered of satellite
2006. hospital that provides inpatient services facilities that were part of a hospital,
in a building also used by another that were in existence on September 30,
4. Separate PPS for IPFs hospital, or in one or more entire 1999, and that met certain other
In accordance with section 124 of the buildings located on the same campus conditions. Further, at § 412.25(e)(3)
BBRA and section 405(g)(2) of Pub. L. as buildings used by another hospital. and (e)(4), we grandfathered satellite
108–173, we established a PPS for Section 412.25(e), relating to satellite facilities that were part of a hospital
inpatient hospital services furnished in facilities of excluded hospital units, unit, were in existence on September
IPFs (that is, psychiatric hospitals and defines a satellite facility as a part of a 30, 1999, and that met certain other
psychiatric units of acute care hospital unit that provides inpatient conditions.
hospitals). On November 15, 2004, we services in a building also used by The regulations addressing
issued in the Federal Register a final another hospital, or in one or more ‘‘separateness and control’’ policies for
rule (69 FR 66922) that established the entire buildings located on the same each of the above types of entities are
IPF PPS, effective for IPF cost reporting campus as buildings used by another presently not entirely uniform. This
periods beginning on or after January 1, hospital. situation has arisen, in part, because the
2005. Under the final rule, we compute There are significant similarities policies were implemented at different
a Federal per diem base rate to be paid between the definition of a satellite times and also because there are
to all IPFs for inpatient psychiatric facility and the definition of a HwH as differences among the types of entities.
services based on the sum of the average it relates to their co-location with other (For example, in the FY 2003 IPPS final
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routine operating, ancillary, and capital Medicare hospital-level providers rule (67 FR 49982 and 50105), we
costs for each patient day of psychiatric (hosts). There are also similarities in our included a detailed discussion of the
care in an IPF, adjusted for budget policy concerns about the potential for ‘‘performance of basic functions’’ test
neutrality. The Federal per diem base patient-shifting (and its consequences utilized for HwHs and how this test was
rate is adjusted to reflect certain patient for the Medicare program) between the not applicable to satellite facilities.)
characteristics, including age, specified co-located entities and their hosts. There are also differences between
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24125
specific features of the grandfathering necessary to carry out the that could increase their Medicare
provisions for HwHs and satellite administration of the Medicare program, reimbursement. However, as noted
facilities, despite the fact that, as noted we are proposing the following above, we did provide that a
above, the intent of each of the revisions to make the policies grandfathered HwH or satellite facility
grandfathering provisions was the same consistent. As set forth below, we are would have the option of changing
(for HwHs at § 412.22(f), for satellite proposing to revise the HwH provision square footage or number of beds if it
facilities of hospitals at § 412.22(h)(3)(i) at § 412.22(f) to include an exception to decided to forego its grandfathered
and (h)(4), and for satellite facilities of the requirement that a grandfathered status and comply with the applicable
hospital units at § 412.25(e)(3) and HwH be operated under the terms and ‘‘separateness and control’’ regulations.
(e)(4)). The regulations exempt certain conditions in effect on October 1, 2003, Recently, several grandfathered LTCH
of these entities from compliance with that corresponds to the existing HwHs and satellite facilities questioned
the ‘‘separateness and control’’ criteria exceptions for HwH satellite facilities whether a decrease in their square
governing the relationships with their and for satellite facilities of hospital footage or their number of beds would
host hospitals as long as they continue units at § 412.22(h)(4) and 412.25(e)(4), result in negating their grandfathered
to operate under the same ‘‘terms and respectively. (As provided in § 412.22(f), status, because compliance with the
conditions,’’ including the number of the original September 1, 1995, each of the above cited grandfathering
beds and square footage considered to ‘‘snapshot in time’’ date for provisions require that they continue to
be part of the hospital or satellite grandfathered HwHs was extended to operate under the same terms and
facility, for purposes of Medicare hospitals that changed the terms and conditions, including the number of
participation and payment in effect as of conditions under which they operated beds and square footage considered to
the date that they were grandfathered. between September 1, 1995, and before be part of the hospital, the satellite
This particular policy was adopted October 1, 2003, in the FY 2004 IPPS facility, or the hospital unit in effect on
because we believed that those entities final rule (68 FR 45462).) Specifically, the day that the grandfathering policy
that were designated as grandfathered, we are proposing a corresponding was implemented. We also have been
versus those that were required to meet change to the HwH grandfathering urged to modify our policies to allow
the ‘‘separateness and control’’ provision at § 412.22(f)(3) that would these grandfathered entities to increase
requirements, should not be permitted allow for increases or decreases in in square footage and number of beds
to alter their operations from the square footage, or decreases in the without requiring compliance with the
‘‘snapshot in time’’ taken when they number of beds of the HwH that are ‘‘separateness and control’’ policies
were grandfathered and thus benefit needed for specific circumstances discussed above. Clearly, under existing
even more from this status. (LTCH beyond the control of the facility. We regulations, a decrease or an increase in
HwHs and satellite facilities of LTCHs are specifying that increases or square footage or number of beds would
that are not grandfathered are also decreases in square footage or decreases result in a loss of status as a
subject to a payment adjustment at in the number of beds that are required grandfathered HwH or hospital satellite
§ 412.534 related to Medicare discharges because of the relocation of a facility to facility (unless § 412.22(h)(4) or
of patients who were admitted from permit construction or renovation § 412.25(b)(3) applies) because the
their host hospitals.) In other words, we necessary for compliance with Federal, existing regulations prohibit any change
believed that grandfathered facilities State, or local law affecting the physical in the terms and conditions of
received a benefit not enjoyed by facility or because of catastrophic events
operation, as described above.
nongrandfathered facilities—namely, We had two objectives in establishing
such as fires, floods, earthquakes, or
they were free from compliance with the our grandfathering policy. The first was
tornadoes. (64 FR 14535) We are to allow existing HwHs and satellite
‘‘separateness and control’’ regulations
proposing to add some phraseology to facilities to continue to be paid outside
and we did not want to allow these
the existing provision in § 412.22(h)(4) of the IPPS, despite the fact that, among
entities to realize additional economic
for consistency with the regulations for other factors, no demonstration of
advantages by expansion that would
grandfathered satellite facilities cited operational or organizational
increase their Medicare payments by
above. separateness between these
virtue of their grandfathered status.
Furthermore, it has been our policy that As noted above, our existing grandfathered entities and their host
if a grandfathered HwH or satellite grandfathering regulations at hospitals were required, as they were for
facility of the HwH chooses not to §§ 412.22(f), 412.22(h)(3) and (h)(4), and HwHs established after September 30,
operate under the same terms and 412.25(e)(3) and (e)(4) require that the 1995, and for satellite facilities
conditions in effect as of its grandfathered entity make no change in established after September 30, 1999.
grandfathering, it could still be paid either its square footage or number of However, the second objective was to
under the applicable excluded hospital beds in order to retain its grandfathered ensure that these entities would not
payment system if it changed its status. In establishing grandfathering make changes that would lead to
relationship with its host to the extent provisions, generally, we intended to increased costs to the Medicare
that it has come into compliance with protect certain existing hospitals and program. The nexus of these two
the applicable ‘‘separateness and satellite facilities from ‘‘the potentially objectives has been the basis of our
control’’ requirements. adverse impact of recent, more specific ‘‘snapshot in time’’ policy discussed
Because the underlying rationale for regulations that we now believe to be above. (For HwHs, as noted above, the
the grandfathering policies for both essential to the goals of the Medicare ‘‘snapshot in time’’ date for changes in
HwHs and satellite facilities of HwHs is program’’ (68 FR 45463). Moreover, it ‘‘terms and conditions’’ was extended to
the same, upon review of these various was our intention that our ‘‘snapshot in before October 1, 2003, if the HwH
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provisions, we believe that, where time’’ policy prevented grandfathered changed its terms and conditions under
appropriate, the grandfathering entities that were advantaged more than which it operated after September 30,
provisions should be consistent. Under their nongrandfathered peer facilities as 1995, but before October 1, 2003, in the
the authority of section 1871(a)(1) of the a result of their protected status from FY 2004 IPPS final rule (68 FR 45462).)
Act, which authorizes the Secretary to realizing additional benefits by As a result of the requests that we
prescribe such regulations as may be changing their ‘‘terms and conditions’’ reconsider our policy for an HwH or
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24126 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
satellite facility that decreases or the number of beds in hospital ‘‘A’’ hospital to contact its fiscal
increases square footage or number of could impact the grandfathered status of intermediary to request that its CCR,
beds, we revisited the requirement for hospital ‘‘B’’ if hospital ‘‘B’’ absorbed otherwise applicable, be changed if the
grandfathered entities to continue to the extra beds. In such a case, if the LTCH presents substantial evidence that
operate under the ‘‘same terms and determination were made that hospital its CCR is inaccurate. (68 FR 34497 and
conditions’’ in effect when they were ‘‘B’’ would expand, in order to maintain 34506 through 34508)
grandfathered. We have determined status as an excluded hospital, hospital Also in the June 9, 2003 final rule, we
that, although increases in square ‘‘B’’ would then have to meet the noted that as hospitals raise their
footage or number of beds would confer applicable ‘‘separateness and control’’ charges faster than their costs increase,
additional benefits on grandfathered requirements at § 412.22(e). over time their CCRs will decline. If
entities, as compared with those HwHs hospitals continue to increase charges at
6. Proposed Changes to the a faster rate than their costs increase
and satellite facilities that were required
Methodology for Determining LTCH over a long period of time, or if they
to comply with ‘‘separateness and
Cost-to-Charge Ratios (CCRs) and the increase charges at extreme rates, their
control’’ policies at §§ 412.22(e),
Reconciliation of High-Cost and Short- CCRs may fall below the range
412.22(h), and 412.25(e) by allowing
Stay Outlier Payments Under the LTCH considered reasonable and fiscal
expansion and result in additional costs
PPS intermediaries may assign a statewide
to the Medicare program, this would not
be the case regarding a decrease in a. Background average CCR. These statewide averages
either the square footage or the numbers are generally considerably higher than
In the June 9, 2003 high-cost outlier
of beds because a decrease in the the threshold. Therefore, prior to the
final rule (68 FR 34498), we made
number of beds or square footage would change in the regulations, these
revisions to our policies concerning the
not result in additional costs to the hospitals benefited from an artificially
determination of LTCHs’ CCRs and the
Medicare program. Therefore, we are high ratio being applied to their already
reconciliation of high-cost and short- high charges. Furthermore, hospitals
proposing revisions to the regulations at stay outlier payments under the LTCH
§ 412.22(f) for grandfathered HwHs and could continue to increase charges faster
PPS. As we stated in that final rule, (68 than costs, without any further
at §§ 412.22(h) and 412.25(e)(5) for FR 34507), because the LTCH PPS high-
grandfathered satellites of hospitals and downward adjustment to their CCR.
cost outlier and short-stay outlier Consequently, in that same final rule,
satellites of hospital units, respectively, policies are modeled after the IPPS
to allow these entities to decrease their we revised the regulations to specify
outlier policy, we believe they are that a fiscal intermediary may use a
square footage or number of beds, or susceptible to the same payment
both, without jeopardizing their statewide average CCR if it is unable to
vulnerabilities and, therefore, merited determine an accurate CCR in one of
grandfathered status. Specifically, we revision. Specifically, because we
are proposing to add a new paragraph three circumstances (discussed in
believe that a hospital has the ability to greater detail below). (68 FR 34499
(f)(3) to § 412.22; a new paragraph (h)(5) inappropriately increase its outlier
to § 412.22(h) (existing paragraphs (h)(5) through 34500 and 34506 through
payments during the time lag between 34507)
through (h)(7) would be redesignated as the current charges and the CCR from In addition, in the June 9, 2003 final
paragraphs (h)(6) through (h)(8), the settled cost report, through dramatic rule (68 FR 34500 through 34501 and
respectively); and a new paragraph charge increases, we established new 34506 through 34508), we noted that we
(e)(5) to § 412.25 (existing paragraph regulations under the LTCH PPS that had become increasingly aware that
(e)(5) would be redesignated as would allow fiscal intermediaries to use some hospitals had taken advantage of
paragraph (e)(6)). We are also proposing more up-to-date data when determining the former outlier policy by increasing
to revise the introductory text to the CCRs for each LTCH. We revised our their charges at extremely high rates,
paragraph (f) of § 412.22; paragraphs regulations to specify that fiscal knowing that there would be a time lag
(h)(1), (h)(3), and (h)(4) of § 412.22; and intermediaries will use either the most before their CCRs would be adjusted to
paragraph (e)(3) of § 412.25. recent settled cost report or the most reflect the higher charges. We believed
Because grandfathered HwHs or recent tentative settled cost report, that even the revisions to the regulations
grandfathered satellite facilities may be whichever is from the later cost described above would not completely
co-located with an acute care hospital or reporting period, because, in many eliminate all such opportunity. We
may be co-located with another cases, using CCRs from tentative settled explained that we believed that a
excluded hospital (69 FR 49198), we cost report reduces the time lag for hospital would still be able to
want to emphasize that under our updating CCRs by a year or more. dramatically increase its charges by far
proposed policy revisions described However, even the later CCRs above the rate-of-increase in costs
above, where the HwH or satellite calculated from the tentative settled cost during any given year. Because this
facility decreases its number of beds or reports would overestimate costs for possibility was of great concern, we
square footage, there could be an impact hospitals that have continued to added a provision to our regulations to
on the host hospital if it is also increase charges much faster than costs provide that outlier payments would
grandfathered from compliance with the during the time between the tentative become subject to reconciliation when
‘‘separateness and control’’ settled cost report and the time when hospitals’ cost reports are settled.
requirements. (Because excluded the claim is processed. Therefore, we Because we continue to have these
hospitals are prohibited from having also revised the regulations to specify same concerns, in the RY 2007 LTCH
excluded hospital units under that, in the event more recent charge PPS proposed rule (71 FR 4648, 4674
§ 412.25(a)(1)(ii), this discussion is data indicate that an alternative CCR through 4676, and 4690 through 4692),
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limited to HwHs and satellite facilities would be more appropriate, CMS has we discussed our current methodology
of hospitals.) For example, if the authority to direct the fiscal for determining hospitals’ CCRs under
grandfathered HwH ‘‘A’’ is co-located intermediary to change the LTCH’s CCR the LTCH PPS high-cost and short-stay
with another hospital excluded from the to reflect the change evidenced by the outlier policies, and we presented
IPPS, hospital ‘‘B’’ (which is a more recent data. In addition, we further proposals to refine our methodology for
rehabilitation hospital), a decrease in revised the regulations to allow a determining the annual CCR ceiling and
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24127
statewide average CCRs. In that same ceiling (discussed below in this section) made for both inpatient operating and
proposed rule, we also discussed our and the proposed statewide average capital-related costs. Therefore, we
existing policy for the reconciliation of LTCH CCRs (as shown in Table 8C of compute a single ‘‘overall’’ or ‘‘total’’
LTCH PPS high-cost and short-stay the Addendum to this IPPS proposed CCR for LTCHs based on the sum of
outlier payments, along with our rule) that would be effective October 1, their operating and capital-related costs
proposal to codify in Subpart O of 42 2006, based on our proposed policy (as described in Chapter 3, section
CFR Part 412 those policies, including changes (along with the values of the 150.24, of the Medicare Claims
proposed modifications and editorial proposed LTCH CCRs that would be Processing Manual (CMS Pub. 100–4) as
clarifications to those existing policies. determined under our current compared to total charges. Specifically,
Historically, annual updates to LTCH methodology). a LTCH’s CCR is calculated by dividing
CCR ceiling and statewide average CCRs an LTCH’s total Medicare costs (that is,
have been effective on October 1. In that b. High-Cost Outliers
the sum of its operating and capital
RY 2007 LTCH PPS proposed rule, we Under the broad authority conferred inpatient routine and ancillary costs)
proposed that the proposed revisions to upon the Secretary by section 123 of the divided by its total Medicare charges
the policies governing the determination BBRA as amended by section 307(b) of (that is, the sum of its operating and
of LTCHs’ CCRs and the reconciliation BIPA, when we implemented the LTCH capital inpatient routine and ancillary
of high-cost and short-stay outlier PPS, we established an adjustment for charges). (Instructions regarding the
payments would be effective October 1, additional payments for outlier cases changes established in the June 9, 2003
2006. In addition, our proposal stated that have extraordinarily high-costs IPPS high-cost outlier final rule for both
that the LTCH CCR ceiling and relative to the costs of most discharges LTCHs and IPPS hospitals can be found
statewide average CCRs that would be at § 412.525(a). Providing additional in Program Transmittal A–03–058
effective October 1, 2006, would be payments for outliers strongly improves (Change Request 2785; July 3, 2003)).
presented in the annual IPPS proposed the accuracy of the LTCH PPS in As a result of the changes established
and final rules. determining resource costs at the patient in the June 9, 2003 IPPS high-cost
We received a few specific comments level and hospital level. Specifically, outlier final rule, as we discussed in
concerning the proposed changes to the under § 412.525(a), we make outlier previous LTCH PPS final rules (RY
policies governing the determination of payments for any discharge if the 2004, 68 FR 34144 through 34146; RY
LTCHs’ CCRs. Several other commenters estimated cost of the case exceeds the 2005, 69 FR 25687 through 25690; and
referenced one of the specific comments adjusted LTCH PPS payment for the RY 2006, 70 FR 24192 through 24194),
on the proposed changes to the LTC–DRG plus a fixed-loss amount. under our current policy, an LTCH is
methodology for determining LTCH Under the LTCH PPS high-cost outlier assigned the applicable statewide
CCRs in their own comments on the RY policy, the LTCH’s loss is limited to the average CCR if, among other things, an
2007 LTCH PPS proposed rule. Based fixed-loss amount and a fixed LTCH’s CCR is found to be in excess of
on one commenter’s synopsis of our percentage of costs above the marginal the applicable maximum CCR threshold
proposed changes concerning the cost factor. We calculate the estimated (that is, the combined IPPS operating
determination of LTCH’s CCRs, we cost of a case by multiplying the overall and capital CCR ceiling). As we
believe that the commenters clearly hospital CCR by the Medicare allowable explained in that same final rule (68 FR
understood the nature and purpose of covered charge. In accordance with 34507), CCRs above this threshold are
the proposed changes. However, the § 412.525(a)(3), we pay outlier cases 80 most likely due to faulty data reporting
commenter pointed out that, in the RY percent of the difference between the or entry, and, therefore, these CCRs
2007 LTCH PPS proposed rule, we did estimated cost of the patient case and should not be used to identify and make
not provide an analysis of the effect of the outlier threshold (the sum of the payments for outlier cases. Such data
this proposed change, nor did we adjusted Federal prospective payment are clearly errors and should not be
provide an example of the new CCR for the LTC-DRG and the fixed-loss relied upon. Thus, under our
values under this proposed amount). established policy, if an LTCH’s CCR is
methodology. Another commenter did above the applicable ceiling, the
not ‘‘object in concept to the proposed (1) CCR Ceiling
applicable combined IPPS statewide
combination of [IPPS] operating and As noted above, we determine the average CCR is assigned to the LTCH
capital cost-to-charge ratios’’ (to estimated cost of the case by instead of the CCR computed from data
compute a ‘‘total’’ CCR for each IPPS multiplying the LTCH’s overall CCR by in its most recent (settled or tentatively
hospital by adding together each the Medicare allowable charges for the settled) cost report.
hospital’s operating CCR and its capital case. As we discussed in greater detail As we explained in the RY 2006
CCR) from which to compute the LTCH in the June 9, 2003 IPPS high-cost LTCH PPS final rule (70 FR 24192), we
CCR ceiling and applicable statewide outlier final rule (68 FR 34506 through believe it is appropriate to use the
average CCRs. However, the commenter 34516), because the LTCH PPS high-cost combined IPPS operating and capital
also pointed out that we did not provide outlier policy (§ 412.525) is modeled CCR ceiling and the applicable
any impact data and requested that we after the IPPS outlier policy, we combined IPPS statewide average CCRs
defer adoption of that proposed change believed that it and the short-stay in determining LTCHs’ CCRs because
until such data are provided for outlier policy (§ 412.529) are susceptible LTCHs’ cost and charge structures are
comment. to the same payment vulnerabilities that similar to that of IPPS acute care
Therefore, we are proposing in this became evident under the IPPS and, hospitals. For instance, LTCHs are
IPPS proposed rule the same changes to therefore, merited revision. Thus, we certified as acute care hospitals, as set
the policies governing the determination revised the high-cost outlier policy at forth in section 1861(e) of the Act, to
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of LTCHs’ CCRs and the reconciliation § 412.525(a) and the short-stay policy at participate as a hospital in the Medicare
of high-cost and short-stay outlier § 412.529 in that same final rule for the program, and these hospitals, in general,
payments that we proposed in the RY determination of LTCHs’ CCRs and the are paid as LTCHs only because their
2007 LTCH PPS proposed rule. We are reconciliation of outlier payments. Medicare average length of stay is
including in this proposed rule the Under the LTCH PPS, a single greater than 25 days (§ 412.23(e)).
values of the proposed LTCH CCR prospective payment per discharge is Furthermore, as also explained in that
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24128 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
same final rule, prior to qualifying as a revise § 412.525(a)(4) to specify that, for which does not differentiate payments
LTCH under § 412.23(e)(2)(i), a hospital discharges occurring on or after October between operating and capital-related
generally is paid as an acute care 1, 2006, if, among other things, a costs. Our rationale for proposing to
hospital under the IPPS during the LTCH’s CCR is in excess of the LTCH continue to use IPPS data to determine
period in which it demonstrates that it CCR ceiling (which would be calculated the LTCH CCR ceiling annually
has an average length of stay of greater as 3 standard deviations above the continues to be the same as the one
than 25 days. In addition, because there corresponding national geometric mean stated above.
are less than 400 LTCHs, and they are total CCR (established and published To summarize, our current
unevenly geographically distributed annually by CMS)), the fiscal methodology (that is, using the
throughout the United States, there may intermediary may use a statewide ‘‘combined’’ IPPS CCR ceiling)
not be sufficient LTCH CCR data to average CCR (also established annually calculates two separate IPPS CCRs (an
determine an appropriate LTCH PPS by CMS and discussed in more detail operating CCR and a capital CCR) by
CCR ceiling using LTCH data. below). (We note, as discussed in greater taking 3 standard deviations from the
As noted above, under the LTCH PPS, detail below in this section, in average of all IPPS operating CCRs and
there is a single prospective payment conjunction with this proposed change 3 standard deviations from the average
per discharge for both inpatient in the calculation of the LTCH CCR of all IPPS capital CCRs separately to
operating and capital-related costs, and ceiling, we are also proposing a change determine the IPPS operating CCR
therefore, we compute a single ‘‘overall’’ in our methodology for calculating the ceiling and IPPS capital CCR ceiling,
or ‘‘total’’ CCR for LTCHs based on the applicable statewide average CCRs respectively. Then we added the IPPS
sum of their Medicare operating and under the LTCH PPS to be based on operating CCR ceiling and the IPPS
capital-related costs and charges. hospital-specific ‘‘total’’ CCRs.) capital CCR ceiling together to get a
However, under the IPPS, Medicare per Specifically, under proposed revised combined’’ LTCH CCR ceiling. The
discharge payments to acute care § 412.525(a)(4)(iv)(C)(2), for discharges proposed methodology would add each
hospitals for the costs of inpatient occurring on or after October 1, 2006, IPPS hospital’s operating CCR and its
operating services are made under the we are proposing that we would capital CCR together first to get a ‘‘total’’
‘‘operating IPPS’’ and per discharge determine the single ‘‘total’’ CCR CCR for each IPPS hospital, and then
payments to acute care hospitals for ceiling, based on IPPS CCR data, by first determine the average (that is, national
inpatient capital-related costs are made calculating the total (that is, operating geometric mean) of all of those total
under the ‘‘capital IPPS.’’ Because and capital) CCR for each hospital and CCRs across all IPPS hospitals. Next we
separate payments are made to acute then determining the average total CCR would take 3 standard deviations above
care hospitals under the IPPS for for all hospitals. For example, if a the corresponding national geometric
operating and capital-related costs, hospital’s operating CCR is 0.432 and its mean total CCR to calculate the LTCH
separate operating and capital CCRs are capital CCR is 0.027, its total CCR CCR ceiling. The underlying data upon
calculated and used in determining would be 0.459 (0.432 + 0.027 = 0.459). which this calculation is based, that is,
IPPS high-cost outlier payments. This calculation would be repeated for the IPPS CCRs, would remain the same.
Accordingly, under the IPPS, a separate all hospitals in order to determine total Based on the most recent complete
‘‘operating’’ CCR ceiling and a ‘‘capital’’ CCRs for all hospitals. Next, those total IPPS total CCR data from the December
CCR ceiling are determined annually. CCRs would be used to determine the 2005 update to the Provider-Specific
As we explained above and as stated in average total CCR and standard File, we are proposing a total CCR
annual instructions (Program deviation across all hospitals. The LTCH ceiling of 1.313 under the LTCH PPS
Transmittal A–02–093 (Change Request CCR ceiling would then be established that would be effective October 1, 2006.
2288, September 27, 2002); Program at 3 standard deviations from the mean We note that this proposed ceiling was
Transmittal A–03–073 (Change Request total CCR, rather than determining the determined based on the same data used
2891, August 22, 2003); Program LTCH total CCR ceiling by adding the to determine the separate proposed IPPS
Transmittal 309 (Change Request 3459, separate IPPS operating CCR and capital operating CCR ceiling (1.25) and the
October 1, 2004); and Program CCR ceilings, which are each separately proposed IPPS capital CCR ceiling
Transmittal 692 (Change Request 4046, determined at 3 standard deviations (0.158) discussed in section II.A.4.c. of
September 30, 2005)), under our current from the average operating CCR and the Addendum to this proposed rule.
policy, if a LTCH’s CCR is above the average capital CCR, respectively, as we Furthermore, we are proposing that, if
applicable ‘‘combined’’ IPPS operating do under our current policy (as more recent data are available (that is,
and capital CCR ceiling (that is, adding demonstrated above). data from the March 2006 update to the
the separate IPPS operating ceiling and Under this proposed policy, we Provider-Specific File, for example), we
the capital CCR ceiling together), the would use the same IPPS CCR data that would use those data to determine the
applicable statewide average CCR is we currently use to annually determine final total CCR ceiling under the LTCH
assigned to the LTCH. For instance, for the separate IPPS operating CCR and PPS for FY 2007 using the proposed
FY 2006, the IPPS operating CCR ceiling capital CCR ceilings (that we add methodology described above.
is 1.254 and the IPPS capital CCR together under our current policy to The LTCH CCR ceiling determined
ceiling is 0.169 (70 FR 47496). determine the annual CCR ceiling for under our current ‘‘combined’’
Therefore, under our current policy, the LTCHs) to compute IPPS hospital- methodology would result in a slightly
‘‘combined’’ operating and capital CCR specific total CCRs that would be used higher LTCH CCR ceiling (that is, 1.25
ceiling is 1.423 (1.254 + 0.169 = 1.423) to determine the single LTCH total CCR + 0.158 = 1.408) for FY 2007 compared
as specified in Program Transmittal 692 ceiling. We believe that determining a to the proposed ‘‘total’’ CCR ceiling of
(Change Request 4046, September 30, LTCH CCR ceiling based on IPPS total 1.313 for FY 2007. However, we note
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2005). (operating and capital-related) Medicare that, based on CCRs from the December
Because LTCHs have a single ‘‘total’’ costs and charges rather than adding the 2005 update of the Provider-Specific
CCR (rather than separate operating and separate IPPS CCR ceilings determined File, there were no LTCHs that have a
capital CCRs), under the broad authority from operating CCRs and capital CCRs, CCR that is greater than the proposed
of section 123 of the BBRA and section respectively, would be more consistent ceiling of 1.313 (the highest LTCH CCR
307(b)(1) of BIPA, we are proposing to with the LTCH PPS single payment, in the database of 363 LTCHs is 1.132).
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24129
As we explained in the RY 2007 should not be applied to hospitals that to be paid as an LTCH (that is, the
LTCH PPS proposed rule (71 FR 4675), convert from acute care IPPS hospitals period of at least 6 months that it was
we are proposing to amend § 412.525 by to LTCHs (and receive a new LTCH paid as a short-term acute care hospital),
adding a new paragraph (a)(4)(iv)(C)(2) provider number). Rather, the cost and or data from other comparable LTCHs,
to reflect the refined methodology for charge data from the IPPS hospital’s cost such as LTCHs in the same chain or in
determining the annual CCR ceiling report (even if they are for more or less the same region.)
under the LTCH PPS. We are proposing than a 12-month cost reporting period) In addition, under proposed
that the revision would be effective for would be used to determine the LTCH’s § 412.525(a)(4)(iv)(C), for discharges
discharges occurring on or after October CCR. occurring on or after October 1, 2006,
1, 2006, rather than July 1, 2006, Thus, in addition to proposing to we are proposing that we would
because we are proposing to continue to revise our methodology for determining annually establish statewide average
use the same IPPS data used to the annual CCR ceiling under the LTCH ‘‘total’’ CCRs (as explained below in this
determine the individual IPPS operating PPS for discharges occurring on or after section) for use under the LTCH PPS
and capital CCR ceilings established and October 1, 2006, under the broad based on IPPS data rather than assigning
published annually in the IPPS authority of section 123 of the BBRA the combined (operating and capital-
proposed and final rules. Because both and section 307(b)(1) of BIPA, we are related) statewide average CCRs
the separate IPPS operating and capital proposing to revise § 412.525(a)(4), for (Transmittal 692 (Change Request 4046,
CCRs ceilings and the LTCH ‘‘total’’ discharges occurring on or after October September 30, 2005)). Specifically,
CCR ceiling would be determined using 1, 2006, to codify in Subpart O of 42 under this proposed policy, we would
the same data, we believe it would be CFR Part 412 the remaining LTCH PPS use the same IPPS CCR data that we
administratively expedient to continue high-cost policy changes that were currently use to annually establish the
to establish the LTCH CCR ceiling to be established in the June 9, 2003 IPPS separate IPPS operating and capital
effective for discharges occurring on or high-cost outlier final rule (68 FR 34506 statewide CCRs (that we add together
after October 1 of each year. (As stated through 34513), including proposed under our current policy to determine
previously, this is consistent with our modifications and editorial the applicable ‘‘combined’’ statewide
current policy, where the LTCH CCR clarifications to those existing policies average CCR for LTCHs) to compute
ceiling is updated annually on October established in that final rule, which are statewide average total CCRs by first
1.) Therefore, under this proposal, the discussed in greater detail below in this calculating the total (that is, operating
public would continue to consult the section. We are proposing these and capital) CCR for each hospital and
annual IPPS proposed and final rules for additional revisions to § 412.525(a)(4) then determining the weighted average
changes to the LTCH CCR ceiling that because we believe that making these total CCR for all hospitals in each State
would be effective for discharges revisions would more precisely describe rather than adding together the separate
occurring on or after October 1. Under the application of those policies as they applicable IPPS operating and capital
this proposal, the current LTCH CCR relate to the determination of LTCH statewide weighted average CCRs as we
ceiling established for discharges CCRs and because these proposed do under our current policy.
occurring on or after October 1, 2005, in changes would be consistent with the We also are proposing that these
the FY 2006 IPPS final rule would proposed changes to the calculation of statewide average ‘‘total’’ (operating and
remain in effect for discharges occurring the LTCH CCR ceiling discussed above capital) CCRs that would be used under
on or before September 30, 2006. in this section. the LTCH PPS would continue to be
Specifically, we are proposing to published annually in the IPPS
(2) Statewide Average CCRs specify in new § 412.525(a)(4)(iv)(C) that proposed and final rules, and, therefore,
In the June 9, 2003 IPPS high-cost the fiscal intermediary may use a the public would continue to consult
outlier final rule, we also established statewide average CCR, which would be the annual IPPS proposed and final
our existing policy for discharges established annually by CMS, if it is rules for changes to the applicable
occurring on or after August 8, 2003, unable to determine an accurate CCR for statewide average total CCRs that would
that, in addition to assigning the a LTCH in one of the following three be effective for discharges occurring on
applicable statewide average CCR to a circumstances: (1) New LTCHs that have or after October 1. Under this proposal,
LTCH whose CCR is above the ceiling, not yet submitted their first Medicare the current applicable statewide average
the fiscal intermediary may use the cost report (for this purpose, consistent operating and capital CCRs, established
applicable statewide average CCR for with current policy, a new LTCH would for discharges occurring on or after
LTCHs for whom data with which to be defined as an entity that has not October 1, 2005, would remain in effect
calculate a CCR are not available (for accepted assignment of an existing for discharges occurring on or before
example, missing or faulty data) or for hospital’s provider agreement in September 30, 2006. Our rationale for
new LTCHs that have not yet submitted accordance with § 489.18); (2) LTCHs proposing to establish statewide average
their first Medicare cost report. (For this whose CCR is in excess of the LTCH ‘‘total’’ CCRs (as described above in this
purpose, a ‘‘new’’ LTCH is defined as an CCR ceiling (that is, 3 standard section) based on IPPS data under
entity that has not accepted assignment deviations above the corresponding proposed § 412.525(a)(4)(iv)(C) is the
of an existing hospital’s provider national geometric mean total CCR, as same as the one stated above for
agreement in accordance with § 489.18.) discussed in greater detail previously in proposing to use IPPS data to determine
We note that, consistent with our this proposed rule); and (3) other LTCHs a ‘‘total’’ LTCH CCR ceiling.
current policy, either CMS or the for whom data with which to calculate Under the current methodology, we
hospital may request the use of a a CCR are not available (for example, determine a ‘‘combined’’ statewide
different (higher or lower) CCR based on missing or faulty data). (Other sources of average CCRs for LTCHs located in rural
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substantial evidence that such a CCR data that the fiscal intermediary may areas of a State that accounts for
more accurately reflects the hospital’s consider in determining an LTCH’s CCR operating and capital costs and charges
actual costs and charges. This applies to included data from a different cost and a ‘‘combined’’ statewide average
new LTCHs (as defined above) as well. reporting period for the LTCH, data CCRs for LTCHs located in urban areas
For instance, CMS may determine that from the cost reporting period preceding of a State that accounts for operating
the applicable statewide average CCR the period in which the hospital began and capital-related costs and charges. In
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order to calculate a combined statewide determine its ‘‘total’’ CCR. Then we using the proposed methodology
average CCR under our current would use the ‘‘total’’ CCRs for all urban describe above.
methodology, we must first calculate IPPS hospitals in the State to compute Comparing the proposed statewide
separate statewide average operating a statewide average total CCR for the average ‘‘total’’ CCRs in Table 8C of the
CCRs and capital CCRs. Under the IPPS, urban areas of a State, and we would Addendum to this proposed rule to the
two statewide average operating CCRs use the ‘‘total’’ CCR for all rural IPPS ‘‘combined’’ statewide average CCRs
are computed for each State: a statewide hospitals in the State to compute a that would be calculated using our
average CCR for rural areas and a statewide average CCR for the rural existing methodology from the proposed
statewide average CCR for urban areas. areas of a State. Below, we outline our operating PPS statewide average CCRs
One statewide average capital CCR is proposed methodology for calculating in Table 8A of the Addendum to this
computed for each State (applicable to the total statewide average CCR for a proposed rule and the proposed capital
both urban and rural areas). We use the rural LTCH: PPS statewide average CCRs in Table 8B
same capital CCR for urban and rural Step 1: Calculate the total CCR for of the Addendum to this proposed rule
areas because capital costs are the same each rural IPPS hospital by adding shows that the proposed changes to our
regardless of geographic location. together its operating CCR and its methodology for determining LTCH
Below, we outline our existing capital CCR. statewide average CCRs would result in
methodology for calculating the Step 2: Calculate the weighted average only minor changes in the average CCR
combined statewide average CCR for a total CCR for all rural IPPS hospitals in for each State. In particular, the largest
rural LTCH: the State (as shown in the third column decrease in a statewide average CCR
Step 1: Calculate the weighted average of Table 8C of the Addendum to this (with the exception of Maryland, as
operating CCR for all IPPS hospitals proposed rule). For example, for a rural discussed below) would be in urban
located in rural areas of the State (as LTCH located in Alabama, under our Indiana (¥1.9 percent). However, there
shown in the third column of Table 8A proposed methodology, the proposed are currently no LTCHs located in
of the Addendum to this proposed rule). ‘‘total’’ statewide average CCR for FY Indiana. The largest increase in a
Step 2: Calculate the weighted average 2007 would be 0.365 (Table 8C of the statewide average CCR would be in
capital CCR for all IPPS hospitals Addendum to this proposed rule). This urban District of Columbia (2.8 percent),
located in the State (both rural and same proposed methodology would be and there are currently only 2 LTCHs
urban areas) (as shown in Table 8B of applied when determining the ‘‘total’’ located in the District of Columbia.
the Addendum to this proposed rule). statewide average CCR for LTCHs We are proposing to determine the
Step 3: Add the weighted average located in urban areas, except that we urban and rural statewide average total
rural operating CCR (Step 1) together would replace ‘‘rural IPPS hospitals’’ CCRs for Maryland LTCHs paid under
with the weighted average capital CCR with ‘‘urban IPPS hospitals’’ in Steps 1 the LTCH PPS using, as a proxy, the
(Step 2) in order to arrive at a and 2. (The total statewide average CCRs national average total CCR for urban
‘‘combined’’ statewide average CCR for for urban LTCHs is shown in the second IPPS hospitals and the national average
LTCHs in rural areas of the State. column of Table 8A of the Addendum total CCR for rural IPPS hospitals,
For example, for a rural LTCH located to this proposed rule.) Under this respectively. We are proposing this
in Alabama, under our current proposal, the underlying data, that is, proxy because we believe that the CCR
methodology, the ‘‘combined’’ statewide the IPPS CCRs, would remain the same. data on the Provider-Specific File for
average CCR for FY 2007 would be Based on the most recent complete Maryland hospitals may not be accurate.
0.360, computed as the operating IPPS total CCR data from the December We believe that the CCR data based on
statewide rural average CCR of 0.334 2005 update of the Provider-Specific Maryland hospitals’ cost report and
(Table 8A of the Addendum to this File, the proposed LTCH PPS statewide charge data may not be accurate because
proposed rule) plus the capital average CCRs that would be effective acute care hospitals in Maryland are
statewide average CCR 0.026 (Table 8B October 1, 2006, are presented in Table operating under a waiver of the
of the Addendum to this proposed rule). 8C of the Addendum to this proposed Medicare’s ratesetting methodologies for
This same methodology is applied when rule. (We note that, as is the case under inpatient and outpatient services under
determining the ‘‘combined’’ statewide the IPPS, all areas in the District of the authorities of sections 1814(b)(3)
average CCR for LTCHs located in urban Columbia, New Jersey, Puerto Rico, and and 1833(a)(2) of the Act. The State’s
areas under our current methodology, Rhode Island are classified as urban, Health Services Cost Review
except that in Step 1 we substitute the and therefore, there are no proposed Commission (HSCRC) is the regulatory
average operating CCR for all rural IPPS rural statewide average total CCRs listed body that establishes hospital-specific
hospitals with the weighted average for those jurisdictions in Table 8C of the rates for all hospital services in
operating CCR for all urban IPPS Addendum to this proposed rule. We Maryland.
hospitals for the State (as shown in the also note that, as is the case under the Because all Maryland short-term acute
second column of Table 8A of the IPPS, although Massachusetts has areas care hospitals are paid based on the
Addendum to this proposed rule) and in that are designated as rural, there are no hospital-specific rates set by the HSCRC
Step 3, we add the weighted average short-term acute care IPPS hospitals or rather than under the IPPS, CCRs are not
urban operating CCR in Step 1 to the LTCHs located in those areas as of required to determine their Medicare
weighted average capital CCR in Step 2 March 2006, and therefore, there is no payments (as they are for other acute
in order to arrive at a ‘‘combined’’ proposed rural statewide average total care hospitals that are not governed
statewide average CCR for LTCHs in CCR listed for rural Massachusetts in under the waiver at sections 1814(b)(3)
urban areas of the State. Table 8C of the Addendum of this and 1833(a)(2) of the Act, and who are
Under our proposed methodology for proposed rule.) Furthermore, we are reimbursed for their treatment of
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calculating a statewide average ‘‘total’’ proposing that, if more recent data are Medicare patients under the IPPS).
CCR under the LTCH PPS that accounts available (that is, data from the March Therefore, CCRs in the Provider-Specific
for operating and capital-related costs 2006 update of the Provider-Specific File for Maryland acute care hospitals,
and charges, first, for each IPPS File, for example), we would use those for the most part, are missing (because
hospital, we would add its operating data to determine the final LTCH PPS they are not used for payment). Those
CCR and its capital CCR together to statewide average CCRs for FY 2007 CCRs that are input into the Provider-
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24131
Specific File for Maryland acute care on or after October 1, 2006, under governing the determination of LTCHs’
hospitals by the fiscal intermediary are proposed revised new CCRs, including proposed modifications
most likely unaudited because they are § 412.525(a)(4)(iv)(A) and (B) are similar and editorial clarifications to our
not used for making payments. For all to our existing policy established in the existing methodology for determining
these reasons, we are concerned that June 9, 2003 IPPS high-cost outlier final the annual LTCH CCR ceiling and
CCRs for Medicare acute care hospitals rule (68 FR 34506 through 34513). In applicable statewide average CCRs
located in Maryland that are in the addition, we are proposing a technical under the LTCH PPS.
Provider-Specific File may not be correction to existing § 412.525(a)(3) to In this proposed rule, under the broad
reliable. Therefore, we believe that they change the plural reference from cost-to- authority of section 123 of the BBRA
should not be used as proxies for setting charge ‘‘ratios’’ to the singular reference and section 307(b)(1) of BIPA, we are
the statewide average total CCRs for to a cost-to-charge ‘‘ratio’’ because, also proposing to revise § 412.525(a)(4),
Maryland LTCHs. under the LTCH PPS, a single (total) for discharges occurring on or after
We believe it would be more CCR is computed for LTCHs. October 1, 2006, to codify in Subpart O
appropriate to establish statewide of 42 CFR Part 412 the provisions
average total CCRs for Maryland LTCHs (4) Reconciliation of High-Cost Outlier discussed above concerning the
based on national average total CCRs of Payments Upon Cost Report Settlement reconciliation of LTCH PPS outlier
IPPS hospitals that were audited by In the June 9, 2003 high-cost outlier payments, including proposed editorial
fiscal intermediaries. We are proposing final rule (68 FR 34508 through 34512), clarifications discussed in greater detail
to establish statewide average total CCRs we established a policy for LTCHs that below in this section, that would more
for Maryland LTCHs based on the provided that, effective for LTCH PPS precisely describe the application of
national average total CCRs of all IPPS discharges occurring on or after August those policies. We are proposing the
hospitals because we believe that the 8, 2003, any reconciliation of outlier additional revisions to § 412.525(a)(4)
average of the CCRs of all the IPPS payments will be based upon the actual concerning the reconciliation of outlier
hospitals across the country that were CCR computed from the costs and payments, which are discussed in
audited by fiscal intermediaries would charges incurred in the period during greater detail below in this section,
be based on sufficient rigorous complete which the discharge occurs. In that because these proposed changes would
data that would be a representative same final rule, we also established that, be consistent with the proposed changes
proxy for the ratio of costs-to-charges of for discharges occurring on or after to the calculation of the LTCH CCR
LTCHs in Maryland that are subject to August 8, 2003, at the time of any ceiling discussed above.
LTCH PPS. (We note that, under our reconciliation, outlier payments may be Specifically, at proposed new
proposal, the fiscal intermediary may adjusted to account for the time value of § 412.525(a)(4)(iv)(D), similar to our
assign the statewide average CCR in one any underpayments or overpayments current policy, we are proposing to
of three circumstances (that is, ‘‘new’’ based upon a widely available index to specify that, for discharges occurring on
LTCHs, as defined above; LTCHs with a be established in advance by the or after October 1, 2006, any
CCR that is in excess of the LTCH Secretary and will be applied from the reconciliation of outlier payments
ceiling; and LTCHs with unavailable midpoint of the cost reporting period to would be based on the CCR calculated
data, as discussed above)). the date of reconciliation. These based on a ratio of costs to charges
However, we are soliciting comments changes regarding the reconciliation of computed from the relevant cost report
or suggestions for an alternative proxy outlier payments under the LTCH PPS and charge data determined at the time
statewide average CCR to use for LTCHs were made in conjunction with the the cost report coinciding with the
that are located in Maryland and are changes regarding the determination of discharge is settled. In addition, at
paid under the LTCH PPS. LTCHs’ CCRs that we established under proposed new § 412.525(a)(4)(iv)(E),
§ 412.525(a)(4) in the June 9, 2003 IPPS similar to our current policy, we are
(3) Data Used to Determine a CCR
high-cost outlier final rule, as discussed proposing to specify that, for discharges
Similar to our current policy, we are in greater detail in section IV.D.3.b. of occurring on or after October 1, 2006, at
also proposing to specify under this preamble. (We note that the the time of any reconciliation, outlier
proposed new § 412.525(a)(4)(iv)(B) instructions for implementing these payments may be adjusted to account
that, for discharges occurring on or after regulations under both the IPPS and the for the time value of any underpayments
October 1, 2006, the CCR applied at the LTCH PPS are discussed in further or overpayments. Consistent with our
time a claim is processed would be detail in Program Transmittal A–03– current policy, we also are proposing
based on either the most recent settled 058. Additional information on the that such an adjustment would be based
cost report or the most recent tentatively administration of the reconciliation upon a widely available index to be
settled cost report, whichever is from process under the IPPS is provided in established in advance by the Secretary
the latest cost reporting period. Program Transmittal 707 (Change and would be applied from the
Furthermore, we are proposing under Request 3966, October 12, 2005). We midpoint of the cost reporting period to
proposed new § 412.525(a)(4)(iv)(A) to note that, in addition to the proposed the date of reconciliation.
state that CMS may specify an changes to the high-cost outlier and We are proposing to make these
alternative to the CCR computed under short-stay outlier policies presented in additions to § 412.525(a)(4) because we
proposed new § 412.525(a)(4)(iv)(B); this proposed rule, we are currently believe that such proposed changes
that is, the CCR computed from the most developing additional instructions on reinforce the concept that the LTCH PPS
recent settled cost report or the most the administration of the existing has a single payment rate for inpatient
recent tentatively settled cost report, reconciliation process under the LTCH operating and capital-related costs (as
whichever is later, or a hospital may PPS that would be similar to the IPPS discussed in greater detail previously),
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also request that the fiscal intermediary reconciliation process.) and because we believe it would be
use a different (higher or lower) CCR As discussed above, we are proposing, more appropriate and administratively
based on substantial evidence presented for discharges occurring on or after simpler to include all of the regulatory
by the hospital. These proposed October 1, 2006, to codify into the LTCH provisions concerning the
revisions to our policy for determining PPS section of the regulations (Subpart determination of LTCH PPS outlier
a LTCH’s CCR for discharges occurring O of 42 CFR Part 412) the provisions payments applicable under the LTCH
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PPS regulations in Subpart O of 42 CFR changes to the high-cost outlier policy at determine the single ‘‘total’’ CCR ceiling
Part 412. existing § 412.525(a)(4)(ii) and (iii).) (as we proposed under the high-cost
As we discuss above in this section, outlier policy at proposed
c. Short-Stay Outliers we are proposing to revise the existing § 412.525(a)(4)(iv)(C)(2), as explained
(1) Background regulations at § 412.525(a)(4) to codify previously in this section) by first
in Subpart O of 42 CFR Part 412 the calculating the total (that is, operating
When we implemented the LTCH provisions governing the determination and capital) CCR for each IPPS hospital
PPS, under § 412.529, we established a of LTCHs’ CCRs, including proposed and then determining the average total
special payment policy for short-stay modifications and editorial CCR for all IPPS hospitals. For example,
outlier cases, that is, LTCH PPS cases clarifications to our existing if an IPPS hospital’s operating CCR is
with a length of stay that is less than or methodology for determining the annual 0.432 and its capital CCR is 0.027, its
equal to five-sixths of the geometric LTCH CCR ceiling and applicable total CCR would be 0.459 (0.432 + 0.027
average length of stay for each LTC– statewide average CCRs under the LTCH = 0.459). This calculation would be
DRG. As noted previously, generally PPS, and the provisions governing the repeated for all IPPS hospitals in order
LTCHs are defined by statute as having reconciliation of high-cost outlier to determine a total CCR for each IPPS
an average length of stay of greater than payments. hospital. Next, those total CCRs would
25 days. We believe that a short-stay We are proposing these changes, as be used to determine the average total
outlier payment adjustment results in we discuss in greater detail below in CCR. Once the average total CCR across
more appropriate payments, because this section, because we believe that all IPPS hospitals is determined, we
these cases most likely would not such proposed changes would be more would take 3 standard deviations above
receive a full course of a LTCH-level of consistent with the LTCH PPS single the corresponding national geometric
treatment in such a short period of time payment rate, and because we believe it mean total CCR (in the previous step) to
and a full LTC–DRG payment may not would be more appropriate and determine the LTCH CCR ceiling. This
always be appropriate. Under the administratively simpler to include the proposed change is similar to the
existing short-stay outlier policy at regulatory provisions that pertain only proposed change to the LTCH PPS high-
§ 412.529, for LTCH PPS discharges to LTCHs for the determination of LTCH cost outlier policy discussed previously
with a length of stay of up to and PPS outlier payments applicable under in this section. (We note, as discussed
including five-sixths the geometric the LTCH PPS regulations in Subpart O in greater detail below in this section, in
average length of stay for the LTC–DRG, of 42 CFR Part 412 (as opposed to conjunction with this proposed change
in general, we adjust the per discharge Subpart A). Because CCRs are also used in the calculation of the LTCH CCR
payment under the LTCH PPS by the in determining short-stay outlier ceiling, we are also proposing a change
least of 120 percent of the estimated cost payments under § 412.529, we are in our methodology for calculating the
of the case, 120 percent of the LTC–DRG proposing, under the broad authority of applicable statewide average CCRs
specific per diem amount multiplied by section 123 of the BBRA as amended by under the LTCH PPS to be based on
the length of stay of that discharge, or section 307(b)(1) of BIPA, to revise ‘‘total’’ hospital-specific CCRs.)
the full LTC–DRG payment. (We note § 412.529(c) consistent with the Specifically, we are proposing under
we have proposed changes to this proposed changes to § 412.525(a)(4) the short-stay outlier policy at proposed
general payment formula in the RY 2007 discussed above in this section. new § 412.529(c)(5)(iv)(C) to use the
Specifically, we are proposing in new same IPPS CCR data that we currently
LTCH PPS proposed rule (71 FR 4679).)
§ 412.529(c)(5)(iv)(C)(2) to specify that, use to annually determine the separate
Consistent with the LTCH PPS high-cost
for discharges occurring on or after IPPS operating CCR and capital CCR
outlier policy, we calculate the
October 1, 2006, if, among other things, ceilings (that we add together under our
estimated cost of a case by multiplying
a LTCH’s CCR is in excess of the LTCH current policy to determine the annual
the overall hospital CCR by the
CCR ceiling (which would be calculated CCR ceiling for LTCHs) to compute the
Medicare allowable covered charge. as 3 standard deviations above the single LTCH ‘‘total’’ CCR ceiling based
(2) Determination of LTCH CCRs and corresponding national geometric mean on IPPS hospital-specific total
Reconciliation CCR (established and published (operating and capital-related) Medicare
annually by CMS)), the fiscal costs and charges, as explained above in
In the June 9, 2003 IPPS outlier final intermediary may use a statewide this section.
rule (68 FR 34507), we revised the short- average CCR (also established annually In other words, our current
stay policy at § 412.529 (and the high- by CMS). (We note that, similar to our methodology (that is, using the
cost outlier policy at § 412.525(a)) current policy, we are also proposing ‘‘combined’’ IPPS CCR ceiling)
because, as we discussed above in this under proposed calculates two separate IPPS CCRs (an
section, we believed that the short-stay §§ 412.529(c)(5)(iv)(C)(1) and (3) that the operating CCR and a capital-related
outlier (and high-cost outlier) policy are fiscal intermediary may use a statewide CCR) by taking 3 standard deviations
susceptible to the same payment average CCR in two other from the average of all IPPS operating
vulnerabilities that became evident circumstances, which are discussed in CCRs and 3 standard deviations from
under the IPPS and, therefore, merited greater detail below in this section.) the average of all IPPS capital CCRs
revision. Therefore, in the regulations Under our current methodology for separately to determine the IPPS
under existing § 412.529(c)(5)(ii) and determining the LTCH CCR ceiling, we operating CCR ceiling and the IPPS
(iii), we established a policy for the add together the separate IPPS operating capital CCR ceiling, respectively. Then
determination of LTCH CCRs and the CCR ceiling and IPPS capital CCR we added the IPPS operating CCR
reconciliation of short-stay outlier ceiling, which are determined at 3 ceiling and the IPPS capital CCR ceiling
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payments, for discharges occurring on standard deviations from the average together to get a ‘‘combined’’ LTCH PPS
or after August 8, 2003 operating CCR and average capital CCR, ceiling. The proposed methodology
(§ 412.529(c)(5)(ii)) and October 1, 2003 respectively. Under proposed would add each IPPS hospital’s
(§ 412.529(c)(5)(iii)), respectively. (As § 412.529(c)(5)(iv)(C)(2), for discharges operating CCR and its capital CCR
noted above in this section, in that same occurring on or after October 1, 2006, together first, to get a ‘‘total’’ CCR and
final rule, we established the same we are proposing that we would then take the average of all of those total
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CCRs across all IPPS hospitals to Consistent with the proposed changes average CCR should not be applied to
calculate a ceiling (that is, 3 standard to §§ 412.525(a)(4)(iv)(A) through (C), hospitals that convert from acute care
deviations above the corresponding under the broad authority of section 123 IPPS hospitals to LTCHs (and receive a
national geometric mean total CCR). The of the BBRA and section 307(b)(1) of new LTCH provider number). Rather,
underlying data, upon which this BIPA, we are also proposing at new the cost and charge data from the IPPS
calculation is based, that is, the IPPS §§ 412.529(c)(5)(iv)(A) through (C), for hospital’s cost report (even if it is for
CCRs, would remain the same. discharges occurring on or after October more or less than a 12-month cost
As we explained in the RY 2007 1, 2006, to codify in Subpart O of 42 reporting period) would be used to
LTCH PPS proposed rule (71 FR 4691), CFR Part 412 the remaining LTCH PPS determine the LTCH’s CCR.)
under this proposal, the total CCR short-stay outlier policy changes In addition, similar to our current
ceiling would continue to be published concerning the determination of LTCHs’ practice and consistent with the
annually in the IPPS proposed and final CCRs that were established in the June proposed change to the high-cost outlier
rules and, therefore, the public should 9, 2003 IPPS high-cost outlier final rule policy discussed previously in this
continue to consult the annual IPPS (68 FR 34506 through 34513), including proposed rule under
proposed and final rules for changes to proposed modifications and editorial § 412.525(a)(4)(iv)(C), we are proposing
the applicable LTCH PPS statewide clarifications to those existing policies that, under § 412.529(c)(5)(iv)(C), for
average total CCRs that would be established in that final rule in order to discharges occurring on or after October
effective for discharges occurring on or more precisely describe the application 1, 2006, we would annually establish
after October 1, 2006 (because, under of those policies as they relate to statewide average ‘‘total’’ CCRs for use
this proposal the current applicable LTCHs. under the LTCH PPS based on IPPS data
combined statewide average CCRs, by first calculating the total (that is,
Specifically, similar to our current
established for discharges occurring on operating and capital) CCR for each
policy and consistent with the proposed
or after October 1, 2005 in the FY 2006 hospital and then determining the
changes to the high-cost outlier policy at
IPPS final rule, would remain in effect weighted average total CCR for all
§ 412.525(a)(4) discussed previously in
for discharges occurring on or before hospitals in each State rather than
this section, we are proposing in
September 30, 2006.) The rationale for assigning the combined (operating and
§ 412.529(c)(5)(iv)(C) to specify that the
this proposed change to the short-stay capital) statewide weighted average
fiscal intermediary may use a statewide
outlier policy at proposed CCRs, as we do under our current
average CCR, which would be
§ 412.529(c)(5)(iv)(C) mirrors the policy. Specifically, in proposing to
rationale provided for the proposed established annually by CMS, if it is compute statewide average total CCRs,
changes to the high-cost outlier policy at unable to determine an accurate CCR for we would use the same IPPS CCR data
proposed § 412.525(a)(4)(iv)(C) a LTCH in one of the following three that we currently use to annually
discussed above in this section. circumstances: (1) New LTCHs that have establish the separate IPPS operating
Therefore, in this proposed rule, not yet submitted their first Medicare statewide average CCRs and capital
based on the most recent complete IPPS cost report (for this purpose, consistent statewide CCRs (that we add together
total CCR data from the December 2005 with current policy, a new LTCH would under our current policy to determine
update of the Provider-Specific File, we be defined as an entity that has not the applicable ‘‘combined’’ statewide
are proposing a total CCR ceiling of accepted assignment of an existing average CCR for LTCHs) to compute
1.313 under the LTCH PPS that would hospital’s provider agreement in statewide average total CCRs as
be effective October 1, 2006. We note accordance with § 489.18); (2) LTCHs explained above in this section.
that this proposed ceiling was whose CCRs are in excess of the LTCH To summarize, our current
determined based on the same data used CCR ceiling (that is, 3 standard methodology (that is, using the
to determine to the separate proposed deviations above the corresponding ‘‘combined’’ IPPS operating and capital
IPPS operating CCR ceiling (1.25) and national geometric mean total CCR); and statewide average CCRs) calculates two
the proposed IPPS capital CCR ceiling (3) other LTCHs for whom data with separate IPPS average CCRs for each
(0.158) discussed in section II.A.4.c. of which to calculate a CCR are not State (an operating statewide average
the Addendum to this proposed rule. available (for example, missing or faulty CCR (one average CCR for urban areas
Furthermore, we are proposing that, if data). (As noted above, other sources of and another average CCR for rural areas)
more recent data are available (that is, data that the fiscal intermediary may and a capital statewide average (for all
data from the March 2006 update of the consider in determining a LTCH’s CCR areas within each State)) by taking the
Provider-Specific File, for example), we include data from a different cost weighted average of all IPPS operating
would use that data to determine the reporting period for the LTCH, data CCRs in each State (for urban areas and
final total CCR ceiling under the LTCH from the cost reporting period preceding for rural areas separately) and the
PPS for FY 2007 using the proposed the period in which the hospital began weighted average of all IPPS capital
methodology described above. As noted to be paid as a LTCH (that is, the period CCRs in each State (for all areas), and
previously in this section, the LTCH of at least 6 months that it was paid as then adding the two averages together
CCR ceiling determined under our a short-term acute care hospital), or data for the particular State to get a
current ‘‘combined’’ methodology from other comparable LTCHs, such as ‘‘combined’’ statewide average CCR (one
would result in a slightly higher LTCH other LTCHs in the same chain or in the for urban areas and one for rural areas).
CCR ceiling (that is. 1.25 + 0.158 = same region. As also noted above and The proposed methodology would add
1.408) for FY 2007 compared to the consistent with our current regulations, each IPPS hospital’s operating CCR and
proposed ‘‘total’’ CCR ceiling of 1.313 either CMS or the hospital may request its capital CCR together first, and then
for FY 2007. However, we note that, the use of a different (higher or lower) takes the weighted average of all of
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based on CCRs from the December 2005 CCR based on substantial evidence that those total CCRs for all urban IPPS
update of the Provider-Specific File, such a CCR more accurately reflects the hospitals in the State to get the urban
there were no LTCHs that have a CCR hospital’s actual costs and charges. This statewide average CCR and for all rural
that is greater than the proposed ceiling applies to new LTCHs (as defined IPPS hospitals in the State to get the
of 1.313 (the highest LTCH CCR in the above) as well. For instance, CMS may rural statewide average CCR. This
database of 363 LTCHs is 1.132). determine that the applicable statewide process is repeated for each State
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24134 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
(except Maryland, as discussed below). governed under the waiver in sections occurring on or after October 1, 2006,
The underlying data, that is, the IPPS 1814(b)(3) and 1833(a)(2) of the Act, and that the CCR applied at the time a claim
CCRs, would remain the same. In this who are reimbursed for their treatment is processed would be based on either
proposed rule, based on the most recent of Medicare patients under the IPPS). the most recent settled cost report or the
complete IPPS total CCR data from the Therefore, as discussed above, CCRs in most recent tentative settled cost report,
December 2005 update of the Provider- the Provider-Specific File for Maryland whichever is from the latest cost
Specific File, the proposed LTCH PPS acute care hospitals, for the most part, reporting period. We are proposing
statewide average CCRs that would be are missing or unaudited (because they under § 412.529(c)(5)(iv)(A) that CMS
effective October 1, 2006 are presented are not used for making payments). may specify an alternative to the CCR
in Table 8C of the Addendum to this Thus, we believe it would be more computed from the most recent settled
proposed rule. (We note that, as is the appropriate to establish statewide cost report or the most recent tentative
case under the IPPS, all areas in the average total CCRs for Maryland LTCHs settled cost report, whichever is later, or
District of Columbia, New Jersey, Puerto based on a national average total CCRs a hospital may also request that its fiscal
Rico, and Rhode Island are classified as of IPPS hospitals that were audited by intermediary use a different (higher or
urban, and therefore, there are no fiscal intermediaries. We are proposing lower) CCR based on substantial
proposed rural statewide average total to establish statewide average total CCRs evidence presented by the hospital. As
CCRs listed for those jurisdictions in for Maryland based on the national noted previously in this proposed rule,
Table 8C of the Addendum to this average total CCRs of all IPPS hospitals these proposed revisions to our policy
proposed rule. We also note that, as is because we believe that the average of for determining a LTCH’s CCR for
the case under the IPPS, although the CCRs of all of the IPPS hospitals discharges occurring on or after October
Massachusetts has areas that are across the country that were audited by 1, 2006, under proposed revised
designated as rural, there are no short- fiscal intermediaries would be based on § 412.529(c)(5)(iv)(A) and (B) are similar
term acute care IPPS hospitals or LTCHs sufficient rigorous complete data that to our existing policy established in the
located in those areas as of March 2006, would be a representative proxy for the June 9, 2003 IPPS high-cost outlier final
and therefore, there is no proposed rural ratio of costs to charges of LTCHs rule (68 FR 34506 through 34513) and
statewide average total CCR listed for located in Maryland that are subject to consistent with the proposed changes to
rural Massachusetts in Table 8C of the the LTCH PPS. (We note, that under our the high-cost outlier policy previously
Addendum of this proposed rule.) proposal, the fiscal intermediary may discussed in this proposed rule.
Furthermore, as stated above, we are assign the statewide average CCR in one Furthermore, similar to our current
proposing that, if more recent data are of three circumstances (that is, ‘‘new’’ policy and consistent with the proposed
available (that is, data from the March LTCHs, as defined above; LTCHs with a change to the high-cost outlier policy
2006 update of the Provider-Specific CCR that is in excess of the LTCH CCR discussed previously in this section,
File, for example), we would use those ceiling; and LTCHs with unavailable under the broad authority under section
data to determine the final LTCH PPS data, as discussed above).) However, we 123 of the BBRA as amended by section
statewide average CCRs for FY 2007 are soliciting comments on suggestions 307(b) of BIPA, we are also proposing
using the proposed methodology for an alternative proxy statewide under § 412.529(c)(5)(iv), for discharges
described above. average CCR to use for LTCHs that are occurring on or after October 1, 2006, to
As we also noted above, we are located in Maryland that are paid under codify in the LTCH PPS regulations
proposing to determine the urban and the LTCH PPS. (Subpart O of 42 CFR Part 412) the
rural statewide average total CCRs for In addition, under this proposal, the outlier reconciliation provisions that
Maryland LTCHs paid under the LTCH statewide average total CCRs would were established in the June 9, 2003
PPS using, as a proxy, the national continue to be published annually in IPPS high-cost outlier final rule (68 FR
average total CCR for urban IPPS the IPPS proposed and final rules and, 34506 through 34513), including
hospitals and the national average total therefore, the public would continue to proposed editorial clarifications to those
CCR for rural IPPS hospitals, consult the annual IPPS proposed and provisions (which are the same as the
respectively. We are proposing this final rules for changes to the applicable proposed changes to the high-cost
proxy because we believe that the CCR LTCH PPS statewide average total CCRs outlier policy discussed above in this
data on the Provider-Specific File for that would be effective for discharges section).
Maryland hospitals may not be accurate. occurring on or after October 1, 2006 Specifically, under proposed
As discussed in greater detail above, we (because, under this proposal, the § 412.529(c)(5)(iv)(D), similar to our
believe that the CCR data in the current applicable combined statewide current policy and consistent with the
Provider-Specific File based on average CCRs, established for discharges proposed change to the high-cost outlier
Maryland short-term acute care occurring on or after October 1, 2005, in policy, we are proposing to specify that,
hospitals’ cost report and charge data the FY 2006 IPPS final rule, would for discharges occurring on or after
may not be reliable because acute care remain in effect for discharges occurring October 1, 2006, any reconciliation of
hospitals in Maryland are waived from on or before September 30, 2006). Our outlier payments would be based on the
Medicare’s ratesetting methodologies for rationale for this proposed change to the CCR calculated based on a ratio of costs
inpatient and outpatient services under short-stay outlier policy at proposed to charges computed from the relevant
the authorities of sections 1814(b)(3) § 412.529(c)(5)(iv)(C) mirrors the cost report and charge data determined
and 1833(a)(2) of the Act. The State’s rationale provided for the proposed at the time the cost report coinciding
HSCRC is the regulatory body that changes to the high-cost outlier policy at with the discharge is settled. In
establishes hospital-specific rates for all proposed § 412.525(a)(4)(iv)(C) addition, at proposed
hospital services in Maryland. Because discussed in greater detail above in this § 412.529(c)(5)(iv)(E), similar to our
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Maryland hospitals are paid based on section. current policy and consistent with the
the hospitals-specific rates set by We also are proposing under proposed change to the high-cost outlier
HSCRC rather than under the IPPS, § 412.529(c)(5)(iv)(B), similar to our policy, we are proposing to specify that,
CCRs are not required to determine their current policy and consistent with the for discharges occurring on or after
Medicare payments (as they are for proposed change to the high-cost outlier October 1, 2006, at the time of any
other acute care hospitals that are not policy discussed above, for discharges reconciliation, outlier payments may be
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24135
adjusted to account for the time value of ‘‘onsite’’ with a hospital. In existing section 1820(c)(2)(B)(i)(II) of the Act by
any underpayments or overpayments. § 412.532, (a)(2) and (a)(3), we include adding language that terminated a
This adjustment would be based upon a satellite facilities and SNFs, State’s authority to waive the location
widely available index that would be respectively, within the onsite provider requirement for a CAH by designating
established in advance by the Secretary payment policy as entities that may be the CAH as a necessary provider,
and would be applied from the co-located with a LTCH, but omitted to effective January 1, 2006. As a result of
midpoint of the cost reporting period to mention them in § 412.533(b) as being this amendment, as of January 1, 2006,
the date of reconciliation. Our rationale included when we defined ‘‘co-located States are no longer able to designate
for these proposed changes to the short- or onsite’’ facilities. We are proposing to CAH status based upon a determination
stay outlier policy at proposed conform § 412.532(b) to include their that an entity is a necessary provider of
§ 412.529(c)(5)(iv)(D) and (E) mirrors the mention. health care. However, section 405(h) of
rationale provided for the proposed
8. Proposed Cross-Reference Correction Public Law 108–173 also included a
changes to the high-cost outlier policy at
in Authority Citations for 42 CFR Parts grandfathering provision for CAHs that
proposed § 412.525(a)(4)(iv)(D) and (E),
412 and 413 are certified as necessary providers prior
discussed in greater detail above in this
section. As stated earlier, on November 15, to January 1, 2006. Under this provision,
2004, we published in the Federal a CAH that is designated as a necessary
7. Technical Corrections Relating to Register the final rule establishing a PPS provider in its State’s rural health plan
LTCHs for IPFs (69 FR 66922). As a part of that prior to January 1, 2006, is permitted to
We are proposing to make the rule, we amended the authority citations maintain its necessary provider
following technical changes to various for 42 CFR parts 412 and 413 to include designation.
sections of the regulations relating to references to section 124 of Public Law The regulations that specify the
LTCHs to update or correct cross- 106–113. Section 124 directed us to take location requirements for CAHs
references or to include inadvertently various actions regarding a per diem described above are set forth at 42 CFR
omitted provisions: PPS for IPFs. We included incorrect 485.610(c). To implement the
a. In the following sections, we are cross-references to the United States
proposing to correct several incorrect amendment made by section 405(h) of
Statutes at Large citation for this
cross-references in the existing Public Law 108–173, we published a
provision. We are proposing to amend
regulations: final rule in the Federal Register on
the authority citations for parts 412 and
• In § 412.505(b)(1), changing the 413 by removing the incorrect cross- August 11, 2004 (69 FR 49271) to revise
cross-reference ‘‘§ 412.22(e) and (h)(5)’’ reference to ‘‘113 Stat. 1515’’ and the regulations under paragraph (c) of
to the phrase ‘‘§ 412.22(e)(3) and (h)(6), inserting the correct cross-reference § 485.610. In that revision, we
if applicable’’. ‘‘113 Stat. 1501A–332’’. inadvertently included an erroneous
• In § 412.508(c)(3), changing the date: In the second sentence of
cross-reference ‘‘§ 1001.301’’ to B. Critical Access Hospitals (CAHs) paragraph (c), we stated that a CAH that
‘‘§ 1001.201.’’ (If you choose to comment on this is designated as a necessary provider as
• In § 412.541(b)(2)(i), changing the section, please include the caption of October 1, 2006, will maintain its
cross-reference ‘‘§ 412.533(b)’’ to ‘‘CAHs’’ at the beginning of your necessary provider designation after
‘‘§ 412.533(a)(5) and § 412.533(c)’’ to comment.) October 1, 2006. Although a correction
correctly refer to the provisions on the notice was published in the Federal
determination of the LTCH PPS rates. 1. Background
Register on October 7, 2004 (69 FR
b. We are proposing to revise Section 1820 of the Act provides for 60252), the notice corrected only the
§ 412.511 to change the cross-reference the establishment of Medicare Rural
second citation of the date in that
‘‘§ 412.22(e) and (h)(5)’’ to the phrase Hospital Flexibility Programs
‘‘§ 412.22(e)(3) and (h)(6)’’ and to clarify paragraph. As a result, the second
(MRHFPs), under which individual
the requirement that LTCHs must meet States may designate certain facilities as sentence of § 485.610(c) continues to
under §§ 412.22(e)(3) and (h)(6) to critical access hospitals (CAHs). state, incorrectly, that a CAH that is
report co-location status as part of its Facilities that are so designated and designated as a necessary provider as of
overall reporting requirements. meet the CAH conditions of October 1, 2006, will maintain its
c. We are proposing to revise participation under 42 CFR part 485, necessary provider designation as of
§ 412.525(d) by adding new paragraphs Subpart F, will be certified as CAHs by January 1, 2006.
(d)(3) and (d)(4) to specify two CMS. Regulations governing payments To avoid further confusion, and to
additional payment adjustments to the to CAHs for services to Medicare ensure that the regulations
per discharge payments under the LTCH beneficiaries are located in 42 CFR part implementing the CAH location
PPS that were inadvertently omitted; 413. requirement under section
that is, the special payment under the 1820(c)(2)(B)(i)(II) of the Act specify that
onsite transfer and readmission policy 2. Sunset of Designation of CAHs as
Necessary Providers: Technical requirement accurately, we are
at § 412.532 and the special payment proposing to revise the second sentence
provisions for LTCH HwHs and Correction
Under section 1820(c)(2)(B)(i) of the of § 485.610(c) to state that a CAH that
satellites of LTCHs at § 412.534.
d. We are proposing to revise Act, a CAH is required to be located was designated as a necessary provider
§ 412.532(a)(2) to correct the cross- more than a 35-mile drive (or in the case on or before December 31, 2005, will
reference to the definition of a satellite of mountainous terrain or only maintain its necessary provider
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facility by changing ‘‘§ 412.22(f)’’ to secondary roads, a 15-mile drive) from designation as of January 1, 2006. We
‘‘§ 412.22(h)’’. In addition, we are a hospital or another CAH, unless the note that this change would merely
proposing to revise paragraph (b) of CAH is certified by the State as a correct the previous error and does not
§ 412.532 to include satellite facilities necessary provider of health care reflect any change in our policy as to
and SNFs as part of the definition of services to residents in the area. Section how the statutory provision is
entities that may be ‘‘co-located’’ or 405(h) of Public Law 108–173 amended implemented.
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24136 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
VII. Payment for Services Furnished available adequately equipped hospital Section 1886(a)(4) of the Act excludes
Outside the United States within the United States. Payment may the costs of administering blood clotting
(If you choose to comment on this be made for physician and ambulance factors to inpatients with hemophilia
section, please include the caption services furnished in connection with from the definition of ‘‘operating costs
‘‘Services Outside the United States’’ at these inpatient and emergency inpatient of inpatient hospital services.’’ Section
the beginning of your comment.) hospital services. Our existing 6011(b) of Pub. L. 101–239 states that
regulations that implement these the Secretary of Health and Human
A. Background statutory provisions are located at 42 Services shall determine the payment
Section 1862(a)(4) of the Act generally CFR 409.3, 409.5, 410.14, 410.66, 411.9, amount made to hospitals under
prohibits payment under Medicare for 413.74 and Subparts G and H of Part Medicare Part A for the costs of
items and services furnished outside the 424. administering blood clotting factors to
United States. Under sections 1861(x) individuals with hemophilia by
B. Proposed Clarification of Regulations
and 210(i) of the Act, ‘‘United States’’ is multiplying a predetermined price per
defined to include the 50 States, the Services that fall under these unit of blood clotting factor by the
District of Columbia, Puerto Rico, the exceptions typically are furnished in number of units provided to the
Virgin Islands, Guam, and America Canada or Mexico. However, in individual. The regulations governing
Samoa. Furthermore, under Public Law accordance with section 1814(f) of the payment for blood clotting factors
94–241, ‘‘those laws which provide Act and the definition of the term furnished to hospital inpatients and for
Federal services and financial assistance ‘‘United States’’ (42 CFR 411.9(a)), it is payment for the furnishing fee are
programs’’ apply to the Northern permissible for Medicare to pay for located in §§ 412.2(f)(8) and 412.115(b).
Mariana Islands to the same extent as services furnished in foreign countries In FY 2005, we made payments for
they do to Guam. In addition, we have other than Canada and Mexico. For blood clotting factors furnished to
interpreted the term ‘‘United States’’ as example, if a Medicare beneficiary who inpatients at 95 percent of average
including U.S. territorial waters. We is in Guam needed emergency inpatient wholesale price (AWP), consistent with
consider shipboard services furnished hospital services and the nearest the rates then paid under section
in a port of the United States or within available hospital adequately equipped 1842(o) of the Act for Medicare Part B
6 hours before arrival at, or departure to treat that beneficiary was located in drugs (including blood clotting factor
from, a port of the United States to be the Philippines, Medicare payment furnished to beneficiaries who are not
furnished in the United States territorial would be permitted for the services. inpatients).
waters. (54 FR 41723) Therefore, in our Several of our existing regulations Section 303 of Pub. L. 108–173 added
regulations at § 411.9(a), we define the (§§ 409.3, 409.5, 410.66, and 413.74) section 1847A to the Act. Effective
United States to include the 50 States, specifically refer to services furnished January 1, 2005, this section requires
the District of Columbia, Puerto Rico, in Canada and Mexico and do not that almost all Medicare Part B drugs
the Virgin Islands, Guam, American indicate that it is permissible for not paid on a cost or prospective basis
Samoa, the Northern Mariana Islands, Medicare payment to be made for be paid at 106 percent of average sales
and for purposes of services furnished services furnished in other foreign price (ASP), while section 1842(o)(5) of
on board ship, the territorial waters countries. The references in these the Act provides for a Medicare Part B
adjoining the land areas of the United sections also are more limited than the payment of a furnishing fee for blood
States. This general prohibition has provisions of 42 CFR part 424, subpart clotting factor. On November 15, 2004,
exceptions, under which payment may H, the portion of our regulations that we published regulations in the Federal
be made for inpatient hospital services, addresses treatment furnished in a Register (69 FR 66310 through 66319)
emergency inpatient hospital services, foreign country. Therefore, we are that implemented the provisions of
and for physician and ambulance proposing to amend those regulations section 1847A of the Act. These
services associated with these hospital that refer to Canada and Mexico in order regulations are codified at Subpart K of
services that are furnished outside the to conform them to the Act and to our Part 414 and § 410.63, respectively.
United States. other regulations addressing these The furnishing fee is updated each
Payment may be made for inpatient situations. calendar year as specified by section
hospital services if a Medicare We also are proposing to make some 1842(o)(5) of the Act. The furnishing fee
beneficiary who is a United States related technical changes. In §§ 409.3(e) for clotting factor for years after CY 2005
resident received these services at a and 424.123(c)(2), we are proposing to is equal to the fee for the previous year
hospital located outside of the United change the references from the Joint increased by the percentage increase in
States that either was closer to, or was Commission on Accreditation of the consumer price index (CPI) for
substantially more accessible from, the Hospitals (JCAH) to the Joint medical care for the 12-month period
beneficiary’s residence than the nearest Commission on Accreditation of ending with June of the previous year.
United States hospital that was Healthcare Organizations (JCAHO), the This requirement is set forth in our
adequately equipped and available to current name of that organization. In regulations at § 410.63.
treat the beneficiary. Payment may be § 424.121(c), we are proposing to change In the FY 2006 IPPS final rule (70 FR
made for emergency inpatient hospital the obsolete cross-reference from 47473), we amended our regulations at
services if a beneficiary was in the § 405.313 to the correct cross-reference, §§ 412.2(f)(8) and 412.115(b) to state
United States (or in Canada while § 411.9. that, for discharges occurring on or after
traveling between Alaska and another October 1, 2005, we make payment for
VIII. Payment for Blood Clotting Factor
State without unreasonable delay and blood clotting factor administered to
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24137
On November 21, 2005, we issued unrecovered cost (§ 413.178 of the prospective payment systems in 2007 by
regulations in the Federal Register (70 regulations). the projected increase in the hospital
FR 70225) updating the furnishing fee market basket index less half of the
B. Changes Made by Section 5004 of
payment amount for CY 2006. We Commission’s expectation for
Pub. L. 109–171
announced that the increase in the CPI productivity growth.’’ This
for medical care for the 12 months Section 5004 of Pub. L. 109–171 (DRA recommendation is discussed in
ending June 30, 2005 was 4.2 percent. of 2005) amended section 1861(v)(1) of Appendix B to this proposed rule.
Consequently, the furnishing fee for CY the Act to mandate that, for cost
In section II.C. of the preamble of this
2006, initially established effective reporting periods beginning on or after
proposed rule, we further address
January 1, 2005, at $0.14 per unit of October 1, 2005, Medicare payments to
MedPac’s 2005 recommendations
clotting factor, for CY 2006 was set at SNFs for certain allowable bad debt
included in Recommendation 1 in the
$0.146 per individual unit (I.U.) for amounts be reduced. Specifically, for
patients that are not full-benefit dual March 2005 Report to Congress on
blood clotting factor. We indicated in Physician-Owned Specialty Hospitals as
the preamble to that rule that while ‘‘the eligible individuals (as defined in
section 1935(c)(6)(A)(ii) of the Act), well as Recommendation 3, which
furnishing fee payment rate is recommended that the Secretary
calculated at 3 digits, the actual amount allowable bad debt amounts attributable
to the coinsurance amounts under the implement MedPAC’s recommended
paid to providers and suppliers is policies over a transition period. The
rounded to 2 digits.’’ Medicare program are reduced by 30
percent (deductibles are not applicable recommendations in Recommendation 1
The fiscal intermediaries continue to relate to refining the DRGs used under
use the Medicare Part B Drug Pricing to patients in SNFs). Allowable bad debt
amounts for patients that are full-benefit the IPPS to more fully capture
File to make payments for blood clotting differences in severity of illness among
factor. The furnishing fee is included in dual eligible individuals (as defined in
section 1935(c)(6)(A)(ii) of the Act) will patients; basing the DRG relative
the ASP price per unit sent with the weights on the estimated cost of
Medicare Part B Drug Pricing File that continue to be paid at 100 percent.
providing care rather than on charges;
is updated annually. By using the C. Proposed Regulation Changes and basing the weights on the national
Medicare Part B Drug Pricing File, average of hospitals’ relative values in
We are proposing to conform the
Medicare will be making consistent each DRG. In section II.E. of the
Medicare regulations under § 413.89 to
payments for blood clotting factor preamble to this proposed rule, we also
the provisions of section 5004 of Pub. L.
provided to inpatients and outpatients. further address Recommendation 2 of
109–171. Specifically, we are proposing
For further updates on pricing, we refer the March 2005 Report on Physician-
to revise paragraph (h) by redesignating
readers to the Medicare Part B drug Owned Specialty Hospitals, which
the existing contents as paragraph (h)(1)
pricing regulations. recommended adjusting the DRG
and add a new paragraph (h)(2) to
IX. Limitation on Payments to Skilled reflect this payment limitation. We are relative weights to account for
Nursing Facilities for Bad Debt proposing to include in proposed differences in the prevalence of high-
paragraph (h)(2) a cross-reference to the cost outlier cases.
A. Background
definition of ‘‘full-benefit dual eligible For further information relating
Under section 1861(v)(1) of the Act individual’’ found at § 423.772 of our specifically to the MedPAC reports or to
and § 413.89 of our existing regulations, regulations. In addition, we are obtain a copy of the reports, contact
Medicare may pay for uncollectible proposing to revise § 413.89(a) to add a MedPAC at (202) 653–7220, or visit
deductible and coinsurance amounts to cross-reference to the existing MedPAC’s Web site at: http://
those entities eligible to receive limitations on payments to hospitals www.medpac.gov.
payment for bad debt. Under our and the new limitations on payments to
existing regulations, Medicare generally SNFs found in paragraph (h), and to XI. Other Required Information
pays 100 percent of allowable bad debt correct the cross-reference to the A. Requests for Data From the Public
amounts to SNFs, CAHs, rural health exception for payments for bad debts
clinics, federally qualified health arising from anesthetists’ services paid In order to respond promptly to
clinics, community mental health under a fee schedule from ‘‘paragraph public requests for data related to the
clinics, health maintenance (h)’’ to ‘‘paragraph (i).’’ prospective payment system, we have
organizations reimbursed on a cost established a process under which
basis, competitive medical plans, and X. MedPAC Recommendations commenters can gain access to raw data
health care prepayment plans. To (If you choose to comment on issues on an expedited basis. Generally, the
determine if bad debt amounts are in this section, please include the data are available in computer tape or
allowable, the requirements at § 413.89 caption ‘‘MedPAC Update cartridge format; however, some files are
and the Provider Reimbursement Recommendation’’ at the beginning of available on diskette as well as on the
Manual (PRM) (CMS Pub.15 Part 1, your comment.) Internet at http://www.cms.hhs.gov/
Chapter 3) must be met. We are required by section providers/hipps. Data files and the cost
However, under our existing 1886(e)(4)(B) of the Act to respond to for each file, if applicable, are listed
regulations, Medicare payments for MedPAC’s IPPS recommendations in below. Anyone wishing to purchase
allowable bad debt amounts for our annual proposed IPPS rule. We have data tapes, cartridges, or diskettes
hospitals are reduced by 30 percent. reviewed MedPAC’s March 2006 should submit a written request along
Moreover, Medicare does not pay for ‘‘Report to the Congress: Medicare with a company check or money order
bad debt amounts arising from Payment Policy’’ and have given it (payable to CMS–PUF) to cover the cost
wwhite on PROD1PC61 with PROPOSALS2
anesthetists’ services paid under a fee careful consideration in conjunction to the following address: Centers for
schedule. In addition, although with the proposed policies set forth in Medicare & Medicaid Services, Public
Medicare pays end-stage renal disease this document. MedPAC’s Use Files, Accounting Division, P.O.
(ESRD) facilities 100 percent of Recommendation 2A states that ‘‘The Box 7520, Baltimore, MD 21207–0520,
allowable bad debt claims, these Congress should increase payment rates (410) 786–3691. Files on the Internet
payments are capped at facilities’ for the acute inpatient and outpatient may be downloaded without charge.
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24138 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
1. CMS Wage Data 5. Provider Occupational Mix (Note: The PPS–XIII, PPS–XIV, PPS–XV,
Adjustment Factors for Each PPS–XVI, PPS–XVII, PPS–XVIII, PPS–XIX
This file contains the hospital hours PPS–XX, and PPS–XXI Minimum Data Sets
and salaries for FY 2003 used to create Occupational Category
are part of the PPS–XIII, PPS–XIV, PPS–XV,
the proposed FY 2007 prospective This file contains each hospital’s PPS–XVI, PPS–XVII, PPS–XVIII, PPS–XIX,
payment system wage index. The file occupational mix adjustment factors by PPS–XX, and PPS–XXI Hospital Data Set
will be available by the beginning of occupational category. Files (refer to item 10 below).)
February for the NPRM and the Media: Internet
beginning of May for the final rule. Periods Available: FY 2007 PPS 9. PPS–IX to PPS–XII Capital Data Set
Update The Capital Data Set contains selected
Processing Wage data PPS fiscal data for capital-related costs, interest
year year year 6. PPS SSA/FIPS MSA State and County
Crosswalk expense and related information and
2006 2003 2007 complete balance sheet data from the
This file contains a crosswalk of State
2005 2002 2006 Medicare hospital cost report. The data
and county codes used by the Social
2004 2001 2005 set includes only the most current cost
Security Administration (SSA) and the
2003 2000 2004 report (as submitted, final settled or
2002 1999 2003 Federal Information Processing
reopened) submitted for a Medicare
2001 1998 2002 Standards (FIPS), county name, and a
certified hospital by the Medicare fiscal
2000 1997 2001 historical list of Metropolitan Statistical
intermediary to CMS. This data set is
1999 1996 2000 Areas (MSAs).
updated at the end of each calendar
1998 1995 1999 Media: Diskette/Internet
1997 1994 1998 File Cost: $165.00 per year quarter and is available on the last day
1996 1993 1997 Periods Available: FY 2007 PPS of the following month.
1995 1992 1996 Update Media: Tape/Cartridge
1994 1991 1995 File Cost: $770.00 per year
1993 1990 1994 7. Reclassified Hospitals New Wage
1992 1989 1993 Index (Formerly: Reclassified Hospitals Periods
1991 1988 1992 by Provider Only) beginning and before
on or after
This file contains a list of hospitals
These files support the following: that were reclassified for the purpose of PPS–IX ............. 10/01/91 10/01/92
• NPRM published in the Federal assigning a new wage index. Two PPS–X .............. 10/01/92 10/01/93
Register. versions of these files are created each PPS–XI ............. 10/01/93 10/01/94
• Final Rule published in the Federal year. They support the following: PPS–XII ............ 10/01/94 10/01/95
Register. • NPRM published in the Federal
Media: Diskette/most recent year on Register. (Note: The PPS–XIII, PPS–XIV, PPS–XV,
the Internet • Final Rule published in the Federal PPS–XVI, PPS–XVII, PPS–XVIII, PPS–XIX
File Cost: $165.00 per year Register. PPS–XX, and PPS–XXI Capital Data Sets are
Periods Available: FY 2007 PPS Media: Diskette/Internet part of the PPS–XIII, PPS–XIV, PPS–XV,
Update File Cost: $165.00 per year PPS–XVI, PPS–XVII, PPS–XVIII, PPS–XIX,
Periods Available: FY 2007 PPS PPS XX, and PPS–XXI Hospital Data Set Files
2. CMS Hospital Wages Indices (refer to item 10 below).)
(Formerly: Urban and Rural Wage Index Update
Values Only) 8. PPS–IV to PPS–XII Minimum Data 10. PPS–XIII to PPS–XXI Hospital Data
This file contains a history of all wage Set Set
indices since October 1, 1983. The Minimum Data Set contains cost, The file contains cost, statistical,
Media: Diskette/most recent year on statistical, financial, and other financial, and other data from the
the Internet information from Medicare hospital cost Medicare Hospital Cost Report. The data
File Cost: $165.00 per year reports. The data set includes only the set includes only the most current cost
Periods Available: FY 2007 PPS most current cost report (as submitted, report (as submitted, final settled, or
Update final settled, or reopened) submitted for reopened) submitted for a Medicare-
a Medicare participating hospital by the certified hospital by the Medicare fiscal
3. FY 2007 Proposed Rule Occupational intermediary to CMS. The data set is
Medicare fiscal intermediary to CMS.
Mix Adjusted and Unadjusted AHW by updated at the end of each calendar
This data set is updated at the end of
Provider quarter and is available on the last day
each calendar quarter and is available
This file includes each hospital’s on the last day of the following month. of the following month.
adjusted and unadjusted average hourly Media: Tape/Cartridge Media: Diskette/Internet
wage. File Cost: $770.00 per year File Cost: $2,500.00
Media: Internet
Periods Available: FY 2007 PPS Periods Periods
beginning and before beginning and before
Update on or after on or after
4. FY 2007 Proposed Rule Occupational
Mix Adjusted and Unadjusted AHW and PPS–IV ............. 10/01/86 10/01/87 PPS–XIII ........... 10/01/95 10/01/96
PPS–V .............. 10/01/87 10/01/88 PPS–XIV ........... 10/01/96 10/01/97
Pre-Reclassified Wage Index by CBSA PPS–XV ............ 10/01/97 10/01/98
PPS–VI ............. 10/01/88 10/01/89
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This file includes each CBSA’s PPS–VII ............ 10/01/89 10/01/90 PPS–XVI ........... 10/01/98 10/01/99
adjusted and unadjusted average hourly PPS–VIII ........... 10/01/90 10/01/91 PPS–XVII .......... 10/01/99 10/01/00
wage. PPS–IX ............. 10/01/91 10/01/92 PPS–XVIII ......... 10/01/00 10/01/01
Media: Internet PPS–X .............. 10/01/92 10/01/93 PPS–XIX ........... 10/01/01 10/01/02
PPS–XI ............. 10/01/93 10/01/94 PPS–XX ............ 10/01/02 10/01/03
Periods Available: FY 2007 PPS PPS–XII ............ 10/01/94 10/01/95 PPS–XXI ........... 10/01/03 10/01/04
Update
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24139
11. Provider-Specific File from an internal file used for the impact Management and Budget (OMB) for
This file is a component of the analysis of the changes to the review and approval. In order to fairly
PRICER program used in the fiscal prospective payment systems published evaluate whether an information
intermediary’s system to compute DRG in the Federal Register. This file is collection should be approved by OMB,
payments for individual bills. The file available for release 1 month after the section 3506(c)(2)(A) of the PRA
contains records for all prospective proposed and final rules are published requires that we solicit comment on the
payment system eligible hospitals, in the Federal Register. following issues:
including hospitals in waiver States, Media: Diskette/Internet • The need for the information
and data elements used in the File Cost: $165.00 collection and its usefulness in carrying
prospective payment system Periods Available: FY 2007 PPS out the proper functions of our agency.
Update • The accuracy of our estimate of the
recalibration processes and related
information collection burden.
activities. Beginning with December 15. AOR/BOR Tables • The quality, utility, and clarity of
1988, the individual records were This file contains data used to the information to be collected.
enlarged to include pass-through per develop the DRG relative weights. It • Recommendations to minimize the
diems and other elements. contains mean, maximum, minimum, information collection burden on the
Media: Diskette/Internet affected public, including automated
File Cost: $265.00 standard deviation, and coefficient of
variation statistics by DRG for length of collection techniques.
Periods Available: FY 2007 PPS The following information collection
Update stay and standardized charges. The BOR
tables are ‘‘Before Outliers Removed’’ requirements included in this proposed
12. CMS Medicare Case-Mix Index File and the AOR is ‘‘After Outliers rule and their associated burdens are
This file contains the Medicare case- Removed.’’ (Outliers refer to statistical subject to the PRA.
outliers, not payment outliers.) We are soliciting public comment on
mix index by provider number as
Two versions of this file are created each of the issues for the following
published in each year’s update of the
each year. They support the following: sections of this document that contain
Medicare hospital inpatient prospective
• NPRM published in the Federal information collection requirements.
payment system. The case-mix index is
a measure of the costliness of cases Register. Section 412.64—Reporting of Hospital
treated by a hospital relative to the cost • Final rule published in the Federal Quality Data for Annual Hospital
of the national average of all Medicare Register. Payment Update
hospital cases, using DRG weights as a Media: Diskette/Internet
File Cost: $165.00 Section 412.64(d)(2) requires
measure of relative costliness of cases. hospitals, in order to qualify for the full
Two versions of this file are created Periods Available: FY 2007 PPS
Update annual market basket update, to submit
each year. They support the following: quality data on a quarterly basis to CMS,
• NPRM published in the Federal 16. Prospective Payment System (PPS) as specified by CMS. In this proposed
Register. Standardizing File rule, we are setting out the specific
• Final rule published in the Federal requirements related to the data that
Register. This file contains information that
standardizes the charges used to must be submitted for the update for FY
Media: Diskette/most recent year on
calculate relative weights to determine 2007.
Internet The burden associated with this
Price: $165.00 per year/per file payments under the prospective
payment system. Variables include wage section is the time and effort associated
Periods Available: FY 1985 through
index, cost-of-living adjustment (COLA), with collecting, copying and submitting
FY 2007
case-mix index, disproportionate share, the data. We estimate that there will be
13. DRG Relative Weights (Formerly and the Metropolitan Statistical Area approximately 4,000 respondents per
Table 5 DRG) (MSA). The file supports the following: year. Of this number, approximately
This file contains a listing of DRGs, • NPRM published in the Federal 3,600 hospitals are JCAHO-accredited
DRG narrative descriptions, relative Register. and are currently collecting measures
weights, and geometric and arithmetic • Final rule published in the Federal and submitting data to the JCAHO on a
mean lengths of stay as published in the Register. quarterly basis. Of the JCAHO-
Federal Register. The hard copy image Media: Internet. accredited hospitals, approximately
has been copied to diskette. There are File Cost: No charge. 3,300 are collecting the same measures
two versions of this file as published in Periods Available: FY 2007 PPS CMS will be collecting for public
the Federal Register: Update. reporting. Therefore, there will be no
• NPRM. For further information concerning additional burden for these hospitals.
• Final rule. these data tapes, contact the CMS Public Only approximately 300 of the JCAHO-
Media: Diskette/Internet Use Files Hotline at (410) 786–3691. accredited hospitals will need to collect
File Cost: $165.00 Commenters interested in obtaining or an additional topic in addition to the
Periods Available: FY 2007 PPS discussing any other data used in data already collected for maintaining
Update constructing this rule should contact JCAHO accreditation. In addition, there
Mark Hartstein at (410) 786–4548. are approximately 400 hospitals that do
14. PPS Payment Impact File not participate in the JCAHO
This file contains data used to B. Collection of Information accreditation process. These hospitals
estimate payments under Medicare’s Requirements will have the additional burden of
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hospital inpatient prospective payment Under the Paperwork Reduction Act collecting data on all three topics.
systems for operating and capital-related of 1995 (PRA), we are required to For JCAHO-accredited hospitals that
costs. The data are taken from various provide 60-day notice in the Federal are not already collecting all of the
sources, including the Provider-Specific Register and solicit public comment required measures, we estimate it will
File, Minimum Data Sets, and prior before a collection of information take 25 hours per month per topic for
impact files. The data set is abstracted requirement is submitted to the Office of collection. We expect the burden for all
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24140 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
of these hospitals to total 102,000 hours If you comment on these information For the reasons stated in the preamble
per year, including time allotted for collection and recordkeeping of this proposed rule, the Centers for
overhead. For non-JCAHO accredited requirements, please mail the copies Medicare & Medicaid Services is
hospitals, we estimate the burden to be directly to the following: proposing to amend 42 CFR Chapter IV
136,000 hours per year. This estimate Centers for Medicare & Medicaid as follows:
also includes overhead. The total Services, Office of Strategic
number of burden hours for all hospitals Operations and Regulatory Affairs, PART 409—HOSPITAL INSURANCE
combined is 238,000. The number of Regulations Development Group, BENEFITS
respondents will vary according to the Attn.: Melissa Musutto, CMS–1488–P. 1. The authority citation for part 409
level of voluntary participation. One Room C4–26–05, 7500 Security continues to read as follows:
hundred percent of the data may be Boulevard, Baltimore, MD 21244–
collected electronically. Authority: Secs. 1102 and 1871 of the
1850; and
Our validation process requires Social Security Act (42 U.S.C. 1302 and
Office of Information and Regulatory 1395hh).
participating hospitals to submit 5 Affairs, Office of Management and
charts per quarter. The burden Budget Room 10235, New Executive 2. Section 409.3 is amended by
associated with this requirement is the Office Building, Washington, DC revising paragraph (e) under the
time and effort associated with 20503, Attn.: Carolyn Lovett, CMS definition of ‘‘Qualified hospital’’ to
collecting, copying, and submitting Desk Officer, CMS–1488–P, read as follows:
these charts. It will take approximately carolyn_lovett@omb.eop.gov. Fax
2 hours per hospital to submit the 5 § 409.3 Definitions.
(202) 395–5167.
charts per quarter. There will be a total * * * * *
of approximately 19,000 charts (3,800 C. Public Comments Qualified hospital means a facility
hospitals × 5 charts per hospital) Because of the large number of public that—* * *
submitted by the hospitals to CMS per comments we normally receive on (e) If it is a foreign hospital, is
quarter for a total burden of 7,600 hours Federal Register documents, we are not licensed, or approved as meeting the
per quarter and a total annual burden of able to acknowledge or respond to them standard for licensing, by the
30,400 hours. individually. We will consider all appropriate foreign licensing agency,
The burden associated with the comments we receive by the date and and for purposes of furnishing
requirements under § 412.64 are time specified in the DATES section of nonemergency services to U.S.
currently approved under OMB Number this preamble, and, when we proceed residents, is accredited by the Joint
0938–0918. OMB approval will expire with a subsequent document, we will Commission on Accreditation of
on December 31, 2008. respond to those comments in the Healthcare Organizations (JCAHO), or
Proposed Revised § 412.92(b)(3) Special preamble to that document. by a foreign program under standards
Treatment: Sole Community Hospitals that CMS finds to be equivalent to those
XII. Regulation Text of JCAHO.
Proposed revised § 412.92(b)(3) would 3. Section 409.5 is revised to read as
List of Subjects
require an approved SCH to notify the follows:
appropriate CMS Regional Office of any 42 CFR Part 409
change which would affect its § 409.5 General description of benefits.
Health Facilities, Medicare.
classification as an SCH. Hospital insurance (Part A of
The burden associated with this 42 CFR Part 410 Medicare) helps pay for inpatient
requirement is the time and effort it Health facilities, Health professions, hospital or inpatient CAH services and
would take for the SCH to provide such Kidney diseases, Laboratories, posthospital SNF care. It also pays for
notification to the CMS Regional Office. Medicare, Rural areas, X-rays. home health services and hospice care.
We estimate that on an annual basis it There are limitations on the number of
would take an SCH 1 hour to provide 42 CFR Part 412 days of care that Medicare can pay for
notification. While this requirement is Administrative practice and and there are deductible and
subject to the PRA, we believe the procedure, Health facilities, Medicare, coinsurance amounts for which the
requirement is exempt because it Puerto Rico, Reporting and beneficiary is responsible. For each type
impacts less than 10 SCHs. recordkeeping requirements. of service, certain conditions must be
Proposed Revised § 412.108(b)(4) met as specified in the pertinent
42 CFR Part 413
Special Treatment: Medicare- sections of this subpart and in part 418
Dependent, Small Rural Hospitals Health facilities, Kidney diseases, of this chapter regarding hospice care.
Medicare, Puerto Rico, Reporting and Conditions for payment of emergency
Proposed revised § 412.108(b)(4) recordkeeping requirements. inpatient services furnished by a
would require an approved MDH to nonparticipating U.S. hospital and for
notify the appropriate CMS Regional 42 CFR Part 424
services furnished in a foreign country
Office of any change which would affect Emergency medical services, Health are set forth in subparts G and H of part
its status as an MDH. facilities, Health professions, Medicare. 424 of this chapter.
The burden associated with this
requirement is the time and effort it 42 CFR Part 485
PART 410—SUPPLEMENTARY
would take for the MDH to provide such Grant programs-health, Health MEDICAL INSURANCE (SMI)
notification to the CMS Regional Office. facilities, Medicaid, Medicare, BENEFITS
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24141
5. Section 410.66 is revised to read as by another hospital, or in one or more c. Redesignating paragraph (e)(5) as
follows: buildings located on the same campus paragraph (e)(6).
as buildings used by another hospital— d. Adding a new paragraph (e)(5).
§ 410.66 Emergency outpatient services (i) May decrease its square footage or
furnished by a nonparticipating hospital The revision and addition read as
number of beds, or both, without follows:
and services furnished in a foreign country.
affecting the provisions of paragraph
Conditions for payment of emergency (f)(1) or (f)(2) of this section; § 412.25 Excluded hospital units: Common
inpatient services furnished by a (ii) May increase or decrease the requirements.
nonparticipating U.S. hospital and for square footage or decrease the number * * * * *
services furnished in a foreign country of beds considered to be part of the (e) * * *
are set forth in subparts G and H of part hospital at any time, if these changes are (3) Except as specified in paragraphs
424 of this chapter. made necessary by relocation of the (e)(4) and (e)(5) of this section, the
hospital— provisions of paragraph (e)(2) of this
PART 412—PROSPECTIVE PAYMENT
(A) To permit construction or section do not apply to any unit
SYSTEMS FOR INPATIENT HOSPITAL
renovation necessary for compliance structured as a satellite facility on
SERVICES
with changes in Federal, State, or local September 30, 1999, and excluded from
6. The authority citation for part 412 law affecting the physical facility; or the prospective payment systems on
is revised to read as follows: (B) Because of catastrophic events that date, to the extent the unit
such as fires, floods, earthquakes, or continues operating under the same
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and tornadoes. terms and conditions, including the
1395hh), and sec. 124 of Pub. L. 106–113 * * * * * number of beds and square footage
(113 Stat. 1501A–332). (h) Satellite facilities. (1) For purposes considered to be part of the unit, in
7. Section 412.22 is amended by— of paragraphs (h)(2) through (h)(5) of effect on September 30, 1999.
a. Revising the introductory text of this section, a satellite facility is a part * * * * *
paragraph (f). of a hospital that provides inpatient (5) For cost reporting periods
b. Adding a new paragraph (f)(3). services in a building also used by beginning on or after October 1, 2006, in
c. Revising paragraph (h)(1). another hospital, or in one or more applying the provisions of paragraph
d. In paragraph (h)(2), removing the entire buildings located on the same (e)(3) of this section, a satellite facility
phrase ‘‘(h)(3), (h)(6), and (h)(7) of this campus as buildings used by another may decrease its number of beds or
section’’ and adding the phrase ‘‘(h)(3), hospital. square footage, or both, without
(h)(7), and (h)(8) of this section’’ in its * * * * * affecting the provision of paragraph
place. (3) Except as provided in paragraphs (e)(3) of this section.
e. Revising the introductory text of (h)(4) and (h)(5) of this section, the * * * * *
paragraph (h)(3). provisions of paragraph (h)(2) of this
f. Revising paragraph (h)(4). section do not apply to— § 412.42 [Amended]
g. Redesignating paragraphs (h)(5), * * * * * 9. In paragraph (d) of § 412.42, the
(h)(6), and (h)(7) as paragraphs (h)(6), (4) In applying the provisions of cross-reference ‘‘§ 405.310(k)’’ is
(h)(7), and (h)(8), respectively. paragraph (h)(3) of this section, any removed, and the cross-reference
h. Adding a new paragraph (h)(5). hospital structured as a satellite facility ‘‘§ 411.15(k)’’ is added in its place.
The revisions and addition read as on September 30, 1999, may increase or
follows: decrease the square footage of the § 412.48 [Amended]
satellite facility or may decrease the 10. In paragraph (b) of § 412.48, the
§ 412.22 Excluded hospitals and hospital number of beds in the satellite facility cross-reference ‘‘§§ 405.330 through
units: General rules. 405.332’’ is removed and the cross-
considered to be part of the satellite
* * * * * facility at any time, if these changes are reference ‘‘§ 411.400 and § 411.402’’ is
(f) Application for certain hospitals. made necessary by relocation of a added in its place.
Except as provided in paragraph (f)(3) of facility — 11. Section 412.64 is amended by—
this section, if a hospital was excluded (i) To permit construction or a. Revising paragraph (d)(2).
from the prospective payment systems renovation necessary for compliance b. Adding a new paragraph (h)(6).
under the provisions of this section on with changes in Federal, State, or local The revision and addition read as
or before September 30, 1995, and at law affecting the physical facility; or follows:
that time occupied space in a building (ii) Because of catastrophic events
also used by another hospital, or in one such as fires, floods, earthquakes, or § 412.64 Federal rates for inpatient
or more buildings located on the same tornadoes. operating costs for Federal fiscal year 2005
campus as buildings used by another (5) For cost reporting periods and subsequent fiscal years.
hospital, the criteria in paragraph (e) of beginning on or after October 1, 2006, in * * * * *
this section do not apply to the hospital applying the provisions of paragraph (d) * * *
as long as the hospital— (h)(3) of this section, a satellite facility (2)(i) In the case of a ‘‘subsection (d)
* * * * * may decrease its number of beds or hospital,’’ as defined under section
(3) For cost reporting periods square footage, or both, without 1886(d)(1)(B) of the Act, that does not
beginning on or after October 1, 2006, in affecting the provisions of paragraph submit quality data on a quarterly basis
applying the provisions of paragraph (h)(3) of this section. to CMS, in the form and manner
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24142 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
(B) For fiscal year 2007 and (c) Case-mix adjustment. The (ii) A prehearing order or finding
subsequent fiscal years, by 2.0 intermediary divides the average base- issued during the provider payment
percentage points. period cost per discharge by the MDH’s appeals process by the appropriate
(ii) Any reduction of the percentage case-mix index for the base period. reviewing authority under § 405.1821 or
change will apply only to the fiscal year (d) Updating base period costs. For § 405.1853 of this chapter that resolved
involved and will not be taken into purposes of determining the updated a matter at issue in the MDH’s base-
account in computing the applicable base-period costs for cost reporting period notice of amount of program
percentage change for a subsequent periods beginning in Federal fiscal year reimbursement.
fiscal year. 2002, the update factor is determined (iii) An affirmation, modification, or
* * * * * using the methodology set forth in reversal of a Provider Reimbursement
(h) * * * § 412.73(c)(14) and (c)(15). Review Board decision by the
(6) If a new rural hospital that is (e) DRG adjustment. The applicable Administrator of CMS under § 405.1875
subject to the hospital inpatient hospital-specific cost per discharge is of this chapter that resolved a matter at
prospective payment system opens in a multiplied by the appropriate DRG issue in the hospital’s base-period
State that has an imputed rural floor and weighting factor to determine the notice of amount of program
has rural areas, CMS uses the imputed hospital-specific base payment amount reimbursement.
floor as the hospital’s wage index until (target amount) for a particular covered (iv) An administrative or judicial
the hospital’s first cost report as an discharge. review decision under §§ 405.1831,
inpatient prospective payment system (f) Notice of hospital-specific rate. The 405.1871, or 405.1877 of this chapter
provider is contemporaneous with the intermediary furnishes the MDH a that is final and no longer subject to
cost reporting period being used to notice of its hospital-specific rate which review under applicable law or
develop a given fiscal year’s wage index. contains a statement of the hospital’s regulations by a higher reviewing
Medicare Part A allowable inpatient authority, and that resolved a matter at
* * * * *
12. A new § 412.79 is added to operating costs, number of Medicare issue in the hospital’s base-period
Subpart E to read as follows: discharges, and case-mix index notice of amount of program
adjustment factor used to determine the reimbursement.
§ 412.79 Determination of the hospital- hospital’s cost per discharge for the
specific rate for inpatient operating costs
(v) A final, nonappealable court
Federal fiscal year 2002 base period.
for Medicare-dependent, small rural judgment relating to the base-period
(g) Right to administrative and
hospitals based on a Federal fiscal year costs.
judicial review. An intermediary’s
2002 base period. determination of the hospital-specific (3) The adjustments to the hospital-
(a) Base-period costs—(1) General rate for a hospital is subject to specific rate made under paragraphs
rule. Except as provided in paragraph administrative and judicial review. (h)(1) and (2) of this section are effective
(a)(2) of this section, for each MDH, the Review is available to an MDH upon retroactively to the time of the
intermediary determines the MDH’s receipt of the notice of the hospital- intermediary’s initial determination of
Medicare Part A allowable inpatient specific rate. The notice is treated as a the rate.
operating costs, as described in final intermediary determination of the (i) Maintaining budget neutrality.
§ 412.2(c), for the 12-month or longer amount of program reimbursement for CMS makes an adjustment to the
cost reporting period ending on or after purposes of subpart R of Part 405 of this hospital-specific rate to ensure that
October 1, 2001, and before October 1, chapter, governing provider changes to the DRG classifications and
2002. reimbursement determinations and recalibrations of the DRG relative
(2) Exceptions. (i) If the MDH’s last appeals. weights are made in a manner so that
cost reporting period ending before (h) Modification of hospital-specific aggregate payments to section 1886(d)
October 1, 2002, is for less than 12 rate. (1) The intermediary recalculates hospitals are not affected.
months, the base period is the MDH’s the hospital-specific rate to reflect the § 412.84 [Amended]
most recent 12-month or longer cost following:
reporting period ending before that (i) Any modifications that are 13. In paragraph (m) of § 412.84, the
short cost reporting period. determined as a result of administrative cross-reference ‘‘paragraph (h)(3)’’ is
(ii) If the MDH does not have a cost or judicial review of the hospital- removed and the cross-reference
reporting period ending on or after specific rate determinations; or ‘‘paragraph (i)(4)’’ is added in its place.
October 1, 2001, and before October 1, (ii) Any additional costs that are 14. Section 412.90 is amended by
2002, and does have a cost reporting recognized as allowable costs for the revising paragraph (j) to read as follows:
period beginning on or after October 1, MDH’s base period as a result of § 412.90 General rules.
2000, and before October 1, 2001, that administrative or judicial review of the
cost reporting period is the base period base-period notice of amount of program * * * * *
unless the cost reporting is for less than reimbursement. (j) Medicare-dependent, small rural
12 months. In that case, the base period (2) With respect to either the hospital- hospitals. For cost reporting periods
is the MDH’s most recent 12-month or specific rate determination or the beginning on or after April 1, 1990, and
longer cost reporting period ending amount of program reimbursement before October 1, 1994, and for
before that short cost reporting period. determination, the actions taken on discharges occurring on or after October
(b) Costs on a per discharge basis. The administrative or judicial review that 1, 1997, and before October 1, 2011,
intermediary determines the MDH’s provide a basis for recalculations of the CMS adjusts the prospective payment
average base-period operating cost per hospital-specific rate include the rates for inpatient operating costs
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discharge by dividing the total operating following: determined under subparts D and E of
costs by the number of discharges in the (i) A reopening and revision of the this part if a hospital is classified as a
base period. For purposes of this MDH’s base-period notice of amount of Medicare-dependent, small rural
section, a transfer as described in program reimbursement under hospital.
§ 412.4(b) is considered to be a §§ 405.1885 through 405.1889 of this * * * * *
discharge. chapter. 15. Section 412.92 is amended by—
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24143
a. In paragraph (b)(2)(iv) of § 412.92, (3) Except as provided in paragraph (iii) For discharges occurring during
the word ‘‘djustment’’ is removed and (d)(2)(iv)(D) of this section, the cost reporting periods (or portions
the word ‘‘adjustment’’ is added in its maximum payment adjustment factor is thereof) beginning on or after October 1,
place. 12 percent. 2006, and before October 1, 2011, 75
b. Revising paragraph (b)(3) to read as (D) Effective for discharges occurring percent of the amount that the Federal
follows: on or after October 1, 2006, for a rate determined under paragraph (c)(1)
hospital that is classified as a Medicare- of this section is exceeded by the
§ 412.92 Special treatment: Sole
dependent, small rural hospital under highest of the following:
community hospitals.
§ 412.108, the payment adjustment (A) The hospital-specific rate as
* * * * * factor limitation specified in paragraph determined under § 412.73.
(b) * * * (d)(2)(iv)(C)(3) does not apply. (B) The hospital-specific rate as
(3) Duration of classification. An (v) If the hospital meets the criteria of determined under § 412.75.
approved classification as a sole paragraph (c)(2) of this section, the (C) The hospital-specific rate as
community hospital remains in effect payment adjustment factor is as follows: determined under § 412.79.
without need for reapproval unless (A) 30 percent for discharges * * * * *
there is a change in the circumstances occurring on or after April 1, 1990, and 19. Section 412.234 is amended by—
under which the classification was before October 1, 1991. a. In paragraph (a)(3)(ii), removing the
approved. An approved sole community (B) 35 percent for discharges term ‘‘fiscal year’’ and adding the term
hospital must notify the appropriate occurring on or after October 1, 1991. ‘‘Federal fiscal year’’ in its place.
CMS regional office of any change that b. Revising paragraph (a)(3)(iii).
* * * * *
would affect its classification as a sole c. Adding a new paragraph (a)(3)(iv).
18. Section 412.108 is amended by—
community hospital. If CMS determines The revisions and addition read as
a. Revising paragraph (a)(1)
that a sole community hospital failed to follows:
introductory text.
comply with this requirement, CMS will
b. Revising paragraph (b)(4).
cancel the hospital’s classification as a § 412.234 Criteria for all hospitals in an
c. Adding a new paragraph (c)(2)(iii). urban county seeking redesignation to
sole community hospital effective on
The revisions and addition read as another urban area.
the earliest discernable date that the
follows: (a) * * *
fiscal intermediary can determine that
the hospital no longer met the criteria § 412.108 Special Treatment: Medicare- (3) * * *
for such classification. dependent, small rural hospitals. (iii) For Federal fiscal year 2007,
* * * * * (a) Criteria for classification as a hospitals located in counties that are in
Medicare-dependent, small rural the same Combined Statistical Area
§ 412.105 [Amended] hospital.—(1) General considerations. (CSA) (under the MSA definitions
16. In paragraph (f)(1)(ii)(C) of For cost reporting periods beginning on announced by the OMB on June 6, 2003)
§ 412.105, the cross-reference or after April 1, 1990, and ending before as the urban area to which they seek
‘‘§ 413.78(c) or § 413.78(d)’’ is removed October 1, 1994, or for discharges redesignation qualify as meeting the
and the cross-reference ‘‘§ 413.78(c), occurring on or after October 1, 1997, proximity requirement for
§ 413.78(d), or § 413.78(e)’’ is added in and before October 1, 2011, a hospital reclassification to the urban area to
its place. is classified as a Medicare-dependent, which they seek redesignation.
17. Section 412.106 is amended by— small rural hospital if it is located in a (iv) For Federal fiscal year 2008 and
a. Revising paragraph (a)(1)(iii). rural area (as defined in subpart D of thereafter, hospitals located in counties
b. Republishing the introductory text this part) and meets all of the following that are in the same Combined
of paragraph (d)(2)(iv). conditions: Statistical Area (CSA) or Core-Based
c. Revising paragraph (d)(2)(iv)(C)(3). Statistical Area (CBSA) (under the MSA
d. Adding a new paragraph * * * * * definitions announced by the OMB on
(d)(2)(iv)(D). (b) * * * June 6, 2003) as the urban area to which
e. Adding a new paragraph (d)(2)(v). (4) A determination of MDH status they seek redesignation qualify as
The revision and additions read as made by the fiscal intermediary is meeting the proximity requirements for
follows: effective 30 days after the date the fiscal reclassification to the urban area to
intermediary provides written which they seek redesignation.
§ 412.106 Special treatment: Hospitals that notification to the hospital. An
serve a disproportionate share of low- approved MDH status determination * * * * *
income patients. remains in effect unless there is a 20. Section 412.316 is amended by—
(a) * * * change in the circumstances under a. Revising paragraph (a).
(1) * * * b. Revising paragraph (b)(2).
which the status was approved. An
(iii) The hospital’s location, in an c. Adding a new paragraph (b)(3).
approved MDH must notify the
urban or rural area, is determined in d. Revising paragraph (c).
appropriate CMS regional office of any The revisions and addition read as
accordance with the definitions in change that would affect its status as an follows:
§ 412.64, except that a reclassification MDH. If CMS determines that an MDH
that results from an urban hospital failed to comply with this requirement, § 412.316 Geographic adjustment factors.
reclassified as rural as set forth in CMS will cancel the hospital’s MDH (a) Local cost variation. CMS adjusts
§ 412.103 is classified as rural. status effective on the earliest for local cost variation based on the
* * * * * discernable date that the fiscal hospital wage index value that is
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(d) * * * intermediary can determine that the applicable to the hospital under subpart
(2) * * * hospital no longer met the criteria for D of this part. The adjustment factor
(iv) If the hospital meets the criteria such status. equals the hospital wage index value
of paragraph (c)(1)(iv) of this section— * * * * * applicable to the hospital raised to the
* * * * * (c) * * * .6848 power and is applied to 100
(C) * * * (2) * * * percent of the Federal rate.
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24144 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
(b) * * * subpart for inpatient hospital services presented by the hospital. A request
(2) For discharges occurring on or furnished to Medicare beneficiaries. must be approved by the CMS Regional
after October 1, 2004, the definition of * * * * * Office.
large urban area under § 412.63(c)(6) (B) The cost-to-charge ratio applied at
continues to be in effect for purposes of § 412.508 [Amended] the time a claim is processed is based
the payment adjustment under this 23. In paragraph (c)(3) of § 412.508, on either the most recent settled cost
section, based on the geographic the cross-reference ‘‘§ 1001.301’’ is report or the most recent tentatively
classification under § 412.64, except as removed and the cross-reference settled cost report, whichever is from
provided for in paragraph (b)(3) of this ‘‘1001.201’’ is added in its place. the latest cost reporting period.
section. 24. Section 412.511 is revised to read (C) The fiscal intermediary may use a
(3) For purposes of this section, the as follows: statewide average cost-to-charge ratio,
geographic classifications specified which CMS establishes annually, if it is
§ 412.511 Reporting and recordkeeping unable to determine an accurate cost-to-
under § 412.64 apply, except that, requirements.
effective for discharges occurring on or charge ratio for a hospital in one of the
A long-term care hospital following circumstances:
after October 1, 2006, for an urban
participating in the prospective (1) A new hospital that has not yet
hospital that is reclassified as rural as
payment system under this subpart submitted its first Medicare cost report.
set forth in § 412.103, the geographic
must meet the requirement of (For this purpose, a new hospital is
classification is rural.
§§ 412.22(e)(3) and 412.22(h)(6) to defined as an entity that has not
(c) Cost-of-living adjustment. CMS
report co-located status, if applicable, accepted assignment of an existing
provides an additional payment to a
and the recordkeeping and cost hospital’s provider agreement in
hospital located in Alaska and Hawaii
reporting requirements of §§ 413.20 and accordance with § 489.18 of this
equal to [0.3152 x (the cost-of-living
413.24 of this subchapter. chapter.)
adjustment factor used to determine
25. Section 412.525 is amended by— (2) A hospital whose cost-to-charge
payments under subpart D of this
a. Revising paragraph (a)(3). ratio is in excess of 3 standard
part¥1)] percent. b. Revising paragraph (a)(4)(ii). deviations above the corresponding
21. Section 412.320 is amended by— c. Revising paragraph (a)(4)(iii). national geometric mean cost to charge
a. Revising paragraph (a)(1)(ii). d. Adding a new paragraph (a)(4)(iv). ratio. CMS establishes and publishes
b. Adding a new paragraph (a)(1)(iii). e. Adding a new paragraph (d)(3). this mean annually.
The revision and addition read as f. Adding a new paragraph (d)(4). (3) Any other hospital for which data
follows: The revisions and additions read as to calculate a cost-to-charge ratio are not
§ 412.320 Disproportionate share
follows: available.
adjustment factor. (D) Any reconciliation of outlier
§ 412.525 Adjustments to the Federal
payments is based on the cost-to-charge
(a) * * * prospective payment.
ratio calculated based on a ratio of costs
(1) * * * (a) * * * to charges computed from the relevant
(ii) For discharges occurring on or (3) The additional payment equals 80 cost report and charge data determined
after October 1, 2004, the payment percent of the difference between the at the time the cost report coinciding
adjustment under this section is based estimated cost of the patient’s care with the discharge is settled.
on the geographic classifications (determined by multiplying the (E) At the time of any reconciliation
specified under § 412.64, except as hospital-specific cost-to-charge ratio by under paragraph (a)(4)(iv)(D) of this
provided for in paragraph (a)(1)(iii) of the Medicare allowable covered charge) section, outlier payments may be
this section. and the sum of the adjusted LTCH PPS adjusted to account for the time value of
(iii) For purposes of this section, the Federal prospective payment and the any underpayments or overpayments.
geographic classifications specified fixed-loss amount. Any adjustment is based upon a widely
under § 412.64 apply, except that, (4) * * * available index to be established in
effective for discharges occurring on or (ii) For discharges occurring on or advance by the Secretary, and is applied
after October 1, 2006, for an urban after August 8, 2003, and before October from the midpoint of the cost reporting
hospital that is reclassified as rural as 1, 2006, high-cost outlier payments are period to the date of reconciliation.
set forth in § 412.103, the geographic subject to the provisions of
§ 412.84(i)(1), (i)(3), and (i)(4) and (m) * * * * *
classification is rural. (d) * * *
* * * * * for adjustments of cost-to-charge ratios.
(3) Patients who are transferred to
22. Section 412.505 is amended by (iii) For discharges occurring on or
onsite providers and readmitted to a
revising paragraph (b)(1) to read as after October 1, 2003, and before
long-term care hospital, as provided for
follows: October 1, 2006, high-cost outlier
in § 412.532.
payments are subject to the provisions (4) Long-term care hospitals-within-
§ 412.505 Conditions for payment under of § 412.84(i)(2) for adjustments to cost- hospitals and satellites of long-term care
the prospective payment system for long- to-charge ratios.
term care hospitals. hospitals as provided in § 412.534.
(iv) For discharges occurring on or 26. Section 412.529 is amended by
* * * * * after October 1, 2006, high-cost outlier revising paragraph (c)(5) to read as
(b) General requirements. (1) Effective payments are subject to the following follows:
for cost reporting periods beginning on provisions:
or after October 1, 2002, a long-term (A) CMS may specify an alternative to § 412.529 Special payment provision for
wwhite on PROD1PC61 with PROPOSALS2
care hospital must meet the conditions the cost-to-charge ratio otherwise short-stay outliers.
for payment of this section, applicable under paragraph (a)(4)(iv)(B) * * * * *
§ 412.22(e)(3) and (h)(6), if applicable, of this section. A hospital may also (c) * * *
and § 412.507 through § 412.511 to request that its fiscal intermediary use a (5)(i) For discharges occurring on or
receive payment under the prospective different (higher or lower) cost-to-charge after October 1, 2002, and before August
payment system described in this ratio based on substantial evidence 8, 2003, no reconciliations are made to
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24145
short-stay outlier payments upon cost section, outlier payments may be 31. Section 413.75 is amended by—
report settlement to account for adjusted to account for the time value of a. In paragraph (b), revising paragraph
differences between cost-to-charge ratio any underpayments or overpayments. (1) under the definition of ‘‘Medicare
and the actual cost-to-charge ratio of the Any adjustment is based upon a widely GME affiliated group’’.
case. available index to be established in b. In paragraph (b), removing the
(ii) For discharges occurring on or advance by the Secretary, and is applied cross-reference ‘‘§ 413.79(g)(2)’’ under
after August 8, 2003, and before October from the midpoint of the cost reporting paragraph (2) of the definition of
1, 2006, short-stay outlier payments are period to the date of reconciliation. ‘‘Medicare GME affiliated group’’ and
subject to the provisions of 27. Section 412.532 is amended by— adding the cross-reference
§ 412.84(i)(1), (i)(3), and (i)(4) and (m) a. Revising paragraph (a)(2). ‘‘§ 413.79(f)(2)’’ in its place.
for adjustments of cost-to-charge ratios. b. Revising paragraph (b). c. In paragraph (b), removing the
(iii) For discharges occurring on or The revisions read as follows: cross-reference ‘‘§ 413.79(g)(2)’’ under
after October 1, 2003, and before § 412.532 Special payment provisions for
paragraph (3) of the definition of
October 1, 2006, short-stay outlier patients who are transferred to onsite ‘‘Medicare GME affiliated group’’ and
payments are subject to the provisions providers and readmitted to a long-term adding the cross-reference
of § 412.84(i)(2) for adjustments to cost- care hospital. ‘‘§ 413.79(f)(2)’’ in its place.
to-charge ratios. (a) * * * The revision reads as follows:
(iv) For discharges occurring on or (2) A satellite facility, as defined in
after October 1, 2006, short-stay outlier § 413.75 Direct GME payments: General
§ 412.22(h), that is co-located with the requirements.
payments are subject to the following long-term care hospital.
provisions: * * * * *
* * * * * (b) * * *
(A) CMS may specify an alternative to (b) As used in this section, ‘‘co-
the cost-to-charge ratio otherwise Medicare GME affiliated group
located’’ or ‘‘onsite’’ facility means a means—
applicable under paragraph (c)(5)(iv)(B) hospital, satellite facility, unit, or SNF
of this section. A hospital may also (1) Two or more hospitals that are
that occupies space in a building also located in the same urban or rural area
request that its fiscal intermediary use a used by another hospital or unit or in
different (higher or lower) cost-to-charge (as those terms are defined in subpart D
one or more buildings on the same of Part 412 of this subchapter) or in a
ratio based on substantial evidence campus, as defined in § 413.65(a)(2) of
presented by the hospital. This request contiguous area and meet the rotation
this subchapter, as buildings used by requirements in § 413.79(f)(2).
must be approved by the CMS Regional another hospital or unit.
Office. * * * * *
(B) The cost-to-charge ratio applied at * * * * * 32. Section 413.77 is amended by
the time a claim is processed is based § 412.541 [Amended] revising paragraphs (e)(1) introductory
on either the most recent settled cost text and (e)(1)(i) to read as follows:
28. In § 412.541, paragraph (b)(2)(i),
report or the most recent tentatively remove the cross-reference § 413.77 Direct GME payments:
settled cost report, whichever is from ‘‘§ 412.533(b)’’ and add in its place Determination of per resident amounts.
the latest cost reporting period. ‘‘§ 412.533(a)(5) and § 412.533(c)’’.
(C) The fiscal intermediary may use a * * * * *
statewide average cost-to-charge ratio, (e) Exceptions—(1) Base period for
PART 413—PRINCIPLES OF certain hospitals. If a hospital did not
which CMS establishes annually, if it is REASONABLE COST
unable to determine an accurate cost-to- have any approved medical residency
REIMBURSEMENT; PAYMENT FOR training programs or did not participate
charge ratio for a hospital in one of the END-STAGE RENAL DISEASE
following circumstances: in Medicare during the base period, but
SERVICES; PROSPECTIVELY either condition changes in a cost
(1) A new hospital that has not yet DETERMINED PAYMENT RATES FOR
submitted its first Medicare cost report. reporting period beginning on or after
SKILLED NURSING FACILITIES July 1, 1985, the fiscal intermediary
(For this purpose, a new hospital is
defined as an entity that has not 29. The authority citation for part 413 establishes a per resident amount for the
accepted assignment of an existing is revised to read as follows: hospital using the information from the
hospital’s provider agreement in first cost reporting period during which
Authority: Secs. 1102, 1812(d), 1814(b),
accordance with § 489.18 of this 1815, 1833(a), (i), and (n), 1861(v), 1871, the hospital participates in Medicare
chapter.) 1881, 1883, and 1886 of the Social Security and the residents are on duty during the
(2) A hospital whose cost-to-charge Act (42 U.S.C. 1302, 1395d(d), 1395f(b), first month of that period. Effective for
ratio is in excess of 3 standard 1395g, 1395l(a), (i), and (n), 1395x(v), cost reporting periods beginning on or
deviations above the corresponding 1395hh, 1395rr, 1395tt, and 1395ww); and after October 1, 2006, if a hospital did
national geometric mean. CMS sec. 124 of Pub. L. 106–133 (113 Stat. 1501A– not have any approved medical
332). residency training programs or did not
establishes and publishes this mean
annually. 30. Section 413.74 is amended by participate in Medicare during the base
(3) Any other hospital for which data revising paragraph (a) to read as follows: period, but either condition changes in
to calculate a cost-to-charge ratio are not a cost reporting period beginning on or
§ 413.74 Payment to a foreign hospital. after October 1, 2006, and the residents
available.
(D) Any reconciliation of outlier (a) Principle. Section 1814(f) of the are not on duty during the first month
payments is based on the cost-to-charge Act provides for the payment of of that period, the fiscal intermediary
ratio calculated based on a ratio of costs emergency and nonemergency inpatient establishes a per resident amount for the
wwhite on PROD1PC61 with PROPOSALS2
to charges computed from the relevant hospitals services furnished by foreign hospital using the information from the
cost report and charge data determined hospitals to Medicare beneficiaries. first cost reporting period immediately
at the time the cost report coinciding Subpart H of part 424 of this chapter, following the cost reporting period
with the discharge is settled. together with this section, specifies the during which the hospital participates
(E) At the time of any reconciliation conditions for payment. in Medicare and residents began
under paragraph (c)(5)(iv)(D) of this * * * * * training at the hospital. The per resident
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24146 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
amount is based on the lower of the § 413.89 Bad debts, charity, and courtesy reference ‘‘§ 405.313’’ and adding the
amount specified in paragraph (e)(1)(i) allowances. cross-reference ‘‘§ 411.9’’ in its place.
or paragraph (e)(1)(ii) of this section, (a) Principle. Bad debts, charity, and 39. Section 424.123 is amended by
subject to the provisions of paragraph courtesy allowances are deductions revising paragraph (c)(2) to read as
(e)(1)(iii) of this section. Any GME costs from revenue and are not to be included follows:
incurred by the hospital during the cost in allowable cost. However, subject to
§ 424.123 Conditions for payment for
reporting period prior to the base period the limitations described under nonemergency inpatient hospital services
used for calculating the PRA are paragraph (h) of this section and the furnished by a hospital closer to the
reimbursed on a reasonable cost basis. exception for anesthetists’ services individual’s residence.
(i) The hospital’s actual cost per described under paragraph (i) of this * * * * *
resident incurred in connection with the section, bad debts attributable to the (c) * * *
GME program(s) based on the cost and deductibles and coinsurance amounts (2) Accredited by the Joint
resident data from the hospital’s base are reimbursable under the program. Commission on Accreditation of
year cost reporting period as established * * * * * Healthcare Organizations (JCAHO) or
in paragraph (e)(1) of this section. (h) Limitations on bad debts. (1) accredited or approved by a program of
* * * * * Hospitals. In determining reasonable the country where it is located under
33. Section 413.79 is amended by— costs for hospitals, the amount of bad standards the CMS finds to be
debt otherwise treated as allowable essentially equivalent to those of the
a. Revising paragraph (e)(1)(iv). JCAHO.
costs (as defined in paragraph (e) of this
b. In the introductory text of section) is reduced by— * * * * *
paragraph (f), removing the cross- (i) For cost reporting periods
reference ‘‘paragraph (e)(3) of this beginning during fiscal year 1998, by 25 PART 485—CONDITIONS OF
section’’ and adding the cross-reference percent; PARTICIPATION: SPECIALIZED
‘‘paragraph (d) of this section’’ in its (ii) For cost reporting periods PROVIDERS
place. beginning during fiscal year 1999, by 40
The revision reads as follows: 40. The authority citation for part 485
percent;
continues to read as follows:
(iii) For cost reporting periods
§ 413.79 Direct GME payments: Authority: Secs. 1102 and 1871 of the
beginning during fiscal year 2000, by 45
Determination of the weighted number of Social Security Act (42 U.S.C. 1302 and
FTE residents. percent; and
1395hh).
(iv) For cost reporting periods
* * * * * beginning during a subsequent fiscal § 485.610 [Amended]
(e) * * * year, by 30 percent. 41. In paragraph (c) of § 485.610, the
(1) * * * (2) Skilled nursing facilities. For cost phrase ‘‘as of October 1, 2006’’ is
(iv) Effective for affiliation agreements reporting periods beginning during removed and the phrase ‘‘on or before
entered into on or after October 1, 2005, fiscal year 2006 or during a subsequent December 31, 2005’’ is added in its
an urban hospital that qualifies for an fiscal year, the amount of skilled place.
adjustment to its FTE cap under nursing facility bad debts for
paragraph (e)(1) of this section is coinsurance otherwise treated as PART 489—PROVIDER AGREEMENTS
permitted to be part of a Medicare GME allowable costs (as defined in paragraph AND SUPPLIER APPROVAL
affiliated group for purposes of (e) of this section) for services furnished
42. The authority citation for part 489
establishing an aggregate FTE cap only to a patient who is not a full-benefit
continues to read as follows:
if the adjustment that results from the dual eligible individual (as defined in
affiliation is an increase to the urban § 423.772) is reduced by 30 percent. Authority: Secs. 1102, 1819, 1861,
hospital’s FTE cap. 1864(m), 1866, 1869, and 187l of the Social
* * * * * Security Act (42 U.S.C. 1302, 1395i-3, 1395x,
* * * * * 1395aa(m), 1395cc, 1395ff, and 1395hh).
34. Section 413.85 is amended by PART 424—CONDITIONS FOR
MEDICARE PAYMENT 43. Section 489.24 is amended by—
revising paragraph (h)(3) to read as a. Revising the definition of ‘‘Labor’’
follows: 36. The authority citation for part 424 under paragraph (b).
§ 413.85 Costs of approved nursing and
continues to read as follows: b. Revising paragraph (f).
allied health education activities. Authority: Secs. 1102 and 1871 of the The revisions read as follows:
* * * * * Social Security Act (42 U.S.C. 1302 and § 489.24 Special responsibilities of
1395hh). Medicare hospitals in emergency cases.
(h) * * *
(3) Educational seminars, workshops, § 424.32 [Amended] * * * * *
and continuing education programs in 37. In § 424.32, in paragraph (b), the (b) * * *
which the employees or trainees phrase ‘‘CMS–1490U–Request for Labor means the process of childbirth
participate that enhance the quality of Medicare Payment by Organization. (For beginning with the latent or early phase
medical care or operating efficiency of use by an organization requesting of labor and continuing through the
the provider and, effective October 1, payment for medical services.)’’ is delivery of the placenta. A woman
2003, do not lead to the ability to removed and the phrase ‘‘CMS–1491– experiencing contractions is in true
practice and begin employment in a Request for Medicare Payment- labor unless a physician, certified nurse-
nursing or allied health specialty. Ambulance. (For use by an organization midwife, or other qualified medical
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requesting payment for ambulance person acting within his or her scope of
* * * * * practice as defined in hospital medical
35. Section 413.89 is amended by— services.)’’ is removed.
staff bylaws and State law, certifies that,
a. Revising paragraph (a). § 424.121 [Amended] after a reasonable time of observation,
b. Revising paragraph (h). 38. In § 424.121, paragraph (c) is the woman is in false labor.
The revisions read as follows: amended by removing the cross- * * * * *
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24147
(f) Recipient hospital responsibilities. average hospital cost per case from a base subsequent fiscal years is set forth at
A participating hospital that has year, updated for inflation. § 412.64. The basic methodology for
specialized capabilities or facilities SCHs are paid based on whichever of the determining the prospective payment rates
following rates yields the greatest aggregate for hospital inpatient operating costs for
(including, but not limited to, facilities hospitals located in Puerto Rico for FY 2005
payment: the Federal national rate; the
such as burn units, shock-trauma units, updated hospital-specific rate based on FY and subsequent fiscal years is set forth at
neonatal intensive care units, or (with 1982 costs per discharge; the updated §§ 412.211 and 412.212. Below we discuss
respect to rural areas) regional referral hospital-specific rate based on FY 1987 costs the factors used for determining the
centers, which, for purposes of this per discharge; or the updated hospital- prospective payment rates.
subpart, means hospitals meeting the specific rate based on FY 1996 costs per In summary, the proposed standardized
requirements of referral centers found at discharge. amounts set forth in Tables 1A, 1B, 1C, and
Under section 1886(d)(5)(G) of the Act, 1D of section VI. of this Addendum reflect—
§ 412.96 of this chapter) may not refuse
MDHs were paid for FY 2006 based on the • Equalization of the standardized
to accept from a referring hospital amounts for urban and other areas at the
Federal national rate or, if higher, the Federal
within the boundaries of the United national rate plus 50 percent of the difference level computed for large urban hospitals
States an appropriate transfer of an between the Federal national rate and the during FY 2004 and onward, as provided for
individual who requires such updated hospital-specific rate based on FY under section 1886(d)(3)(A)(iv) of the Act,
specialized capabilities or facilities if 1982 or FY 1987 costs per discharge, updated by the applicable percentage
the receiving hospital has the capacity whichever is higher. (MDHs do not have the increase required under sections
to treat the individual. This requirement option to use their FY 1996 hospital-specific 1886(b)(3)(B)(i)(XX) and 1886(b)(3)(B)(viii) of
rate.) Section 5003(a)(1) of Pub. L. 109–171 the Act.
applies to any participating hospital • The two labor-related shares that are
with specialized capabilities, regardless extended and modified the MDH special
payment provision which was previously set applicable to the standardized amounts and
of whether the hospital has a dedicated Puerto Rico-specific standardized amounts,
to expire on October 1, 2006, to discharges
emergency department. occurring on or after October 1, 2006, but depending on whether the hospital’s
* * * * * before October 1, 2011. Under section payments would be higher with a lower (in
the case of a wage index less than or equal
(Catalog of Federal Domestic Assistance 5003(b) of Pub. L. 109–171, if the change
to 1.0000) or higher (in the case of a wage
Program No. 93.773, Medicare—Hospital results in an increase to its target amount,
index above 1.0000) labor share, as provided
Insurance; and Program No. 93.774, MDHs must rebase their hospital-specific
for under sections 1886(d)(3)(E), and
rates to their FY 2002 cost reports. In
Medicare—Supplementary Medical 1886(d)(9)(C)(iv) of the Act.
addition, under section 5003(c) of Pub. L. • Proposed updates of 3.4 percent for all
Insurance Program)
109–171, MDHs will now be paid based on areas (that is, the full market basket
Dated: March 30, 2006. the Federal national rate or, if higher, the percentage increase of 3.4 percent), as
Mark B. McClellan, Federal national rate plus 75 percent of the required by section 1886(b)(3)(B)(i)(XX) of
Administrator, Centers for Medicare & difference between the Federal national rate the Act, as amended by section 5001 of Pub.
Medicaid Services. and the updated hospital-specific rate. L. 109–171, and reflecting the requirements
Further, based upon section 5003(d) of Pub. of section 1886(b)(3)(B)(viii) of the Act, as
Dated: April 10, 2006. L. 109–171, MDHs will no longer be subject added by section 5001(a)(3) of Pub. L. 109–
Michael O. Leavitt, to the 12-percent cap on their DSH payment 171, to reduce the applicable percentage
Secretary. adjustment factor. increase by 2.0 percentage points for a
For hospitals in Puerto Rico, the payment hospital that fails to submit data, in a form
[Editorial Note: The following Addendum per discharge is based on the sum of 25 and manner specified by the Secretary,
and appendices will not appear in the Code percent of a Puerto Rico rate that reflects base relating to the quality of inpatient care
of Federal Regulations.] year average costs per case of Puerto Rico furnished by the hospital;
Addendum—Proposed Schedule of
hospitals and 75 percent of the Federal • An adjustment to ensure the proposed
national rate. (See section II.D.3. of this DRG recalibration and wage index update
Standardized Amounts Effective With Addendum for a complete description.) and changes are budget neutral, as provided
Discharges Occurring On or After As discussed below in section II. of this for under sections 1886(d)(4)(C)(iii) and
October 1, 2006 and Update Factors Addendum, we are proposing to make 1886(d)(3)(E) of the Act, by applying new
and Rate-of-Increase Percentages changes in the determination of the budget neutrality adjustment factors to the
Effective With Cost Reporting Periods prospective payment rates for Medicare standardized amount;
Beginning On or After October 1, 2006 inpatient operating costs for FY 2007. The • An adjustment to ensure the effects of
proposed changes, to be applied effective the special transition measures adopted in
(If you choose to comment on issues in this with discharges occurring on or after October relation to the implementation of new labor
section, please include the caption 1, 2006, affect the calculation of the Federal market areas are budget neutral;
‘‘Operating Payment Rates’’ at the beginning rates. In section III. of this Addendum, we • An adjustment to ensure the effects of
of your comment.) discuss our proposed changes for geographic reclassification are budget
determining the prospective payment rates neutral, as provided for in section
I. Summary and Background
for Medicare inpatient capital-related costs 1886(d)(8)(D) of the Act, by removing the FY
In this Addendum, we are setting forth the for FY 2007. Section IV. of this Addendum 2006 budget neutrality factor and applying a
proposed amounts and factors for sets forth our proposed changes for revised factor;
determining prospective payment rates for determining the rate-of-increase limits for • An adjustment to apply the new outlier
Medicare hospital inpatient operating costs hospitals excluded from the IPPS for FY offset by removing the FY 2006 outlier offset
and Medicare hospital inpatient capital- 2007. Section V. of this Addendum sets forth and applying a new offset;
related costs. We are also setting forth the proposed policies on payment for blood • An adjustment to ensure the effects of
proposed rate-of-increase percentages for clotting factors administered to hemophilia the rural community hospital demonstration
updating the target amounts for hospitals and inpatients. The tables to which we refer in required under section 410A of Pub. L. 108–
hospital units excluded from the IPPS. the preamble of this proposed rule are 173 are budget neutral, as required under
For discharges occurring on or after presented in section VI. of this Addendum. section 410A(c)(2) of Pub. L. 108–173.
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October 1, 2006, except for SCHs, MDHs, and A. Calculation of the Adjusted Standardized
hospitals located in Puerto Rico, each II. Proposed Changes to Prospective Payment
Rates for Hospital Inpatient Operating Costs Amount
hospital’s payment per discharge under the
IPPS has been based on 100 percent of the for FY 2007 1. Standardization of Base-Year Costs or
Federal national rate, which has been based The basic methodology for determining Target Amounts
on the national adjusted standardized prospective payment rates for hospital The national standardized amount is based
amount. This amount reflects the national inpatient operating costs for FY 2005 and on per discharge averages of adjusted
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24148 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
hospital costs from a base period (section computed for large urban hospitals during FY adjustment, we would not satisfy these
1886(d)(2)(A) of the Act) or, for Puerto Rico, 2003, updated by the applicable percentage conditions.
adjusted target amounts from a base period update. Section 1886(d)(9)(A) of the Act Budget neutrality is determined by
(section 1886(d)(9)(B)(i) of the Act), updated equalizes the Puerto Rico-specific urban and comparing aggregate IPPS payments before
and otherwise adjusted in accordance with rural area rates. Accordingly, we are using and after making the changes that are
the provisions of section 1886(d) of the Act. this proposed rule to provide for a single required to be budget neutral (for example,
The September 1, 1983 interim final rule (48 national standardized amount and a single reclassifying and recalibrating the DRGs,
FR 39763) contained a detailed explanation Puerto Rico standardized amount for FY updating the wage data, and geographic
of how base-year cost data (from cost 2007. reclassifications). We include outlier
reporting periods ending during FY 1981) 3. Updating the Average Standardized payments in the payment simulations
were established in the initial development Amount because outliers may be affected by changes
of standardized amounts for the IPPS. The in these payment parameters.
September 1, 1987 final rule (52 FR 33043 In accordance with section We are also proposing to adjust the
and 33066) contains a detailed explanation of 1886(d)(3)(A)(iv)(II) of the Act, we are standardized amount this year by an amount
how the target amounts were determined, proposing to update the equalized estimated to ensure that aggregate IPPS
and how they are used in computing the standardized amount for FY 2007 by the full payments do not exceed the amount of
Puerto Rico rates. estimated market basket percentage increase payments that would have been made in the
Sections 1886(d)(2)(B) and (d)(2)(C) of the for hospitals in all areas, as specified in absence of the rural community hospital
Act require us to update base-year per section 1886(b)(3)(B)(i)(XX) of the Act, as demonstration required under section 410A
discharge costs for FY 1984 and then amended by section 5001(a)(1) of Pub. L. of Pub. L. 108–173. This demonstration is
standardize the cost data in order to remove 109–171. The percentage change in the required to be budget neutral under section
the effects of certain sources of cost market basket reflects the average change in 410A(c)(2) of Pub. L. 108–173.
variations among hospitals. These effects the price of goods and services purchased by
hospitals to furnish inpatient care. The most a. Recalibration of DRG Weights and Updated
include case-mix, differences in area wage Wage Index—Budget Neutrality Adjustment
levels, cost-of-living adjustments for Alaska recent forecast of the hospital market basket
and Hawaii, indirect medical education increase for FY 2007 is 3.4 percent. Thus, for Section 1886(d)(4)(C)(iii) of the Act
costs, and costs to hospitals serving a FY 2007, the proposed update to the average specifies that, beginning in FY 1991, the
disproportionate share of low-income standardized amount is 3.4 percent for annual DRG reclassification and recalibration
patients. hospitals in all areas. of the relative weights must be made in a
In accordance with section 1886(d)(3)(E) of Section 1886(b)(3)(B) of the Act specifies manner that ensures that aggregate payments
the Act, the Secretary estimates, from time- the mechanism used to update the to hospitals are not affected. As discussed in
to-time, the proportion of hospitals’ costs that standardized amount for payment for section II. of the preamble, we normalized
are attributable to wages and wage-related inpatient hospital operating costs. Section the recalibrated DRG weights by an
costs. The standardized amount is divided 1886(b)(3)(B)(viii) of the Act, as added by adjustment factor, so that the average case
into labor-related and nonlabor-related section 5001(a)(3) of Pub. L. 109–171, weight after recalibration is equal to the
amounts; only the proportion considered the provides for a reduction of 2.0 percentage average case weight prior to recalibration.
labor-related amount is adjusted by the wage points to the update percentage increase (also However, equating the average case weight
index. Section 1886(d)(3)(E) of the Act known as the market basket update) for FY after recalibration to the average case weight
requires that 62 percent of the standardized 2007 and each subsequent fiscal year for any before recalibration does not necessarily
amount be adjusted by the wage index, ‘‘subsection (d) hospital’’ that does not achieve budget neutrality with respect to
unless doing so would result in lower submit quality data as discussed in section aggregate payments to hospitals because
payments to a hospital than would otherwise IV.A. of the preamble of this proposed rule. payments to hospitals are affected by factors
be made. (Section 1886(d)(9)(C)(iv)(II) of the The proposed standardized amounts in other than average case weight. Therefore, as
Act extends this provision to the labor- Tables 1A through 1C of section VI. of this we have done in past years, we are proposing
related share for hospitals located in Puerto Addendum reflect these differential amounts. to make a budget neutrality adjustment to
Rico.) Although the update factors for FY 2007 ensure that the requirement of section
For FY 2007, we are proposing not to are set by law, we are required by section 1886(d)(4)(C)(iii) of the Act is met.
adjust the national and Puerto Rico-specific 1886(e)(4) of the Act to recommend, taking Section 1886(d)(3)(E) of the Act requires us
labor-related and nonlabor-related share from into account MedPAC’s recommendations, to update the hospital wage index on an
the percentages established in FY 2006. appropriate update factors for FY 2007 for annual basis beginning October 1, 1993. This
Accordingly, we are proposing to adjust 62 both IPPS hospitals and hospitals and provision also requires us to make any
percent of the national standardized amount hospital units excluded from the IPPS. Our updates or adjustments to the wage index in
for all hospitals whose wage indexes are less recommendation on the update factors a manner that ensures that aggregate
than or equal to 1.0000. For all hospitals (which is required by sections 1886(e)(4)(A) payments to hospitals are not affected by the
whose wage values are greater than 1.0000, and (e)(5)(A) of the Act) is set forth in change in the wage index. For FY 2007, we
we are proposing to adjust 69.7 percent of the Appendix B of this proposed rule. are proposing to continue to adjust 10
national standardized amount by the 4. Other Adjustments to the Average percent of the wage index factor for
hospitals’ wage indexes. For hospitals in occupational mix. We describe the proposed
Standardized Amount
Puerto Rico, we are proposing to adjust 58.7 occupational mix adjustment in section III.C.
As in the past, we are proposing to adjust of the preamble to this proposed rule.
percent of the Puerto Rico-specific
the FY 2007 standardized amount to remove Because section 1886(d)(3)(E) of the Act
standardized amount for all hospitals whose
the effects of the FY 2006 geographic requires us to update the wage index on a
Puerto Rico-specific wage indexes are less
reclassifications and outlier payments before budget neutral basis, we are including the
than or equal to 1.0000. For Puerto Rico
applying the proposed FY 2007 updates. We effects of this proposed occupational mix
hospitals whose Puerto Rico-specific wage
index values are greater than 1.0000, we are then apply the new offsets for outliers and adjustment on the wage index in our budget
proposing to adjust 62 percent of the Puerto geographic reclassifications to the proposed neutrality calculations.
Rico-specific standardized amount. standardized amount for FY 2007. In FY 2005, those urban hospitals that
The proposed standardized amounts We do not remove the prior year’s budget became rural under the new labor market
appear in Table 1A, 1B, and 1C of the neutrality adjustments for reclassification area definitions were assigned the wage
Addendum to this proposed rule. and recalibration of the DRG weights and for index of the urban area in which they were
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updated wage data because, in accordance located under the previous labor market
2. Computing the Average Standardized with sections 1886(d)(4)(C)(iii) and definitions for a 3-year period of FY 2005, FY
Amount 1886(d)(3)(E) of the Act, estimated aggregate 2006, and FY 2007. Because we are in the
Section 1886(d)(3)(A)(iv) of the Act payments after the changes in the DRG third year of this 3-year transition, we are
requires that, beginning with FY 2004 and relative weights and wage index should equal proposing to adjust the standardized amounts
thereafter, an equal standardized amount is estimated aggregate payments prior to the for FY 2007 to ensure budget neutrality for
to be computed for all hospitals at the level changes. If we removed the prior year this policy. We discuss this proposed
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24149
adjustment in section III.B. of the preamble b. Reclassified Hospitals—Budget Neutrality determine whether the costs of a case exceed
to this proposed rule. Adjustment the fixed-loss cost threshold, a hospital’s
Section 4410 of Pub. L. 105–33 provides Section 1886(d)(8)(B) of the Act provides cost-to-charge ratio is applied to the total
that, for discharges on or after October 1, that, effective with discharges occurring on covered charges for the case to convert the
1997, the area wage index applicable to any or after October 1, 1988, certain rural charges to costs. Payments for eligible cases
hospital that is not located in a rural area hospitals are deemed urban. In addition, are then made based on a marginal cost
may not be less than the area wage index section 1886(d)(10) of the Act provides for factor, which is a percentage of the costs
the reclassification of hospitals based on above the fixed-loss cost threshold. The
applicable to hospitals located in rural areas
determinations by the MGCRB. Under section marginal cost factor for FY 2007 is 80
in that State. This provision is required by
1886(d)(10) of the Act, a hospital may be percent—the same marginal cost factor we
section 4410(b) of Pub. L. 105–33 to be have used since FY 1995 (59 FR 45367).
budget neutral. Therefore, we include the reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the In accordance with section
effects of this provision in our calculation of 1886(d)(5)(A)(iv) of the Act, outlier payments
the proposed wage update budget neutrality Secretary is required to adjust the
standardized amount to ensure that aggregate for any year are projected to be not less than
factor. As discussed in the FY 2006 IPPS 5 percent nor more than 6 percent of total
final rule (70 FR 47493), FY 2007 is the third payments under the IPPS after
implementation of the provisions of sections operating DRG payments plus outlier
and final year of the 3-year provision that payments. Section 1886(d)(3)(B) of the Act
1886(d)(8)(B) and (C) and 1886(d)(10) of the
uses an imputed wage index floor for States Act are equal to the aggregate prospective requires the Secretary to reduce the average
that have no rural areas and States that have payments that would have been made absent standardized amount by a factor to account
geographic rural areas, but that have no these provisions. We note that neither the for the estimated proportion of total DRG
hospitals actually classified as rural. We are wage index reclassifications provided under payments made to outlier cases. Similarly,
also proposing to adjust for the effects of this section 508 of Pub. L. 108–173 nor the wage section 1886(d)(9)(B)(iv) of the Act requires
provision in our calculation of the wage index adjustments provided under section the Secretary to reduce the average
update budget neutrality factor. 1886(d)(13) of the Act are budget neutral. standardized amount applicable to hospitals
To comply with the requirement that DRG Section 508(b) of Pub. L. 108–173 provides in Puerto Rico to account for the estimated
reclassification and recalibration of the proportion of total DRG payments made to
that the wage index reclassifications
outlier cases. More information on outlier
relative weights be budget neutral, and the approved under section 508(a) of Pub. L.
payments may be found on the CMS Web site
requirement that the updated wage index be 108–173 ‘‘shall not be effected in a budget
at http://www.cms.hhs.gov/
budget neutral, we used FY 2005 discharge neutral manner.’’ Section 1886(d)(13)(H) of
AcuteInpatientPPS/04_outlier.asp#
data to simulate payments and compared the Act similarly provides that any increase
TopOfPage.
aggregate payments using the FY 2006 in a wage index under section 1886(d)(13)
relative weights and wage indexes to shall not be taken into account ‘‘in applying i. Proposed FY 2007 Outlier Fixed-Loss Cost
any budget neutrality adjustment with Threshold
aggregate payments using the proposed FY
2007 relative weights and wage indexes. The respect to such index’’ under section For FY 2007, we are proposing to use the
same methodology was used for the FY 2006 1886(d)(8)(D) of the Act. To calculate this same methodology used for FY 2006 (70 FR
budget neutrality adjustment. proposed budget neutrality factor, we used 47493) to calculate the outlier threshold. As
Based on this comparison, we computed a FY 2005 discharge data to simulate we have done in the past, to calculate the
payments, and compared total IPPS proposed FY 2007 outlier threshold, we
proposed budget neutrality adjustment factor
payments prior to any reclassifications under simulated payments by applying proposed
equal to 0.998363. We also are proposing to
sections 1886(d)(8)(B) and (C) and FY 2007 rates and policies using cases from
adjust the Puerto Rico-specific standardized
1886(d)(10) of the Act to total IPPS payments the FY 2005 MedPAR files. Therefore, in
amount for the effect of DRG reclassification after such reclassifications. Based on these order to determine the proposed FY 2007
and recalibration. We computed a proposed simulations, we are proposing to apply an outlier threshold, we are proposing to inflate
budget neutrality adjustment factor for the adjustment factor of 0.991727 to ensure that the charges on the MedPAR claims by 2
Puerto Rico-specific standardized amount the effects of this reclassification are budget years, from FY 2005 to FY 2007.
equal to 0.998963. These proposed budget neutral. In certain years in the past, we have
neutrality adjustment factors are applied to The proposed adjustment factor is applied inflated MedPAR claims by calculating a 2-
the standardized amounts without removing to the standardized amount after removing year average annual rate-of-change in
the effects of the FY 2006 budget neutrality the effects of the FY 2006 budget neutrality charges-per-case using the charge data for the
adjustments. In addition, as discussed in adjustment factor. We note that the proposed two most recent years for which we had
section IV.E. of the preamble to this proposed FY 2007 adjustment reflects FY 2007 wage relatively complete MedPAR data. As
rule, we are applying the same proposed DRG index reclassifications approved by the discussed in the FY 2006 IPPS final rule (70
reclassification and recalibration budget MGCRB or the Administrator, and the effects FR 47494), however, we believe that charge
neutrality factor of 0.998963 to the hospital- of MGCRB reclassifications approved in FY data from FY 2003 may be distorted due to
specific rates that are to be effective for cost 2005 and FY 2006 (section 1886(d)(10)(D)(v) the atypically high rate of hospital charge
reporting periods beginning on or after of the Act makes wage index reclassifications inflation during FY 2003. Therefore, we are
October 1, 2006. effective for 3 years). not proposing to inflate charges using a 2-
Using the same data, we calculated a year average annual rate-of-change from FY
c. Outliers
proposed transition budget neutrality 2003 to FY 2004 and FY 2004 to FY 2005.
Section 1886(d)(5)(A) of the Act provides Instead, we are proposing to continue to
adjustment to account for the ‘‘hold
for payments in addition to the basic use a refined methodology that takes into
harmless’’ policy under which urban
prospective payments for ‘‘outlier’’ cases account the lower inflation in hospital
hospitals that became rural under the new involving extraordinarily high costs. To charges that is occurring as a result of the
labor market area definitions were assigned qualify for outlier payments, a case must outlier final rule (68 FR 34494), which
the wage index of the urban area in which have costs greater than the sum of the changed our methodology for determining
they were located under the previous labor prospective payment rate for the DRG, any outlier payments by implementing the use of
market area definitions for a 3-year period of IME and DSH payments, any new technology more current and accurate CCRs. Our refined
FY 2005, FY 2006, and FY 2007 (see Table add-on payments, and the ‘‘outlier methodology uses more recent data that
2 in section VI. of this Addendum). Using the threshold’’ or ‘‘fixed loss’’ amount (a dollar reflects the rate-of-change in hospital charges
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pre-reclassified wage index, we simulated amount by which the costs of a case must under the new outlier policy. Specifically,
payments under the new labor market area exceed payments in order to qualify for an we are proposing to establish the proposed
definitions and compared them to simulated outlier payment). We refer to the sum of the FY 2007 outlier threshold as follows: Using
payments under the ‘‘hold harmless’’ policy. prospective payment rate for the DRG, any the latest data available, we propose to
Based on this comparison, we computed a IME and DSH payments, any new technology calculate the 1-year average annualized rate-
proposed transition budget neutrality add-on payments, and the outlier threshold of-change in charges-per-case from the last
adjustment of 0.999591. as the outlier ‘‘fixed-loss cost threshold.’’ To quarter of FY 2004 in combination with the
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24150 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
first quarter of FY 2005 (July 1, 2004 through cost-to-charge ratios that are used to compute reconciliation than pre-reconciliation outlier
December 31, 2004) to the last quarter of FY the outlier threshold. Using lower cost-to- payments. As a result, we are proposing to
2005 in combination with the first quarter of charge ratios from the December 2005 continue to omit any assumptions about the
FY 2006 (July 1, 2005 through December 31, Provider-Specific File, in combination with effects of reconciliation from the outlier
2005). This rate of change was 7.57 percent the FY 2005 MedPAR claims and inflated threshold calculation.
(1.0757) or 15.15 percent (1.1515) over 2 charges, contributes to a higher proposed
years. outlier threshold for FY 2007 compared to FY ii. Other Changes Concerning Outliers
As we have done in the past, we are 2006. As stated in the FY 1994 IPPS final rule (58
proposing to establish the proposed FY 2007 As we did in establishing the FY 2006 FR 46348, September 1, 1993), we establish
outlier threshold using hospital cost-to- outlier threshold (70 FR 47494), in our outlier thresholds that are applicable to both
charge ratios from the December 2005 update projection of FY 2007 outlier payments, we
hospital inpatient operating costs and
to the Provider-Specific File—the most recent are not making an adjustment for the
available at the time of this proposed rule. possibility that hospitals’ cost-to-charge hospital inpatient capital-related costs. When
This file includes cost-to-charge ratios that ratios and outlier payments may be we modeled the combined operating and
reflect implementation of the changes to the reconciled upon cost report settlement. We capital outlier payments, we found that using
policy for determining the applicable cost-to- continue to believe that, due to the policy a common set of thresholds resulted in a
charge ratios that became effective August 8, implemented in the June 9, 2003 outlier final lower percentage of outlier payments for
2003 (68 FR 34494). rule, cost-to-charge ratios will no longer capital-related costs than for operating costs.
Using this methodology, we are proposing fluctuate significantly and, therefore, few We project that the thresholds for FY 2007
to establish an outlier fixed-loss cost hospitals will actually have these ratios will result in outlier payments equal to 5.1
threshold for FY 2007 equal to the reconciled upon cost report settlement. In percent of operating DRG payments and 4.87
prospective payment rate for the DRG, plus addition, it is difficult to predict which percent of capital payments based on the
any IME and DSH payments, and any add- specific hospitals will have cost-to-charge Federal rate.
on payments for new technology, plus ratios and outlier payments reconciled in In accordance with section 1886(d)(3)(B) of
$25,530. their cost reports in any given year. We also
the Act, we are proposing to reduce the
We note that the case-weighted national note that reconciliation occurs because
average cost-to-charge ratio declined by hospitals’ actual cost-to-charge ratios for the proposed FY 2007 standardized amount by
approximately 1 percent from the March cost reporting period are different than the the same percentage to account for the
2005 to the December 2005 update of the interim cost-to-charge ratios used to calculate projected proportion of payments paid to
Provider-Specific File. Hospital charges outlier payments when a bill is processed. outliers.
continue to increase at a steady rate of Our simulations assume that cost-to-charge The proposed outlier adjustment factors
growth between 7 and 8 percent over each of ratios accurately measure hospital costs and, that would be applied to the standardized
the last 2 years, resulting in a decline to the therefore, are more indicative of post- amount for FY 2007 are as follows:
We are proposing to apply the outlier proposed statewide average operating cost-to- using the FY 2004 MedPAR file (discharge
adjustment factors to the FY 2007 rates after charge ratios for urban hospitals and for rural data for FY 2004 bills). That is, the estimate
removing the effects of the FY 2006 outlier hospitals for which the fiscal intermediary is of actual outlier payments did not reflect
adjustment factors on the standardized unable to compute a hospital-specific cost-to- actual FY 2005 bills, but instead reflected the
amount. charge ratio within the above range. Effective application of FY 2005 rates and policies to
To determine whether a case qualifies for for discharges occurring on or after October available FY 2004 bills.
outlier payments, we apply hospital-specific 1, 2006, these proposed statewide average Our current estimate, using available FY
cost-to-charge ratios to the total covered ratios would replace the ratios published in 2005 bills, is that actual outlier payments for
charges for the case. Operating and capital the IPPS final rule for FY 2006 (70 FR 47672). FY 2005 were approximately 4.10 percent of
costs for the case are calculated separately by Table 8B in section VI. of this Addendum actual total DRG payments. Thus, the data
applying separate operating and capital cost- contains the proposed comparable statewide indicate that, for FY 2005, the percentage of
to-charge ratios. These costs are then average capital cost-to-charge ratios. Again, actual outlier payments relative to actual
combined and compared with the outlier the proposed cost-to-charge ratios in Tables total payments is lower than we projected
fixed-loss cost threshold. 8A and 8B would be used during FY 2007 before FY 2005 (and, thus, is less than the
The outlier final rule (68 FR 34494) when hospital-specific cost-to-charge ratios percentage by which we reduced the
eliminated the application of the statewide based on the latest settled cost report are standardized amounts for FY 2005). We note
average cost-to-charge ratios for hospitals either not available or are outside the range that, for FY 2006, the outlier threshold was
whose cost-to-charge ratios fall below 3 noted above. For an explanation of Table 8C, lowered to $23,600 compared to $25,800 for
standard deviations from the national mean please see section VI. of this Addendum. FY 2005. The outlier threshold was lower in
cost-to-charge ratio. However, for those We finally note that we published a FY 2006 than FY 2005 as a result of slower
hospitals for which the fiscal intermediary manual update (Change Request 3966) to growth in hospital charge inflation following
outliers on October 12, 2005. The manual implementation of the outlier final rule that
computes operating cost-to-charge ratios
update covered an array of topics, including went into effect on August 9, 2003.
greater than 1.25 or capital cost-to-charge
cost-to-charge ratios, reconciliation, and the
ratios greater than 0.158, or hospitals for Nevertheless, consistent with the policy and
time value of money. To download and view
whom the fiscal intermediary is unable to statutory interpretation we have maintained
the manual update, please visit http://www.
calculate a cost-to-charge ratio (as described since the inception of the IPPS, we do not
cms.hhs.gov/transmittals/downloads/
at § 412.84(i)(3) of our regulations), we are plan to make retroactive adjustments to
R707CP.pdf.
still using statewide average cost-to-charge outlier payments to ensure that total outlier
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ratios to determine whether a hospital iii. FY 2005 and FY 2006 Outlier Payments payments for FY 2005 are equal to 5.1
qualifies for outlier payments.22 Table 8A in In the FY 2006 IPPS final rule (70 FR percent of total DRG payments.
section VI. of this Addendum contains the 47496), we stated that, based on available We currently estimate that actual outlier
data, we estimated that actual FY 2005 payments for FY 2006 will be approximately
22 These figures represent 3.0 standard deviations outlier payments would be approximately 4.1 4.71 percent of actual total DRG payments,
from the mean of the log distribution of cost-to- percent of actual total DRG payments. This 0.39 percentage point lower than the 5.1
charge ratios for all hospitals. estimate was computed based on simulations percent we projected in setting the outlier
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24151
policies for FY 2006. This estimate is based of the preamble to this proposed rule, we are percent, and the labor-related share applied
on simulations using the FY 2005 MedPAR proposing to satisfy this requirement by to the standardized amounts in Table 1B is
file (discharge data for FY 2005 bills). We adjusting national IPPS rates by a factor that 62 percent. In accordance with sections
used these data to calculate an estimate of the is sufficient to account for the added costs of 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act,
actual outlier percentage for FY 2006 by this demonstration. We estimate that the we are applying the labor-related share of 62
applying FY 2006 rates and policies, average additional annual payment that will percent, unless the application of that
including an outlier threshold of $23,600 to be made to each participating hospital under percentage would result in lower payments
available FY 2005 bills. Even though we are the demonstration will be approximately to a hospital than would otherwise be made.
estimating payments below the 5.1 percent $1,021,985. We based this estimate on the The effect of this application is that the labor-
threshold for FY 2006, our simulations using recent historical experience of the difference related share of the standardized amount is
FY 2005 Medicare data show consistent between inpatient cost and payment for 62 percent for all hospitals (other than those
levels of charge inflation and a need to hospitals that are participating in the
in Puerto Rico) whose wage indexes are less
increase the threshold for FY 2007 to ensure demonstration. For 9 participating hospitals,
than or equal to 1.0000.
that 5.1 percent of total IPPS payments are the total annual impact of the demonstration
In addition, Tables 1A and 1B include
paid as outliers. However, our current program is estimated to be $9,197,870. The
required adjustment to the Federal rate used proposed standardized amounts reflecting
estimate of the outlier threshold for FY 2007
in calculating Medicare inpatient prospective the full 3.4 percent proposed update for FY
may change in the final rule based on
payments as a result of the demonstration is 2007, and proposed standardized amounts
updated data.
0.999905. reflecting the 2.0 percentage point reduction
iv. Technical Changes to the proposed update (a 1.4 percent update)
In order to achieve budget neutrality, we
Subpart F of Part 412 of the existing are proposing to adjust national IPPS rates by applicable for hospitals that fail to submit
regulations discusses payment for outlier an amount sufficient to account for the added quality data consistent with section
cases and special payment for new costs of this demonstration. In other words, 1886(b)(3)(B)(viii) of the Act.
technology. We have become aware of an we are proposing to apply budget neutrality The following table illustrates the
inadvertent mistake in § 412.84(m). across the payment system as a whole rather proposed changes from the FY 2006 national
Currently, § 412.84(m) discusses the than merely across the participants of this average standardized amount. The first
application of the time value of money when demonstration. We believe that the language column shows the proposed changes from
a hospital’s outlier payments are reconciled. of the statutory budget neutrality requirement the FY 2006 standardized amounts for
When referencing reconciliation, the section permits the agency to implement the budget hospitals that satisfy the quality data
by mistake references paragraph (h)(3) neutrality provision in this manner. This is submission requirement for receiving the full
instead of paragraph (i)(4). We are proposing because the statutory language requires that update (3.4 percent). The second column
to revise § 412.84(m) to reference the current ‘‘aggregate payments made by the Secretary shows the proposed changes for hospitals
policy under paragraph (i)(4). do not exceed the amount which the receiving the reduced update (1.4 percent).
d. Rural Community Hospital Demonstration Secretary would have paid if the The first row of the table shows the proposed
Program Adjustment (Section 410A of Pub. L. demonstration * * * was not implemented,’’ updated (through FY 2006) average
108–173) but does not identify the range across which standardized amount after restoring the FY
aggregate payments must be held equal. 2006 offsets for outlier payments,
Section 410A of Pub. L. 108–173 requires
the Secretary to establish a demonstration 5. Proposed FY 2007 Standardized Amount demonstration budget neutrality, the wage
that will modify reimbursement for inpatient The adjusted standardized amount is index transition budget neutrality and
services for up to 15 small rural hospitals. divided into labor-related and nonlabor- geographic reclassification budget neutrality.
Section 410A(c)(2) of Pub. L. 108–173 related portions. Tables 1A and 1B in section The DRG reclassification and recalibration
requires that ‘‘in conducting the VI. of this Addendum contain the national and wage index budget neutrality factor is
demonstration program under this section, standardized amount that we are proposing cumulative. Therefore, we did not remove
the Secretary shall ensure that the aggregate to apply to all hospitals, except hospitals in the FY 2006 budget neutrality factors for DRG
payments made by the Secretary do not Puerto Rico. The Puerto Rico-specific reclassification and recalibration from the
exceed the amount which the Secretary amounts are shown in Table 1C. The amounts in the table. We have added
would have paid if the demonstration amounts shown in Tables 1A and 1B differ separate rows to this table to reflect the
program under this section was not only in that the labor-related share applied to different labor-related shares that apply to
implemented.’’ As discussed in section IV.M. the standardized amounts in Table 1A is 69.7 hospitals.
COMPARISON OF FY 2006 STANDARDIZED AMOUNTS TO PROPOSED FY 2007 SINGLE STANDARDIZED AMOUNT WITH FULL
UPDATE AND REDUCED UPDATE
Full update Reduced update
(3.4 percent) (1.4 percent)
FY 2006 Base Rate, after removing reclassification budget neutrality, demonstration budget Labor: $3,505.76 ......... Labor: $3,505.76.
neutrality, wage index transition budget neutrality factors and outlier offset (based on the Nonlabor: $1,524.03 ... Nonlabor: $1,524.03.
proposed labor and nonlabor market share percentage for FY 2007).
Proposed FY 2007 Update Factor ............................................................................................... 1.034 ........................... 1.014.
Proposed FY 2007 DRG Recalibrations and Wage Index Budget Neutrality Factor .................. 0.998363 ..................... 0.998363.
Proposed FY 2007 Reclassification Budget Neutrality Factor ..................................................... 0.991727 ..................... 0.991727.
Adjusted for Blend of FY 2006 DRG Recalibration and Wage Index Budget Neutrality Factors Labor: $3,589.08 ......... Labor: $3,519.67.
Nonlabor: $1,560.25 ... Nonlabor: $1,530.07.
Proposed FY 2007 Outlier Factor ................................................................................................ 0.948984 ..................... 0.948984.
Proposed FY 2007 Labor Market Wage Index Transition Budget Neutrality Factor ................... 0.999591 ..................... 0.999591.
Proposed Rural Demonstration Budget Neutrality Factor ............................................................ 0.999905 ..................... 0.999905.
Proposed Rate for FY 2007 (after multiplying FY 2006 base rate by above factors) where the Labor: $3,028.19 ......... Labor: $2,969.62.
wage index is less than or equal to 1.0000. Nonlabor: $1,855.98 ... Nonlabor: $1,820.08.
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Proposed Rate for FY 2007 (after multiplying FY 2006 base rate by above factors) where the Labor: $3,404.27 ......... Labor: $3,338.42.
wage index is greater than 1.0000. Nonlabor: $1,479.90 ... Nonlabor: $1,451.28.
Under section 1886(d)(9)(A)(ii) of the Act, payment rate is based on the discharge- standardized amount (as set forth in Table
the Federal portion of the Puerto Rico weighted average of the national large urban 1A). The proposed labor-related and
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24152 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
nonlabor-related portions of the national TABLE OF COST-OF-LIVING ADJUST- qualifying quality data (full update for
average standardized amounts for Puerto qualifying hospitals, update minus 2.0
MENT FACTORS: ALASKA AND HAWAII
Rico hospitals for FY 2007 are set forth in percentage points for nonqualifying
HOSPITALS hospitals).
Table 1C of section VI. of this Addendum.
This table also includes the Puerto Rico Step 2—Multiply the labor-related portion
Cost of living of the standardized amount by the applicable
standardized amounts. The labor-related Area adjustment wage index for the geographic area in which
share applied to the Puerto Rico specific factor the hospital is located or the area to which
standardized amount is 58.7 percent, or 62 the hospital is reclassified (see Tables 4A–1,
percent, depending on which is more Alaska-All areas ...................... 1.25
4A–2, 4B, 4C–1, and 4C–2 of section VI. of
advantageous to the hospital. (Section Hawaii:
this Addendum).
County of Honolulu ............. 1.25
1886(d)(9)(C)(iv) of the Act, as amended by Step 3—For hospitals in Alaska and
Hawaii ................................. 1.165
section 403(b) of Pub. L. 108–173, provides Hawaii, multiply the nonlabor-related
County of Kauai .................. 1.2325
that the labor-related share for hospitals in portion of the standardized amount by the
County of Maui .................... 1.2375
Puerto Rico will be 62 percent, unless the appropriate cost-of-living adjustment factor.
County of Kalawao .............. 1.2375
application of that percentage would result in Step 4—Add the amount from Step 2 and
the nonlabor-related portion of the
lower payments to the hospital.) (The above factors are based on data
standardized amount (adjusted, if
obtained from the U.S. Office of Personnel
B. Adjustments for Area Wage Levels and appropriate, under Step 3).
Management.)
Cost-of-Living Step 5—Multiply the final amount from
C. DRG Relative Weights Step 4 by the relative weight corresponding
Tables 1A through 1C, as set forth in to the appropriate DRG (see Table 5 of
section VI. of this Addendum, contain the As discussed in section II. of the preamble
of this proposed rule, we have developed a section VI. of this Addendum).
labor-related and nonlabor-related shares that The Federal rate as determined in Step 5
classification system for all hospital
we are proposing to use to calculate the discharges, assigning them into DRGs, and may then be further adjusted if the hospital
prospective payment rates for hospitals have developed relative weights for each qualifies for either the IME or DSH
located in the 50 States, the District of DRG that reflect the resource utilization of adjustment. In addition, for hospitals that
Columbia, and Puerto Rico for FY 2007. This cases in each DRG relative to Medicare cases qualify for a low-volume payment adjustment
section addresses two types of adjustments to in other DRGs. Table 5 of section VI. of this under section 1886(d)(12) of the Act, the
Addendum contains the relative weights that payment in Step 5 would be increased by 25
the standardized amounts that are made in
we are proposing to use for discharges percent.
determining the proposed prospective
payment rates as described in this occurring in FY 2007. These factors have 2. Hospital-Specific Rate (Applicable Only to
Addendum. been recalibrated as explained in section II. SCHs and MDHs)
of the preamble of this proposed rule.
1. Adjustment for Area Wage Levels a. Calculation of Hospital-Specific Rate
D. Calculation of the Proposed Prospective Section 1886(b)(3)(C) of the Act provides
Sections 1886(d)(3)(E) and Payment Rates for FY 2007 that SCHs are paid based on whichever of the
1886(d)(9)(C)(iv) of the Act require that we
General Formula for Calculation of following rates yields the greatest aggregate
make an adjustment to the labor-related payment: the Federal rate; the updated
portion of the national and Puerto Rico Prospective Payment Rates for FY 2007
hospital-specific rate based on FY 1982 costs
prospective payment rates, respectively, to The proposed operating prospective per discharge; the updated hospital-specific
account for area differences in hospital wage payment rate for all hospitals paid under the rate based on FY 1987 costs per discharge; or
levels. This adjustment is made by IPPS located outside of Puerto Rico, except the updated hospital-specific rate based on
SCHs and MDHs, for FY 2007 equals the FY 1996 costs per discharge.
multiplying the labor-related portion of the
Federal rate based on the corresponding As discussed above, MDHs must rebase
adjusted standardized amounts by the amounts in Table 1A or Table 1B in section
appropriate wage index for the area in which their hospital-specific rates to their FY 2002
VI. of this Addendum. cost reports if doing so results in higher
the hospital is located. In section III. of the The proposed prospective payment rate for payments. In addition, effective for
preamble to this proposed rule, we discuss SCHs for FY 2007 equals the higher of the discharges occurring on or after October 1,
the data and methodology for the proposed applicable Federal rate (from Table 1A or 2006, MDHs are paid based on the Federal
FY 2007 wage index. The proposed FY 2007 Table 1B) or the hospital-specific rate as national rate or, if higher, the Federal
wage indexes are set forth in Tables 4A–1, described below. The proposed prospective national rate plus 75 percent of the difference
4A–2, 4B, 4C–1, 4C–2, and 4F of section VI. payment rate for MDHs for FY 2007 equals
between the Federal national rate and the
of this Addendum. the higher of the Federal rate, or the Federal
greater of the updated hospital-specific rates
rate plus 75 percent of the difference between
2. Adjustment for Cost-of-Living in Alaska based on either FY 1982, FY 1987 or FY 2002
the Federal rate and the hospital-specific rate
and Hawaii costs per discharge. Further, MDHs will no
as described below. The proposed
longer be subject to the 12-percent cap on
Section 1886(d)(5)(H) of the Act authorizes prospective payment rate for Puerto Rico for
their DSH payment adjustment factor.
an adjustment to take into account the FY 2007 equals 25 percent of the Puerto Rico
Hospital-specific rates have been
rate from Table 1C in section VI. of this
unique circumstances of hospitals in Alaska determined for each of these hospitals based
Addendum plus 75 percent of the applicable
and Hawaii. Higher labor-related costs for on the FY 1982 costs per discharge, the FY
national rate from Table 1A or Table 1B in
these two States are taken into account in the section VI. of this Addendum. 1987 costs per discharge, or, for SCHs, the FY
adjustment for area wages described above. 1996 costs per discharge or for MDHs the FY
1. Federal Rate 2002 cost per discharge. For a more detailed
For FY 2007, we are proposing to adjust the
payments for hospitals in Alaska and Hawaii For discharges occurring on or after discussion of the calculation of the hospital-
October 1, 2006 and before October 1, 2007, specific rates, we refer the reader to the FY
by multiplying the nonlabor-related portion
except for SCHs, MDHs, and hospitals in 1984 IPPS interim final rule (September 1,
of the standardized amount by the Puerto Rico, payment under the IPPS is based 1983, 48 FR 39772); the April 20, 1990 final
appropriate adjustment factor contained in exclusively on the Federal rate. rule with comment (55 FR 15150); the FY
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the table below. If the Office of Personnel The Federal rate is determined as follows: 1991 IPPS final rule (September 4, 1990, 55
Management releases revised cost-of-living Step 1—Select the appropriate average FR 35994); and the FY 2001 IPPS final rule
adjustment factors before July 1, 2006, we standardized amount considering the (August 1, 2000, 65 FR 47082). In addition,
will publish them in the final rule and use applicable wage index (Table 1A for wage for both SCHs and MDHs, the hospital-
them in determining FY 2007 payments. indexes greater than 1.0000 and Table 1B for specific rate is adjusted by the budget
wage indexes less than or equal to 1.0000) neutrality adjustment factor (that is, by the
and whether the hospital has submitted proposed recalibration budget neutrality
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24153
factor of 0.998963) as discussed in section Step 4—Multiply the amount from Step 3 aggregate payments for inpatient hospital
IV.C. of the preamble to this proposed rule. by the appropriate DRG relative weight (see capital costs were projected to equal 90
The resulting rate would be used in Table 5 of section VI. of the Addendum). percent of the payments that would have
determining the payment rate an SCH or Step 5—Multiply the result in Step 4 by 75 been made for capital-related costs on a
MDH would receive for its discharges percent. reasonable cost basis during the fiscal year.
beginning on or after October 1, 2006. The sum of the Puerto Rico rate and the That provision expired in FY 1996. Section
national rate computed above equals the 412.308(b)(2) describes the 7.4 percent
b. Updating the FY 1982, FY 1987, FY 1996,
prospective payment for a given discharge for reduction to the capital rate that was made
and FY 2002 Hospital-Specific Rates for FY
a hospital located in Puerto Rico. This rate in FY 1994, and § 412.308(b)(3) describes the
2007 may then be further adjusted if the hospital 0.28 percent reduction to the capital rate
We are proposing to increase the hospital- qualifies for either the IME or DSH made in FY 1996 as a result of the revised
specific rates by 3.4 percent (the hospital adjustment. policy of paying for transfers. In FY 1998, we
market basket percentage increase) for SCHs implemented section 4402 of Pub. L. 105–33,
and MDHs for FY 2007. Section III. Proposed Changes to Payment Rates for which required that, for discharges occurring
Acute Care Hospital Inpatient Capital- on or after October 1, 1997, and before
1886(b)(3)(C)(iv) of the Act provides that the
Related Costs for FY 2007 October 1, 2002, the unadjusted capital
update factor applicable to the hospital-
specific rates for SCHs is equal to the update (If you choose to comment on issues in this standard Federal rate is reduced by 17.78
factor provided under section section, please include the caption ‘‘Capital percent. As we discussed in the FY 2003
1886(b)(3)(B)(iv) of the Act, which, for SCHs Payment Rate’’ at the beginning of your IPPS final rule (67 FR 50102) and
in FY 2007, is the market basket rate-of- comment.) implemented in § 412.308(b)(6), a small part
increase. Section 1886(b)(3)(D) of the Act The PPS for acute care hospital inpatient of that reduction was restored effective
provides that the update factor applicable to capital-related costs was implemented for October 1, 2002.
the hospital-specific rates for MDHs also cost reporting periods beginning on or after To determine the appropriate budget
equals the update factor provided under October 1, 1991. Effective with that cost neutrality adjustment factor and the regular
section 1886(b)(3)(B)(iv) of the Act, which, reporting period, hospitals were paid during exceptions payment adjustment during the
for FY 2007, is the market basket rate-of- a 10-year transition period (which extended 10-year transition period, we developed a
increase. through FY 2001) to change the payment dynamic model of Medicare inpatient
methodology for Medicare acute care hospital capital-related costs; that is, a model that
3. General Formula for Calculation of inpatient capital-related costs from a projected changes in Medicare inpatient
Proposed Prospective Payment Rates for reasonable cost-based methodology to a capital-related costs over time. With the
Hospitals Located in Puerto Rico Beginning prospective methodology (based fully on the expiration of the budget neutrality provision,
On or After October 1, 2006 and Before Federal rate). the capital cost model was only used to
October 1, 2007 The basic methodology for determining estimate the regular exceptions payment
Section 1886(d)(9)(E)(iv) of the Act Federal capital prospective rates is set forth adjustment and other factors during the
provides that, effective for discharges in regulations at §§ 412.308 through 412.352. transition period. As we explained in the FY
occurring on or after October 1, 2004, Below we discuss the factors that we are 2002 IPPS final rule (66 FR 39911), beginning
hospitals located in Puerto Rico are paid proposing to use to determine the capital in FY 2002, an adjustment for regular
based on a blend of 75 percent of the national Federal rate for FY 2007, which would be exception payments is no longer necessary
prospective payment rate and 25 percent of effective for discharges occurring on or after because regular exception payments were
the Puerto Rico-specific rate. October 1, 2006. The 10-year transition only made for cost reporting periods
period ended with hospital cost reporting beginning on or after October 1, 1991, and
a. Puerto Rico Rate periods beginning on or after October 1, 2001 before October 1, 2001 (see § 412.348(b)).
The Puerto Rico prospective payment rate (FY 2002). Therefore, for cost reporting Because payments are no longer being made
is determined as follows: periods beginning in FY 2002, all hospitals under the regular exception policy effective
Step 1—Select the appropriate average (except ‘‘new’’ hospitals under with cost reporting periods beginning in FY
standardized amount considering the § 412.304(c)(2)) are paid based on 100 2002, we no longer use the capital cost
applicable wage index (see Table 1C). percent of the capital Federal rate. For FY model. The capital cost model and its
Step 2—Multiply the labor-related portion 1992, we computed the standard Federal application during the transition period are
of the standardized amount by the payment rate for capital-related costs under described in Appendix B of the FY 2002 IPPS
appropriate Puerto Rico-specific wage index the IPPS by updating the FY 1989 Medicare final rule (66 FR 40099).
(see Table 4F of section VI. of the inpatient capital cost per case by an actuarial Section 412.374 provides for the use of a
Addendum). estimate of the increase in Medicare inpatient blended payment system for payments to
Step 3—Add the amount from Step 2 and capital costs per case. Each year after FY Puerto Rico hospitals under the PPS for acute
the nonlabor-related portion of the 1992, we update the capital standard Federal care hospital inpatient capital-related costs.
standardized amount. rate, as provided at § 412.308(c)(1), to Accordingly, under the capital PPS, we
Step 4—Multiply the amount from Step 3 account for capital input price increases and compute a separate payment rate specific to
by the appropriate DRG relative weight. (see other factors. The regulations at Puerto Rico hospitals using the same
Table 5 of section IV. of the Addendum). § 412.308(c)(2) provide that the capital methodology used to compute the national
Step 5—Multiply the result in Step 4 by 25 Federal rate is adjusted annually by a factor Federal rate for capital-related costs. In
percent. equal to the estimated proportion of outlier accordance with section 1886(d)(9)(A) of the
payments under the capital Federal rate to Act, under the PPS for acute care hospital
b. National Rate
total capital payments under the capital operating costs, hospitals located in Puerto
The national prospective payment rate is Federal rate. In addition, § 412.308(c)(3) Rico are paid for operating costs under a
determined as follows: requires that the capital Federal rate be special payment formula. Prior to FY 1998,
Step 1—Select the appropriate average reduced by an adjustment factor equal to the hospitals in Puerto Rico were paid a blended
standardized amount considering the estimated proportion of payments for (regular operating rate that consisted of 75 percent of
applicable wage index (see Table 1C). and special) exceptions under § 412.348. the applicable standardized amount specific
Step 2—Multiply the labor-related portion Section 412.308(c)(4)(ii) requires that the to Puerto Rico hospitals and 25 percent of the
of the standardized amount by the applicable capital standard Federal rate be adjusted so applicable national average standardized
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wage index for the geographic area in which that the effects of the annual DRG amount. Similarly, prior to FY 1998,
the hospital is located or the area to which reclassification and the recalibration of DRG hospitals in Puerto Rico were paid a blended
the hospital is reclassified (see Table 4F of weights and changes in the geographic capital rate that consisted of 75 percent of the
section VI. of this Addendum). adjustment factor are budget neutral. applicable capital Puerto Rico-specific rate
Step 3—Add the amount from Step 2 and For FYs 1992 through 1995, § 412.352 and 25 percent of the applicable capital
the nonlabor-related portion of the national required that the capital Federal rate also be Federal rate. However, effective October 1,
average standardized amount. adjusted by a budget neutrality factor so that 1997, in accordance with section 4406 of
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24154 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
Pub. L. 105–33, operating payments to capital prospective payments. Since capital We estimate that the real case-mix increase
hospitals in Puerto Rico were revised to be payments constitute about 10 percent of would also equal 1.0 percent in FY 2007. The
based on a blend of 50 percent of the hospital payments, a 1-percent change in the net adjustment for change in case-mix is the
applicable standardized amount specific to capital Federal rate yields only about 0.1 difference between the projected increase in
Puerto Rico hospitals and 50 percent of the percent change in actual payments to case-mix and the projected total increase in
applicable national average standardized hospitals. As noted above, aggregate case-mix. Therefore, the proposed net
amount. In conjunction with this change to payments under the capital IPPS are adjustment for case-mix change in FY 2007
the operating blend percentage, effective with estimated to decrease slightly in FY 2007 is 0.0 percentage points.
discharges occurring on or after October 1, compared to FY 2006. The capital update framework also
1997, we also revised the methodology for 1. Projected Capital Standard Federal Rate contains an adjustment for the effects of DRG
computing capital payments to hospitals in Update reclassification and recalibration. This
Puerto Rico to be based on a blend of 50 adjustment is intended to remove the effect
percent of the Puerto Rico capital rate and 50 a. Description of the Update Framework on total payments of prior year changes to the
percent of the capital Federal rate. Under § 412.308(c)(1), the capital standard DRG classifications and relative weights, in
As we discussed in the FY 2005 IPPS final Federal rate is updated on the basis of an order to retain budget neutrality for all case-
rule (69 FR 49185), section 504 of Pub. L. analytical framework that takes into account mix index-related changes other than those
108–173 increased the national portion of the changes in a capital input price index (CIPI) due to patient severity. Due to the lag time
operating IPPS payments for Puerto Rico and several other policy adjustment factors. in the availability of data, there is a 2-year
hospitals from 50 percent to 62.5 percent and Specifically, we have adjusted the projected lag in data used to determine the adjustment
decreased the Puerto Rico portion of the CIPI rate-of-increase as appropriate each year for the effects of DRG reclassification and
operating IPPS payments from 50 percent to for case-mix index-related changes, for recalibration. For example, we are adjusting
37.5 percent for discharges occurring on or intensity, and for errors in previous CIPI for the effects of the FY 2005 DRG
after April 1, 2004 through September 30, forecasts. The proposed update factor for FY reclassification and recalibration as part of
2004 (see the March 26, 2004 One-Time 2007 under that framework is 0.8 percent our proposed update for FY 2007. We
Notification (Change Request 3158)). In based on the best data available at this time. estimate that FY 2005 DRG reclassification
addition, section 504 of Pub. L. 108–173 The proposed update factor is based on a and recalibration would result in a 0.0
provided that the national portion of projected 0.8 percent increase in the CIPI, a percent change in the case-mix when
operating IPPS payments for Puerto Rico 0.0 percent adjustment for intensity, a 0.0 compared with the case-mix index that
hospitals is equal to 75 percent and the percent adjustment for case-mix, a 0.0 would have resulted if we had not made the
Puerto Rico portion of operating IPPS percent adjustment for the FY 2005 DRG reclassification and recalibration changes to
payments is equal to 25 percent for reclassification and recalibration, and a the DRGs. Therefore, we are proposing to
discharges occurring on or after October 1, forecast error correction of 0.0 percent. As make a 0.0 percent adjustment for DRG
2004. Consistent with that change in discussed below in section III.C. of this reclassification and recalibration in the
operating IPPS payments to hospitals in Addendum, we believe that the CIPI is the update for FY 2007 to maintain budget
Puerto Rico, for FY 2005 (as we discussed in most appropriate input price index for neutrality.
the FY 2005 IPPS final rule), we revised the capital costs to measure capital price changes The capital update framework also
methodology for computing capital payments in a given year. We also explain the basis for contains an adjustment for forecast error. The
to hospitals located in Puerto Rico to be the FY 2007 CIPI projection in that same input price index forecast is based on
based on a blend of 25 percent of the Puerto section of this Addendum. Below we historical trends and relationships
Rico capital rate and 75 percent of the capital describe the proposed policy adjustments ascertainable at the time the update factor is
Federal rate for discharges occurring on or that have been applied. established for the upcoming year. In any
after October 1, 2004. The case-mix index is the measure of the given year, there may be unanticipated price
average DRG weight for cases paid under the fluctuations that may result in differences
A. Determination of Proposed Federal
IPPS. Because the DRG weight determines
Hospital Inpatient Capital-Related between the actual increase in prices and the
the prospective payment for each case, any
Prospective Payment Rate Update forecast used in calculating the update
percentage increase in the case-mix index
In the FY 2006 IPPS final rule (70 FR factors. In setting a prospective payment rate
corresponds to an equal percentage increase
47503), we established a capital Federal rate under the framework, we make an
in hospital payments.
of $420.65 for FY 2006. In the discussion that The case-mix index can change for any of adjustment for forecast error only if our
follows, we explain the factors that we are several reasons: estimate of the change in the capital input
proposing to use to determine the FY 2007 • The average resource use of Medicare price index for any year is off by 0.25
capital Federal rate. In particular, we explain patients changes (‘‘real’’ case-mix change); percentage points or more. There is a 2-year
why the proposed FY 2007 capital Federal • Changes in hospital coding of patient lag between the forecast and the
rate would increase approximately 0.9 records result in higher weight DRG measurement of the forecast error. A forecast
percent compared to the FY 2006 capital assignments (‘‘coding effects’’); and error of ¥0.1 percentage point was
Federal rate. However, we estimate aggregate • The annual DRG reclassification and calculated for the FY 2005 update. That is,
capital payments would decrease by 0.4 recalibration changes may not be budget current historical data indicate that the
percent during this same period. This neutral (‘‘reclassification effect’’). forecasted FY 2005 CIPI used in calculating
decrease is due to a decrease in the estimated We define real case-mix change as actual the FY 2005 update factor (0.7 percent)
total number of Medicare fee-for-service changes in the mix (and resource slightly overstated the actual realized price
discharges for FY 2007 as compared to the requirements) of Medicare patients as increases (0.6 percent) by 0.1 percentage
estimated total number of Medicare fee-for- opposed to changes in coding behavior that point. This slight overprediction was mostly
service discharges in FY 2006. We are result in assignment of cases to higher due to an underestimation in the deceleration
estimating a decrease in Medicare fee-for- weighted DRGs but do not reflect higher of the average yield of the long-term
service discharges in FY 2007 as compared resource requirements. The capital update municipal bonds. The forecast correctly
to FY 2006, in part because we are projecting framework includes the same case-mix index anticipated the deceleration of the municipal
an increase in beneficiary Medicare managed adjustment used in the former operating IPPS bond rates; however, it underestimated the
care enrollment as a result of the update framework (as discussed in the May magnitude of the deceleration resulting from
implementation of several provisions of Pub. 18, 2005 IPPS proposed rule for FY 2005 (69 the relatively looser Federal monetary policy
L. 108–173. Therefore, although we are FR 28816)). (We are no longer using an (that is, delaying interest rate hikes).
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projecting that capital PPS payments per update framework in making a However, because this estimation of the
discharge would increase slightly from FY recommendation for updating the operating change in the CIPI is less than 0.25
2006 to FY 2007, we project that aggregate IPPS standardized amounts as discussed in percentage points, it is not reflected in the
capital PPS payments would decrease for the section II, of Appendix B in the FY 2006 IPPS update recommended under this framework.
same period. final rule (70 FR 47707).) Therefore, we are proposing to make a 0.0
Total payments to hospitals under the IPPS For FY 2007, we are projecting a 1.0 percent adjustment for forecast error in the
are relatively unaffected by changes in the percent total increase in the case-mix index. update for FY 2007.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24155
Under the capital IPPS update framework, skewed (as discussed in greater detail below) declining, we believed a zero (rather than
we also make an adjustment for changes in and we established a 0.0 percent adjustment negative) intensity adjustment was
intensity. We calculate this adjustment using in each of those years. Furthermore, we appropriate. Similarly, we believe that it is
the same methodology and data that were stated that we would continue to apply a 0.0 appropriate to apply a zero intensity
used in the framework used in the past under percent adjustment for intensity until any adjustment for FY 2007 until any increase in
the operating IPPS. The intensity factor for increase in charges can be tied to intensity charges can be tied to intensity rather than
the operating update framework reflects how rather than attempts to maximize outlier to attempts to maximize outlier payments.
hospital services are utilized to produce the payments. Above, we described the basis of the
final product, that is, the discharge. This As noted above, our intensity measure is components used to develop the proposed
component accounts for changes in the use based on a 5-year average, and therefore, the 0.8 percent capital update factor for FY 2007
of quality-enhancing services, for changes in proposed intensity adjustment for FY 2007 is as shown in the table below.
within-DRG severity, and for expected based on data from the 5-year period FY 2001
modification of practice patterns to remove through FY 2005. We found a dramatic CMS PROPOSED FY 2007 UPDATE
noncost-effective services. increase in hospital charges for each of those
We calculate case-mix constant intensity as 5 years without a corresponding increase in
FACTOR TO THE CAPITAL FEDERAL
the change in total charges per admission, the hospital case-mix index. These findings RATE
adjusted for price level changes (the CPI for are similar to the considerable increase in
hospital and related services) and changes in hospitals’ charges, which we found when we Capital Input Price Index .............. 0.8
real case-mix. The use of total charges in the were determining the intensity factor in the Intensity ........................................ 0.0
calculation of the intensity factor makes it a FY 2004, FY 2005 and FY 2006 update Case-Mix Adjustment Factors:
total intensity factor; that is, charges for recommendations as discussed in the FY Real Across DRG Change ........ 1.0
capital services are already built into the 2004 IPPS final rule (68 FR 45482), the FY Projected Case-Mix Change ..... ¥1.0
calculation of the factor. Therefore, we have 2005 IPPS final rule (69 FR 49285) and the
incorporated the intensity adjustment from FY 2006 IPPS final rule (70 FR 47500), Subtotal ................................. 0.0
the operating update framework into the respectively. If hospitals were treating new or Effect of FY 2005 Reclassification
capital update framework. Without reliable different types of cases, which would result and Recalibration ...................... 0.0
estimates of the proportions of the overall in an appropriate increase in charges per Forecast Error Correction ............. 0.0
annual intensity increases that are due, discharge, then we would expect hospitals’
respectively, to ineffective practice patterns case-mix to increase proportionally. Total Proposed Update ......... 0.8
and to the combination of quality-enhancing As we discussed in the FY 2006 IPPS final
new technologies and within-DRG rule (70 FR 47500), because our intensity b. Comparison of CMS and MedPAC Update
complexity, we assume, as in the operating calculation relies heavily upon charge data Recommendation
update framework, that one-half of the and we believe that these charge data may be In the past, MedPAC has included update
annual increase is due to each of these inappropriately skewed, we established a 0.0 recommendations for capital PPS in a Report
factors. The capital update framework thus percent adjustment for intensity for FY 2006. to Congress. In its March 2006 Report to
provides an add-on to the input price index On June 9, 2003, we published revisions to Congress, MedPAC did not make an update
rate of increase of one-half of the estimated our outlier policy for determining the recommendation for capital PPS payments
annual increase in intensity, to allow for additional payment for extraordinarily high- for FY 2007. However, in that same report,
within-DRG severity increases and the cost cases (68 FR 34494 through 34515). MedPAC made an update recommendation
adoption of quality-enhancing technology. These revised policies were effective on for hospital inpatient and outpatient services
We have developed a Medicare-specific August 8, 2003, and October 1, 2003. While (page 46). MedPAC reviews inpatient and
intensity measure based on a 5-year average. it does appear that a response to these policy outpatient services together because they are
Past studies of case-mix change by the RAND changes is beginning to occur, that is, the so closely interrelated. For FY 2007, MedPAC
Corporation (‘‘Has DRG Creep Crept Up? change in charges for FYs 2004 and 2005 are recommended an increase in the payment
Decomposing the Case Mix Index Change somewhat less than the previous 4 years, rate for the operating IPPS by the projected
Between 1987 and 1988’’ by G. M. Carter, J. they still show a significant annual increase increase in the hospital market basket index,
P. Newhouse, and D. A. Relles, R–4098– in charges without a corresponding increase less half of MedPAC’s expectation for
HCFA/ProPAC (1991)) suggest that real case- in hospital case-mix. The increase in charges productivity growth (or 0.45 percent, based
mix change was not dependent on total in FY 2004, for example, is approximately 12 on its assessment of beneficiaries’ access to
change, but was usually a fairly steady 1.0 to percent, which, while less than the increase care and changes in hospital capacity,
1.4 percent per year. We use 1.4 percent as in the previous 3 years, is still much higher volume of services, access to capital, quality
the upper bound because the RAND study than increases in years prior to FY 2001. In of care, and the relationship of Medicare
did not take into account that hospitals may addition, this approximate 12-percent payments and hospitals’ costs. In addition,
have induced doctors to document medical increase in charges for FY 2004 significantly MedPAC recommended combining the
records more completely in order to improve exceeds the case-mix increase for the same annual rate update with an incentive
payment. period. Based on the approximate 12-percent payment policy for quality. (MedPAC’s
We calculate case-mix constant intensity as increase in charges for FY 2004, we believe Report to the Congress: Medicare Payment
the change in total charges per admission, residual effects of hospitals’ charge practices Policy, March 2006, Section 2A.)
adjusted for price level changes (the CPI for prior to the implementation of the outlier
hospital and related services), and changes in policy revisions established in the June 9, 2. Proposed Outlier Payment Adjustment
real case-mix. As we noted above, in 2003 final rule continue to appear in the data Factor
accordance with § 412.308(c)(1)(ii), we began because hospitals may not have had enough Section 412.312(c) establishes a unified
updating the capital standard Federal rate in time to adopt changes in their behavior in outlier methodology for inpatient operating
FY 1996 using an update framework that response to the new outlier policy. Thus, we and inpatient capital-related costs. A single
takes into account, among other things, believe that the FY 2004 and FY 2005 charge set of thresholds is used to identify outlier
allowable changes in the intensity of hospital data may still be skewed. Because the cases for both inpatient operating and
services. For FYs 1996 through 2001, we intensity adjustment is based on a 5-year inpatient capital-related payments. Section
found that case-mix constant intensity was average, and although the new outlier policy 412.308(c)(2) provides that the standard
declining and we established a 0.0 percent was generally effective in FY 2004, we Federal rate for inpatient capital-related costs
wwhite on PROD1PC61 with PROPOSALS2
adjustment for intensity in each of those believe it still will be several years before all be reduced by an adjustment factor equal to
years. For FYs 2002 and 2003, we found that the effects of hospitals attempting to the estimated proportion of capital-related
case-mix constant intensity was increasing maximize outlier payments are removed from outlier payments to total inpatient capital-
and we established a 0.3 percent adjustment the intensity calculation. Therefore, we are related PPS payments. The outlier thresholds
and 1.0 percent adjustment for intensity, proposing a 0.0 percent adjustment for are set so that operating outlier payments are
respectively. For FYs 2004 and 2005, we intensity for FY 2007. In the past (FYs 1996 projected to be 5.1 percent of total operating
found that the charge data appeared to be through 2001) when we found intensity to be DRG payments.
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24156 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
In the FY 2006 IPPS final rule (70 FR payments that would have been made on the relative weights and the proposed FY 2007
47501), we estimated that outlier payments basis of the capital Federal rate without such GAF. As we established in the FY 2006 IPPS
for capital would equal 4.85 percent of changes. Because we implemented a separate final rule (70 FR 47503), the budget
inpatient capital-related payments based on GAF for Puerto Rico, we apply separate neutrality factors were 0.9920 for the national
the capital Federal rate in FY 2006. Based on budget neutrality adjustments for the capital rate and 0.9959 for the Puerto Rico
the thresholds as set forth in section II.A.4.c. national GAF and the Puerto Rico GAF. We capital rate. In making the comparison, we
of this Addendum, we estimate that outlier apply the same budget neutrality factor for set the exceptions reduction factor to 1.00. To
payments for capital-related costs would DRG reclassifications and recalibration achieve budget neutrality for the changes in
equal 4.87 percent for inpatient capital- nationally and for Puerto Rico. Separate
the national GAF, based on calculations
related payments based on the Federal rate in adjustments were unnecessary for FY 1998
using updated data, we are proposing to
FY 2007. Therefore, we are proposing to and earlier because the GAF for Puerto Rico
was implemented in FY 1998. apply an incremental budget neutrality
apply an outlier adjustment factor of 0.9513
In the past, we used the actuarial capital adjustment of 1.0003 for FY 2007 to the
to the capital Federal rate. Thus, the
cost model (described in Appendix B of the previous cumulative FY 2006 adjustments of
percentage of capital outlier payments to
total capital standard payments for FY 2007 FY 2002 IPPS final rule (66 FR 40099)) to 0.9920, yielding an adjustment of 0.9922,
would be slightly higher than the percentages estimate the aggregate payments that would through FY 2007 (calculations done on
for FY 2006. have been made on the basis of the capital unrounded numbers). For the Puerto Rico
The outlier reduction factors are not built Federal rate with and without changes in the GAF, we are proposing to apply an
permanently into the capital rates; that is, DRG classifications and weights and in the incremental budget neutrality adjustment of
they are not applied cumulatively in GAF to compute the adjustment required to 1.0017 for FY 2007 to the previous
determining the capital Federal rate. The maintain budget neutrality for changes in cumulative FY 2006 adjustment of 0.9959,
proposed FY 2007 outlier adjustment of DRG weights and in the GAF. During the yielding a cumulative adjustment of 0.9986
0.9513 is a ¥0.02 percent change from the transition period, the capital cost model was through FY 2007.
FY 2006 outlier adjustment of 0.9515. also used to estimate the regular exception We then compared estimated aggregate
Therefore, the net change in the outlier payment adjustment factor. As we explain in capital Federal rate payments based on the
adjustment to the proposed capital Federal section III.A.4. of this Addendum, beginning FY 2006 DRG relative weights and the FY
rate for FY 2007 is 0.9998 (0.9513/0.9915). in FY 2002, an adjustment for regular 2006 GAF to estimated aggregate capital
Thus, the proposed outlier adjustment exception payments is no longer necessary. Federal rate payments based on the proposed
decreases the proposed FY 2007 capital Therefore, we are no longer using the capital
FY 2007 DRG relative weights and the
Federal rate by 0.02 percent compared with cost model. Instead, we are using historical
proposed FY 2007 GAF. The proposed
the FY 2006 outlier adjustment. data based on hospitals’ actual cost
experiences to determine the exceptions incremental adjustment for DRG
3. Proposed Budget Neutrality Adjustment payment adjustment factor for special classifications and changes in relative
Factor for Changes in DRG Classifications exceptions payments. weights is 1.0009 both nationally and for
and Weights and the GAF To determine the proposed factors for FY Puerto Rico. The proposed cumulative
Section 412.308(c)(4)(ii) requires that the 2007, we compared (separately for the adjustments for DRG classifications and
capital Federal rate be adjusted so that national capital rate and the Puerto Rico changes in relative weights and for changes
aggregate payments for the fiscal year based capital rate) estimated aggregate capital in the GAF through FY 2007 are 0.9932
on the capital Federal rate after any changes Federal rate payments based on the FY 2006 nationally and 0.9986 for Puerto Rico. The
resulting from the annual DRG DRG relative weights and the FY 2006 GAF following table summarizes the adjustment
reclassification and recalibration and changes to estimated aggregate capital Federal rate factors for each fiscal year:
in the GAF are projected to equal aggregate payments based on the proposed FY 2007 BILLING CODE 4120–01–P
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24157
BILLING CODE 4120–01–C the DRG relative weights. Under the capital medical education payments, or the large
The methodology used to determine the PPS, there is a single DRG/GAF budget urban add-on payments.
proposed recalibration and geographic (DRG/ neutrality adjustment factor (the national In the FY 2006 IPPS final rule (70 FR
GAF) budget neutrality adjustment factor for capital rate and the Puerto Rico capital rate 47503), we calculated a GAF/DRG budget
FY 2007 is similar to that used in are determined separately) for changes in the neutrality factor of 1.0008 for FY 2006. For
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establishing budget neutrality adjustments GAF (including geographic reclassification) FY 2007, we are proposing to establish a
under the PPS for operating costs. One and the DRG relative weights. In addition, GAF/DRG budget neutrality factor of 1.0012.
difference is that, under the operating PPS, there is no adjustment for the effects that The GAF/DRG budget neutrality factors are
the budget neutrality adjustments for the built permanently into the capital rates; that
geographic reclassification has on the other
effect of geographic reclassifications are is, they are applied cumulatively in
payment parameters, such as the payments
determined separately from the effects of determining the capital Federal rate. This
for serving low-income patients, indirect
EP25AP06.021</GPH>
other changes in the hospital wage index and follows from the requirement that estimated
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24158 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
aggregate payments each year be no more or Under the special exceptions provision permanently into the capital rates; that is, the
less than they would have been in the specified at § 412.348(g)(1), eligible hospitals factors are not applied cumulatively in
absence of the annual DRG reclassification include SCHs, urban hospitals with at least determining the capital Federal rate.
and recalibration and changes in the GAF. 100 beds that have a disproportionate share Therefore, the net change in the exceptions
The incremental change in the proposed percentage of at least 20.2 percent or qualify adjustment factor used in determining the
adjustment from FY 2006 to FY 2007 is for DSH payments under § 412.106(c)(2), and proposed FY 2007 capital Federal rate is
1.0012. The cumulative change in the hospitals with a combined Medicare and 1.0000 (0.9997/0.9997).
proposed capital Federal rate due to this Medicaid inpatient utilization of at least 70
5. Proposed Capital Standard Federal Rate for
proposed adjustment is 0.9932 (the product percent. An eligible hospital may receive
FY 2007
of the incremental factors for FYs 1993 special exceptions payments if it meets: (1)
though 2006 and the proposed incremental A project need requirement as described at In the FY 2006 IPPS final rule (70 FR
factor of 1.0012 for FY 2007). (We note that § 412.348(g)(2), which, in the case of certain 47503), we established a capital Federal rate
averages of the incremental factors that were urban hospitals, includes an excess capacity of $420.65 for FY 2006. In this proposed rule,
in effect during FYs 2005 and 2006, test as described at § 412.348(g)(4); (2) an age we are proposing to establish a capital
respectively, were used in the calculation of of assets test as described at § 412.348(g)(3); Federal rate of $424.42 for FY 2007. The
the proposed cumulative adjustment of and (3) a project size requirement as proposed capital Federal rate for FY 2007
1.0012 for FY 2007.) described at § 412.348(g)(5). was calculated as follows:
This proposed factor accounts for DRG Based on information compiled from our • The proposed FY 2007 update factor is
reclassifications and recalibration and for fiscal intermediaries, six hospitals have 1.0080; that is, the proposed update is 0.8
changes in the GAF. It also incorporates the qualified for special exceptions payments percent.
effects on the proposed GAF of FY 2007 under § 412.348(g). Since we have cost • The proposed FY 2007 budget neutrality
geographic reclassification decisions made by reports ending in FY 2005 for all of these adjustment factor that is applied to the
the MGCRB compared to FY 2006 decisions. hospitals, we calculated the adjustment capital standard Federal payment rate for
However, it does not account for changes in based on actual cost experience. Using data proposed changes in the DRG relative
payments due to changes in the DSH and from cost reports ending in FY 2005 from the weights and in the GAF is 1.0012.
IME adjustment factors or in the large urban December 2005 update of the HCRIS data, we • The proposed FY 2007 outlier
add-on. divided the capital special exceptions adjustment factor is 0.9513.
payment amounts for the six hospitals that • The proposed FY 2007 (special)
4. Proposed Exceptions Payment Adjustment qualified for special exceptions by the total exceptions payment adjustment factor is
Factor capital PPS payment amounts (including 0.9997.
Section 412.308(c)(3) requires that the special exception payments) for all hospitals. Because the proposed capital Federal rate
capital standard Federal rate be reduced by Based on the data from cost reports ending has already been adjusted for differences in
an adjustment factor equal to the estimated in FY 2005, this ratio is rounded to 0.0003. case-mix, wages, cost-of-living, indirect
proportion of additional payments for both Because we have not received all cost reports medical education costs, and payments to
regular exceptions and special exceptions ending in FY 2005, we also divided the FY hospitals serving a disproportionate share of
under § 412.348 relative to total capital PPS 2005 special exceptions payments by the low-income patients, we are not proposing to
payments. In estimating the proportion of total capital PPS payment amounts for all make additional adjustments in the capital
regular exception payments to total capital hospitals with cost reports ending in FY standard Federal rate for these factors, other
PPS payments during the transition period, 2004. This ratio also rounds to 0.0003. than the budget neutrality factor for changes
we used the actuarial capital cost model Because special exceptions are budget in the DRG relative weights and the GAF.
originally developed for determining budget neutral, we are proposing to offset the capital We are providing a chart that shows how
neutrality (described in Appendix B of the Federal rate by 0.03 percent for special each of the proposed factors and adjustments
FY 2002 IPPS final rule (66 FR 40099)) to exceptions payments for FY 2007. Therefore, for FY 2007 affected the computation of the
determine the exceptions payment the proposed exceptions adjustment factor is proposed FY 2007 capital Federal rate in
adjustment factor, which was applied to both equal to 0.9997 (1—0.0003) to account for comparison to the average FY 2006 capital
the Federal and hospital-specific capital special exceptions payments in FY 2007. Federal rate. The proposed FY 2007 update
rates. In the FY 2006 IPPS final rule (70 FR factor has the effect of increasing the
An adjustment for regular exception 47503), we estimated that total (special) proposed capital Federal rate by 0.80 percent
payments is no longer necessary in exceptions payments for FY 2006 would compared to the average FY 2006 Federal
determining the proposed FY 2007 capital equal 0.03 percent of aggregate payments rate. The proposed GAF/DRG budget
Federal rate because, in accordance with based on the capital Federal rate. Therefore, neutrality factor has the effect of increasing
§ 412.348(b), regular exception payments we applied an exceptions adjustment factor the proposed capital Federal rate by 0.12
were only made for cost reporting periods of 0.9997 (1—0.0003) in determining the FY percent. The proposed FY 2007 outlier
beginning on or after October 1, 1991 and 2006 capital Federal rate. As we stated above, adjustment factor has the effect of decreasing
before October 1, 2001. Accordingly, as we we estimate that exceptions payments in FY the proposed capital Federal rate by 0.02
explained in the FY 2002 IPPS final rule (66 2007 will equal 0.03 percent of aggregate percent compared to the average FY 2006
FR 39949), in FY 2002 and subsequent fiscal payments based on the proposed FY 2007 capital Federal rate. The proposed FY 2007
years, no payments will be made under the capital Federal rate. Therefore, we are exceptions payment adjustment factor
regular exceptions provision. However, in proposing to apply an exceptions payment remains unchanged from the FY 2006
accordance with § 412.308(c), we still need to adjustment factor of 0.9997 to the capital exceptions payment adjustment factor, and
compute a budget neutrality adjustment for Federal rate for FY 2007. The proposed therefore, has a 0.0 percent net effect on the
special exception payments under exceptions adjustment factor for FY 2007 is proposed FY 2007 capital Federal rate. The
§ 412.348(g). We describe our methodology the same as the factor used in determining combined effect of all the proposed changes
for determining the exceptions adjustment the FY 2006 capital Federal rate in the FY is to increase the proposed capital Federal
used in calculating the proposed FY 2007 2006 IPPS final rule (70 FR 47503). The rate by 0.90 percent compared to the average
capital Federal rate below. exceptions reduction factors are not built FY 2006 capital Federal rate.
Proposed Percent
FY 2006 Change
FY 2007 change
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24159
Proposed Percent
FY 2006 Change
FY 2007 change
6. Proposed Special Capital Rate for Puerto hospital is located (which is computed from greater than the prospective payment rate for
Rico Hospitals national data for all hospitals in the United the DRG plus $25,530.
Section 412.374 provides for the use of a States and Puerto Rico). In FY 1998, we An eligible hospital may also qualify for a
blended payment system for payments to implemented a 17.78 percent reduction to the special exceptions payment under
Puerto Rico hospitals under the PPS for acute Puerto Rico capital rate as a result of Pub. L. § 412.348(g) for up through the 10th year
care hospital inpatient capital-related costs. 105–33. In FY 2003, a small part of that beyond the end of the capital transition
Accordingly, under the capital PPS, we reduction was restored. period if it meets: (1) A project need
compute a separate payment rate specific to For FY 2006, before application of the requirement described at § 412.348(g)(2),
GAF, the special capital rate for Puerto Rico which in the case of certain urban hospitals
Puerto Rico hospitals using the same
hospitals was $201.93 for discharges includes an excess capacity test as described
methodology used to compute the national
occurring on or after October 1, 2005 through at § 412.348(g)(4); and (2) a project size
Federal rate for capital-related costs. Under
September 30, 2006. With the changes we are requirement as described at § 412.348(g)(5).
the broad authority of section 1886(g) of the
proposing to make to the factors used to Eligible hospitals include SCHs, urban
Act, as discussed in section VI. of the
determine the capital rate, the proposed FY hospitals with at least 100 beds that have a
preamble of this proposed rule, beginning
2007 special capital rate for Puerto Rico is DSH patient percentage of at least 20.2
with discharges occurring on or after October
$202.98. percent or qualify for DSH payments under
1, 2004, capital payments to hospitals in
§ 412.106(c)(2), and hospitals that have a
Puerto Rico are based on a blend of 25 B. Calculation of the Proposed Inpatient combined Medicare and Medicaid inpatient
percent of the Puerto Rico capital rate and 75 Capital-Related Prospective Payments for FY utilization of at least 70 percent. Under
percent of the capital Federal rate. The 2007 § 412.348(g)(8), the amount of a special
Puerto Rico capital rate is derived from the exceptions payment is determined by
costs of Puerto Rico hospitals only, while the Because the 10-year capital PPS transition
period ended in FY 2001, all hospitals comparing the cumulative payments made to
capital Federal rate is derived from the costs the hospital under the capital PPS to the
of all acute care hospitals participating in the (except ‘‘new’’ hospitals under § 412.324(b)
and under § 412.304(c)(2)) are paid based on cumulative minimum payment level. This
IPPS (including Puerto Rico). amount is offset by: (1) Any amount by
To adjust hospitals’ capital payments for 100 percent of the capital Federal rate in FY
which a hospital’s cumulative capital
geographic variations in capital costs, we 2006. The applicable capital Federal rate was
payments exceed its cumulative minimum
apply a GAF to both portions of the blended determined by making adjustments as
payment levels applicable under the regular
capital rate. The GAF is calculated using the follows:
exceptions process for cost reporting periods
operating IPPS wage index and varies, • For outliers, by dividing the capital beginning during which the hospital has
depending on the labor market area or rural standard Federal rate by the outlier reduction been subject to the capital PPS; and (2) any
area in which the hospital is located. We use factor for that fiscal year; and amount by which a hospital’s current year
the Puerto Rico wage index to determine the • For the payment adjustments applicable operating and capital payments (excluding 75
GAF for the Puerto Rico part of the capital- to the hospital, by multiplying the hospital’s percent of operating DSH payments) exceed
blended rate and the national wage index to GAF, disproportionate share adjustment its operating and capital costs. Under
determine the GAF for the national part of factor, and IME adjustment factor, when § 412.348(g)(6), the minimum payment level
the blended capital rate. appropriate. is 70 percent for all eligible hospitals.
Because we implemented a separate GAF For purposes of calculating payments for During the transition period, new hospitals
for Puerto Rico in FY 1998, we also apply each discharge during FY 2007, the capital (as defined under § 412.300) were exempt
separate budget neutrality adjustments for standard Federal rate is adjusted as follows: from the capital PPS for their first 2 years of
the national GAF and for the Puerto Rico (Standard Federal Rate) × (DRG weight) × operation and were paid 85 percent of their
GAF. However, we apply the same budget (GAF) × (Large Urban Add-on, if applicable) reasonable costs during that period. Effective
neutrality factor for DRG reclassifications and × (COLA for hospitals located in Alaska and with the third year of operation through the
recalibration nationally and for Puerto Rico. Hawaii) × (1 + Disproportionate Share remainder of the transition period, under
As we stated above in section III.A.4. of this Adjustment Factor + IME Adjustment Factor, § 412.324(b), we paid the hospitals under the
Addendum, for Puerto Rico, the proposed if applicable). The result is the adjusted appropriate transition methodology (if the
GAF budget neutrality factor is 1.0017, while capital Federal rate. hold-harmless methodology were applicable,
the proposed DRG adjustment is 1.0009, for Hospitals also may receive outlier the hold-harmless payment for assets in use
a combined proposed cumulative adjustment payments for those cases that qualify under during the base period would extend for 8
of 0.9986. the thresholds established for each fiscal years, even if the hold-harmless payments
In computing the payment for a particular year. Section 412.312(c) provides for a single extend beyond the normal transition period).
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Puerto Rico hospital, the Puerto Rico portion set of thresholds to identify outlier cases for Under § 412.304(c)(2), for cost reporting
of the capital rate (25 percent) is multiplied both inpatient operating and inpatient periods beginning on or after October 1,
by the Puerto Rico-specific GAF for the labor capital-related payments. The proposed 2002, we pay a new hospital 85 percent of
market area in which the hospital is located, outlier thresholds for FY 2007 are in section its reasonable costs during the first 2 years
and the national portion of the capital rate II.A.4.c. of this Addendum. For FY 2007, a of operation unless it elects to receive
(75 percent) is multiplied by the national case qualifies as a cost outlier if the cost for payment based on 100 percent of the capital
GAF for the labor market area in which the the case plus the IME and DSH payments is Federal rate. Effective with the third year of
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24160 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
operation, we pay the hospital based on 100 market basket (70 FR 47396 through 47405) LTCHs that receive payment based on a
percent of the capital Federal rate (that is, the is 3.4 percent. blended payment amount will no longer
same methodology used to pay all other LTCHs, rehabilitation hospitals and units, receive a portion of their payment that is
hospitals subject to the capital PPS). and psychiatric hospitals and units, based, in part, on reasonable cost subject to
historically, were excluded from the IPPS the rate-of-ceiling under § 413.40. This is
C. Capital Input Price Index
and subject to the rate-of-increase limits because, in accordance with § 412.533,
1. Background under § 413.40, as well. However, LTCHs are paid 100 percent of the adjusted
Like the operating input price index, the prospective payment systems have been Federal prospective payment amount and
capital input price index (CIPI) is a fixed- developed for each of the three types of zero percent of the amount calculated under
weight price index that measures the price hospitals, and each kind of hospital is reasonable cost principles for cost reporting
changes associated with capital costs during currently paid under its own PPS, either at periods beginning on or after October 1,
a given year. The CIPI differs from the 100 percent of the Federal rate or according 2006.
operating input price index in one important to a transition period methodology, if As part of the PPS for existing IPFs, we
aspect—the CIPI reflects the vintage nature of applicable. (For more detailed discussion of have established a 3-year transition period
capital, which is the acquisition and use of these payment methodologies, see 69 FR during which existing IPFs will be paid
capital over time. Capital expenses in any 49190; 69 FR 66922; 68 FR 45674; and 67 FR based on a blend of reasonable cost-based
given year are determined by the stock of 55954.) payment (subject to the TEFRA limit) and the
capital in that year (that is, capital that For cost reporting periods beginning on or prospective per diem payment rate. IPFs that
remains on hand from all current and prior after October 1, 2002, to the extent a LTCH are paid under a blended methodology will
capital acquisitions). An index measuring or a psychiatric hospital or unit has all or a have the reasonable cost-based portion of
capital price changes needs to reflect this portion of its payment determined under their payment subject to a hospital target
vintage nature of capital. Therefore, the CIPI reasonable cost principles, the target amounts amount. The most recent proposed projected
was developed to capture the vintage nature for the reasonable cost-based portion of the forecast of the market basket percentage
of capital by using a weighted-average of past blended payment are determined in increase for FY 2007 for the reasonable cost-
capital purchase prices up to and including accordance with sections 1886(b)(3)(A)(i) and based portion of an IPF’s payment using the
the current year. 1886(b)(3)(B)(ii) of the Act and the excluded hospital market basket (70 FR
We periodically update the base year for regulations at § 413.40(c)(4)(ii). Section 47396 through 47405) is 3.6 percent. For cost
the operating and capital input prices to 413.40(c)(4)(ii) states, ‘‘Subject to the reporting periods beginning on or after
reflect the changing composition of inputs for provisions of [§ 413.40], paragraph (c)(4)(iii) January 1, 2008, IPFs will be paid 100
operating and capital expenses. The CIPI was of this section, for subsequent cost reporting percent of the Federal prospective per diem
last rebased to FY 2002 in the FY 2006 IPPS periods, the target amount equals the amount.
final rule (70 FR 47387). hospital’s target amount for the previous cost The proposed market basket percentage
2. Forecast of the CIPI for FY 2007 reporting period increased by the update increases for FY 2007 are made by CMS’
factor for the subject cost reporting period, Office of the Actuary and reflect the average
Based on the latest forecast by Global unless the provisions of [§ 413.40] paragraph change in the price of goods and services
Insight, Inc. (first quarter of 2006), we are (c)(5)(ii) of this section apply.’’ Thus, because purchased by hospitals to furnish inpatient
forecasting the CIPI to increase 0.8 percent in § 413.40(c)(4)(ii) indicates that the provisions hospital care. As discussed in section IV. of
FY 2007. This reflects a projected 1.4 percent of that paragraph are subject to the provisions the preamble in the FY 2006 IPPS final rule,
increase in vintage-weighted depreciation of § 413.40(c)(4)(iii), which are applicable we use the IPPS market basket for children’s
prices (building and fixed equipment, and only for cost reporting periods beginning on hospitals, cancer hospitals, and RNHCIs, and
movable equipment) and a 3.0 percent or after October 1, 1997 through September
increase in other capital expense prices in FY the excluded hospital market basket for
30, 2002, the target amount for FY 2003 is LTCHs, and IPFs for the reasonable cost
2007, partially offset by a 2.3 percent decline
determined by updating the target amount for portion of its payment to the extent a portion
in vintage-weighted interest expenses in FY
FY 2002 by the applicable update factor. For of its PPS payment is based on reasonable
2007. The weighted average of these three
example, if a provider was paid the cap costs. We are not proposing any changes to
factors produces the 0.8 percent increase for
amount for FY 2002 (§ 413.40(c)(4)(iii)), the our method of calculating the hospital market
the CIPI as a whole in FY 2007.
target amount for FY 2003 would be the basket for IPPS or for excluded hospitals. As
IV. Payment Rates for Excluded Hospitals amount paid in FY 2002, updated to FY 2003 we indicated above, the proposed IPPS
and Hospital Units: Proposed Rate-of- (that is, the target amount from the previous market basket is 3.4 percent and the
Increase Percentages year increased by the applicable update proposed excluded hospital market basket is
(If you choose to comment on issues in this factor). 3.6 percent.
section, please include the caption Effective for cost reporting periods
beginning on or after October 1, 2002, IRFs B. New Excluded Hospitals and Units
‘‘Excluded Hospitals Rate of Increase’’ at the
beginning of your comment.) are paid 100 percent of the adjusted Federal Section 1886(b)(7) of the Act established a
prospective payment rate under the IRP PPS. payment methodology for new (cost reporting
A. Payments to Existing Excluded Hospitals Effective for cost reporting periods periods beginning on or after October 1,
and Units beginning on or after October 1, 2002, LTCHs 1997) rehabilitation hospitals and units,
As discussed in section VI. of the preamble also are no longer paid on a reasonable cost psychiatric hospitals and units, and LTCHs.
of this proposed rule, the inpatient operating basis, but are paid under a LTCH DRG-based For the first two 12-month cost reporting
costs of children’s hospitals and cancer PPS. In implementing the LTCH PPS, an periods, payment was based on the lower of
hospitals that are excluded from the IPPS are existing LTCH (that is, not defined as new the hospital’s net inpatient operating costs or
paid on the basis of reasonable cost subject under § 412.23(e)(4)) could have elected to be 110 percent of the national median of target
to the rate-of-increase ceiling established paid based on 100 percent of the standard amounts for the particular class of hospital
under the authority of sections Federal prospective payment rate during the for FY 1996, updated to the applicable cost
1886(b)(3)(A)(i) and (ii) of the Act and transition period. However, we also reporting period, and adjusted for differences
§ 413.40 of the regulations. The ceiling is established a 5-year transition period from in area wage levels. Consequently, beginning
based on a target amount per discharge under reasonable cost-based payments (subject to with the FY 1998 IPPS final rule, we
TEFRA. In addition, in accordance with the TEFRA limit) to fully Federal prospective published annually in the Federal Register,
§ 403.752(a) of the regulations, RNHCIs also payment amounts during which an existing the updated 110 percent median of the wage-
wwhite on PROD1PC61 with PROPOSALS2
are paid under § 413.40 which uses section LTCH could receive a PPS-blended payment neutral national target amounts, divided into
1886(b)(3)(B)(ii) of the Act to update the consisting of two payment components—one the labor and nonlabor-related share, for each
percentage increase in the rate of increase based on reasonable cost under the TEFRA of the three classes of providers affected by
limits. The most recent proposed projected payment system, and the other based on the the payment limitation. As explained in the
forecast of the market basket percentage standard Federal prospective payment rate. FY 2006 IPPS final rule (70 FR 47466 through
increase for FY 2007 for children’s hospitals, Effective for cost reporting periods that 47467), the charts containing the updated
cancer hospitals, and RNHCIs using the IPPS will begin on or after October 1, 2006, the 110 percent median payment amount
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24161
information are no longer needed and are Medicare Part B payment amounts for blood determined under Subpart K of 42 CFR Part
discontinued. clotting factor as determined under Subpart 414 and that payment amounts for the
K of 48 CFR Part 414 and for the furnished furnishing fee for the blood clotting factor be
V. Proposed Payment for Blood Clotting fee as determined under § 410.63.
Factor Administered to Inpatient With calculated at 3 digits, currently at $0.146 per
In accordance with § 410.63(c)(2) and our I.U. of blood clotting factor.
Hemophilia November 21, 2005 regulations (70 FR The fiscal intermediaries continue to use
(If you choose to comment on issues in this 70225), the furnishing fee for blood clotting the Medicare Part B Drug Pricing File to
section, please include the caption ‘‘Blood factor for CY 2006 was determined to be
make payments for blood clotting factors.
Clotting Factor Payment Rate’’ at the $0.146 per individual unit (I.U.). Although
beginning of your comment.) the furnishing fee payment rate is calculated The furnishing fee is included in the ASP
As discussed in section VIII. of the at 3 digits, the actual amount paid to price per unit sent with the Medicare Part B
preamble to this proposed rule, in the FY providers and suppliers is rounded to 2 Drug Pricing File that is updated quarterly.
2006 IPPS final rule (70 FR 47473), we digits. In section VIII of the preamble to this By using the Medicare Part B Drug Pricing
amended our regulations at §§ 412.2(f)(8) and proposed rule, we are proposing that the File, Medicare will be making consistent
412.115(b) to state that, for discharges fiscal intermediaries continue to make payments for blood clotting factor provided
occurring on or after October 1, 2005, we payment amounts for blood clotting factor to inpatients and outpatients. For further
make payment for blood clotting factor administered to hemophilia inpatients using updates on pricing, we refer reader to the
administered to hospital inpatients using the the Medicare Part B payment amounts Medicare Part B drug pricing regulations.
wwhite on PROD1PC61 with PROPOSALS2
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24162 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
VI. Tables Table 4A–1—Wage Index and Capital Table 6H—Deletions from the CC Exclusions
This section contains the tables referred to Geographic Adjustment Factor (GAF) for List
throughout the preamble to this proposed Urban Areas by CBSA—FY 2007 Table 7A—Medicare Prospective Payment
rule and in this Addendum. Tables 1A, 1B, Table 4A–2—Wage Index and Capital System Selected Percentile Lengths of
1C, 1D, 2, 3A, 3B, 4A–1, 4A–2, 4B, 4C–1, 4C– Geographic Adjustment Factor (GAF) for Stay: FY 2005 MedPAR Update
2, 4F, 4J, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 6H, Certain Urban Areas by CBSA for the December 2005 GROUPER V23.0
Period April 1 through September 30, Table 7B—Medicare Prospective Payment
7A, 7B, 8A, 8B, 8C, 9A, 9B, 9C, 10, and 11
2007 System Selected Percentile Lengths of
are presented below. The tables presented
Table 4B—Wage Index and Capital Stay: FY 2005 MedPAR Update
below are as follows:
Geographic Adjustment Factor (GAF) for December 2005 GROUPER V24.0
Table 1A—National Adjusted Operating Table 8A—Statewide Average Operating
Standardized Amounts, Labor/Nonlabor Rural Areas by CBSA—FY 2007
Table 4C–1—Wage Index and Capital Cost-to-Charge Ratios—March 2006
(69.7 Percent Labor Share/30.3 Percent Table 8B—Statewide Average Capital Cost-to-
Nonlabor Share If Wage Index Is Greater Geographic Adjustment Factor (GAF) for
Hospitals That Are Reclassified by Charge Ratios—March 2006
Than 1) Table 8C—Statewide Average Total Cost-to-
Table 1B—National Adjusted Operating CBSA—FY 2007
Charge Ratios for LTCHs—March 2006
Standardized Amounts, Labor/Nonlabor Table 4C–2—Wage Index and Capital
Table 9A—Hospital Reclassifications and
(62 Percent Labor Share/38 Percent Geographic Adjustment Factor (GAF) for
Redesignations by Individual Hospital
Nonlabor Share If Wage Index Is Less Certain Hospitals That Are Reclassified and CBSA—FY 2007
Than or Equal To 1) by CBSA for the Period April 1 through Table 9B—Hospital Reclassifications and
Table 1C—Adjusted Operating Standardized September 30, 2007 Redesignations by Individual Hospital
Amounts for Puerto Rico, Labor/ Table 4F—Puerto Rico Wage Index and Under Section 508 of Pub. L. 108–173—
Nonlabor Capital Geographic Adjustment Factor FY 2007
Table 1D—Capital Standard Federal Payment (GAF) by CBSA—FY 2007 Table 9C—Hospitals Redesignated as Rural
Rate Table 4J—Out-Migration Adjustment—FY under Section 1886(d)(8)(E) of the Act—
Table 2—Hospital Case-Mix Indexes for 2007 FY 2007
Discharges Occurring in Federal Fiscal Table 5—List of Diagnosis-Related Groups Table 10—Geometric Mean Plus the Lesser of
Year 2005; Hospital Wage Indexes for (DRGs), Relative Weighting Factors, and .75 of the National Adjusted Operating
Federal Fiscal Year 2007; Hospital Geometric and Arithmetic Mean Length Standardized Payment Amount
Average Hourly Wage for Federal Fiscal of Stay (LOS) (Increased to Reflect the Difference
Years 2005 (2001 Wage Data), 2006 (2002 Table 6A—New Diagnosis Codes Between Costs and Charges) or .75 of
Wage Data), and 2007 (2003 Wage Data); Table 6B—New Procedure Codes One Standard Deviation of Mean Charges
Wage Indexes and 3-Year Average of Table 6C—Invalid Diagnosis Codes by Diagnosis-Related Group (DRG)—
Hospital Average Hourly Wages Table 6D—Invalid Procedure Codes March 2006
Table 3A—FY 2007 and 3-Year Average Table 6E—Revised Diagnosis Code Titles Table 11—Proposed FY 2007 LTC–DRGs,
Hourly Wage for Urban Areas by CBSA Table 6F—Revised Procedure Code Titles Relative Weights, Geometric Average
Table 3B—FY 2007 and 3-Year Average Table 6G—Additions to the CC Exclusions Length of Stay, and 5/6ths of the
Hourly Wage for Rural Areas by CBSA List Geometric Average Length of Stay
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24163
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES
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24164 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24165
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24166 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24167
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24168 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24169
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24170 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24171
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24172 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24173
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24174 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24175
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24176 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24177
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24178 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24179
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24180 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24181
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24182 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24183
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24184 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24185
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24186 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24187
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24188 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24189
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24190 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24191
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24192 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00198 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24193
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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24194 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00200 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24195
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00201 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24196 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00202 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24197
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00203 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24198 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00204 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24199
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00205 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24200 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00206 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24201
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00207 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24202 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00208 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24203
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00209 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24204 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00210 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24205
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00211 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24206 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00212 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24207
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00213 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24208 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00214 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24209
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00215 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24210 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00216 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24211
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00217 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24212 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00218 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24213
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00219 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24214 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00220 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24215
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00221 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24216 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00222 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24217
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00223 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24218 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00224 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24219
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00225 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24220 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00226 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24221
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00227 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24222 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24223
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00229 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24224 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00230 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24225
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00231 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24226 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00232 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24227
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00233 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24228 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 2.—HOSPITAL CASE-MIX INDEXES FOR DISCHARGES OCCURRING IN FEDERAL FISCAL YEAR 2005; HOSPITAL WAGE
INDEXES FOR FEDERAL FISCAL YEAR 2007; HOSPITAL AVERAGE HOURLY WAGES FOR FEDERAL FISCAL YEARS 2005
(2001 WAGE DATA), 2006 (2002 WAGE DATA), AND 2007 (2003 WAGE DATA); WAGE INDEXES AND 3-YEAR AVER-
AGE OF HOSPITAL AVERAGE HOURLY WAGES—Continued
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
wwhite on PROD1PC61 with PROPOSALS2
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24229
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
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24230 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00236 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24231
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00237 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24232 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00238 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24233
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00239 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24234 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 3A.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
TABLE 3B.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA
[*Based on the sum of the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00240 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24235
TABLE 3B.—FY 2007 AND 3-YEAR AVERAGE HOURLY WAGE FOR URBAN AREAS BY CBSA—Continued
[*Based on the sum of the salaries and hours computed for Federal Fiscal Years 2005, 2006, and 2007]
FY 2007 3-year
CBSA code Urban area average average
hourly wage hourly wage
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007
CBSA Wage
Urban area (constituent counties) GAF
code index
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24236 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24237
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
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24238 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00244 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24239
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00245 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24240 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00246 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24241
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00247 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24242 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00248 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24243
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00249 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24244 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00250 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24245
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00251 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24246 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00252 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24247
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00253 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24248 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00254 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24249
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00255 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24250 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00256 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24251
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00257 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24252 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00258 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24253
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00259 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24254 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00260 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24255
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00261 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24256 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00262 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24257
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00263 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24258 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4A–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA—
FY 2007—Continued
CBSA Wage
Urban area (constituent counties) GAF
code index
TABLE 4A–2.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR CERTAIN URBAN AREAS BY
CBSA FOR THE PERIOD APRIL 1 THROUGH SEPTEMBER 30, 2007*
CBSA Wage
Urban area (constituent counties) GAF
code index
TABLE 4B.—WAGE INDEX AND CAPITAL GEORGRAPHIC ADJUSTMENT (GAF) FOR RURAL AREAS BY CBSA–FY 2007
CBSA Wage
Nonurban area GAF
code index
wwhite on PROD1PC61 with PROPOSALS2
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24259
TABLE 4B.—WAGE INDEX AND CAPITAL GEORGRAPHIC ADJUSTMENT (GAF) FOR RURAL AREAS BY CBSA–FY 2007—
Continued
CBSA Wage
Nonurban area GAF
code index
TABLE 4C–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR HOSPITALS THAT ARE
RECLASSIFIED BY CBSA—FY 2007
CBSA Wage
Area GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00265 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24260 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4C–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR HOSPITALS THAT ARE
RECLASSIFIED BY CBSA—FY 2007—Continued
CBSA Wage
Area GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00266 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24261
TABLE 4C–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR HOSPITALS THAT ARE
RECLASSIFIED BY CBSA—FY 2007—Continued
CBSA Wage
Area GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00267 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24262 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 4C–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR HOSPITALS THAT ARE
RECLASSIFIED BY CBSA—FY 2007—Continued
CBSA Wage
Area GAF
code index
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00268 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24263
TABLE 4C–1.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR HOSPITALS THAT ARE
RECLASSIFIED BY CBSA—FY 2007—Continued
CBSA Wage
Area GAF
code index
TABLE 4C–2.—WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR CERTAIN HOSPITALS THAT ARE
RECLASSIFIED BY CBSA FOR THE PERIOD APRIL 1 THROUGH SEPTEMBER 30, 2007*
CBSA Wage
Area GAF
code index
TABLE 4F.—PUERTO RICO WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) BY CBSA—FY 2007
Wage index—
CBSA Wage GAS—reclas-
Area GAF reclassified
code index sified hospitals
hospitals
The following list represents all hospitals increased by the out-migration adjustment the out-migration adjustment if they are
that are eligible to have their wage index listed in this table. Hospitals cannot receive reclassified under section 1886(d)(10) of the
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00269 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24264 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
Act, reclassified under section 508 of Pub. L. 1886(d)(8) of the Act for any portion of the 1886(d)(10) of the Act, reclassified under
108–173, or redesignated under section fiscal year are designated with an asterisk section 508 of Pub. L. 108–173, or
1886(d)(8) of the Act. If a hospital has a half Hospitals have 45 days from the publication redesignated under section 1886(d)(8) of the
fiscal year reclassification, the hospital will of this proposed rule to review their Act wish to retain their reclassification/
be eligible for the out-migration adjustment individual situations to determine whether to redesignation status and waive the
for the portion of the fiscal year that it is not submit a request to withdraw their
reclassified. Hospitals that have already been reclassification/redesignation and receive the application of the out-migration adjustment.
reclassified under section 1886(d)(10) of the out-migration adjustment instead. We will Hospitals are not required to provide CMS
Act, reclassified under section 508 of Pub. L. automatically assume that hospitals that have with any type of formal notification that they
108–173, or redesignated under section already been reclassified under section wish to remain reclassified/redesignated.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24265
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24266 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24267
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24268 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24269
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24270 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00276 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24271
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00277 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24272 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
1 .......... Yes .......... No ............ 01 SURG ...... CRANIOTOMY AGE >17 W CC .................. 3.5289 7.3 9.8
2 .......... Yes .......... No ............ 01 SURG ...... CRANIOTOMY AGE >17 W/O CC .............. 1.9870 3.4 4.4
3 .......... No ............ No ............ 01 SURG* ..... CRANIOTOMY AGE 0–17 ........................... 1.9870 9.2 12.5
4 .......... No ............ No ............ 01 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
5 .......... No ............ No ............ 01 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
6 .......... No ............ No ............ 01 SURG ...... CARPAL TUNNEL RELEASE ...................... 0.7965 2.1 3.1
7 .......... Yes .......... Yes .......... 01 SURG ...... PERIPH & CRANIAL NERVE & DOTHER 2.5775 6.6 9.5
NERV SYST PROC W CC.
8 .......... Yes .......... Yes .......... 01 SURG ...... PERIPH & CRANIAL NERVE & DOTHER 1.4057 2.0 2.8
NERV SYST PROC W/O CC.
9 .......... No ............ No ............ 01 MED ......... SPINAL DISORDERS & INJURIES ............. 1.4543 4.4 6.2
10 ........ Yes .......... No ............ 01 MED ......... NERVOUS SYSTEM NEOPLASMS W CC 1.2513 4.6 6.0
11 ........ Yes .......... No ............ 01 MED ......... NERVOUS SYSTEM DNEOPLASMS W/O 0.8359 2.7 3.6
CC.
12 ........ Yes .......... No ............ 01 MED ......... DEGENERATIVE NERVOUS SYSTEM 1.0105 4.4 5.6
DISORDERS.
13 ........ Yes .......... No ............ 01 MED ......... MULTIPLE SCLEROSIS & DCEREBELLAR 0.9266 4.0 4.9
wwhite on PROD1PC61 with PROPOSALS2
ATAXIA.
14 ........ Yes .......... No ............ 01 MED ......... INTRACRANIAL HEMORRHAGE OR 1.2480 4.3 5.5
DCEREBRAL INFARCTION.
15 ........ Yes .......... No ............ 01 MED ......... NONSPECIFIC CVA & PRECEREBRAL 0.9170 3.1 4.0
OCCLUSION W/O INFARCT.
16 ........ Yes .......... No ............ 01 MED ......... NONSPECIFIC CEREBROVASCULAR 1.3632 5.0 6.4
DISORDERS W CC.
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00278 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24273
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
17 ........ Yes .......... No ............ 01 MED ......... NONSPECIFIC CEREBROVASCULAR 0.6692 2.4 3.0
ISORDERS W/O CC.
18 ........ Yes .......... No ............ 01 MED ......... CRANIAL & PERIPHERAL NERVE DIS- 1.0501 4.1 5.2
ORDERS W CC.
19 ........ Yes .......... No ............ 01 MED ......... CRANIAL & PERIPHERAL NERVE DIS- 0.7128 2.7 3.4
ORDERS W/O CC.
20 ........ Yes .......... No ............ 01 MED ......... NERVOUS SYSTEM INFECTION EXCEPT 2.7596 8.0 10.3
VIRAL DMENINGITIS.
21 ........ No ............ No ............ 01 MED ......... VIRAL MENINGITIS ..................................... 1.4536 4.7 6.2
22 ........ No ............ No ............ 01 MED ......... HYPERTENSIVE ENCEPHALOPATHY ...... 1.2386 3.9 5.0
23 ........ No ............ No ............ 01 MED ......... NONTRAUMATIC STUPOR & COMA ......... 0.8423 3.0 3.9
24 ........ Yes .......... No ............ 01 MED ......... SEIZURE & HEADACHE AGE >17 W CC .. 1.0388 3.5 4.7
25 ........ Yes .......... No ............ 01 MED ......... SEIZURE & HEADACHE AGE >17 W/O CC 0.6436 2.5 3.1
26 ........ No ............ No ............ 01 MED ......... SEIZURE & HEADACHE AGE 0–17 ........... 1.1844 2.6 3.8
27 ........ No ............ No ............ 01 MED ......... TRAUMATIC STUPOR & COMA, COMA >1 1.4281 3.1 4.8
HR.
28 ........ Yes .......... No ............ 01 MED ......... TRAUMATIC STUPOR & COMA, COMA <1 1.4037 4.2 5.7
HR AGE >17 W CC.
29 ........ Yes .......... No ............ 01 MED ......... TRAUMATIC STUPOR & COMA, COMA <1 0.7658 2.6 3.2
HR AGE >17 W/O CC.
30 ........ No ............ No ............ 01 MED* ....... TRAUMATIC STUPOR & COMA, COMA <1 0.7658 * *
HR AGE 0–17.
31 ........ No ............ No ............ 01 MED ......... CONCUSSION AGE >17 W CC .................. 0.9511 3.0 3.9
32 ........ No ............ No ............ 01 MED ......... CONCUSSION AGE >17 W/O CC .............. 0.5859 1.8 2.3
33 ........ No ............ No ............ 01 MED* ....... CONCUSSION AGE 0–17 ........................... 0.5859 * *
34 ........ Yes .......... No ............ 01 MED ......... OTHER DISORDERS OF NERVOUS SYS- 1.0347 3.6 4.8
TEM W CC.
35 ........ Yes .......... No ............ 01 MED ......... OTHER DISORDERS OF NERVOUS SYS- 0.6453 2.5 3.1
TEM W/O CC.
36 ........ No ............ No ............ 02 SURG ...... RETINAL PROCEDURES ............................ 0.7936 1.3 1.7
37 ........ No ............ No ............ 02 SURG ...... ORBITAL PROCEDURES ............................ 1.2193 2.7 4.1
38 ........ No ............ No ............ 02 SURG ...... PRIMARY IRIS PROCEDURES .................. 0.5783 2.2 2.8
39 ........ No ............ No ............ 02 SURG ...... LENS PROCEDURES WITH OR WITHOUT 0.7098 1.5 2.0
VITRECTOMY.
40 ........ No ............ No ............ 02 SURG ...... EXTRAOCULAR PROCEDURES EXCEPT 1.1061 3.0 4.1
ORBIT AGE >17.
41 ........ No ............ No ............ 02 SURG* ..... EXTRAOCULAR PROCEDURES EXCEPT 1.1061 * *
ORBIT AGE 0–17.
42 ........ No ............ No ............ 02 SURG ...... INTRAOCULAR PROCEDURES EXCEPT 0.9264 2.1 3.0
RETINA, IRIS & LENS.
43 ........ No ............ No ............ 02 MED ......... HYPHEMA .................................................... 0.5799 2.4 3.0
44 ........ No ............ No ............ 02 MED ......... ACUTE MAJOR EYE INFECTIONS ............ 0.8191 3.8 4.8
45 ........ No ............ No ............ 02 MED ......... NEUROLOGICAL EYE DISORDERS .......... 0.6809 2.5 3.0
46 ........ No ............ No ............ 02 MED ......... OTHER DISORDERS OF THE EYE AGE 0.8135 3.2 4.2
>17 W CC.
47 ........ No ............ No ............ 02 MED ......... OTHER DISORDERS OF THE EYE AGE 0.5728 2.4 3.0
>17 W/O CC.
48 ........ No ............ No ............ 02 MED* ....... OTHER DISORDERS OF THE EYE AGE 0.5728 * *
0–17.
49 ........ No ............ No ............ 03 SURG ...... MAJOR HEAD & NECK PROCEDURES .... 1.7653 3.2 4.5
50 ........ No ............ No ............ 03 SURG ...... SIALOADENECTOMY .................................. 0.8292 1.5 1.9
51 ........ No ............ No ............ 03 SURG ...... SALIVARY GLAND PROCEDURES EX- 0.8841 1.9 2.7
CEPT SIALOADENECTOMY.
52 ........ No ............ No ............ 03 SURG ...... CLEFT LIP & PALATE REPAIR .................. 0.7608 1.4 1.7
53 ........ No ............ No ............ 03 SURG ...... SINUS & MASTOID PROCEDURES AGE 1.2984 2.5 4.0
>17.
54 ........ No ............ No ............ 03 SURG* ..... SINUS & MASTOID PROCEDURES AGE 1.2984 * *
0–17.
55 ........ No ............ No ............ 03 SURG ...... MISCELLANEOUS EAR, NOSE, MOUTH & 0.9555 1.9 2.9
THROAT PROCEDURES.
wwhite on PROD1PC61 with PROPOSALS2
56 ........ No ............ No ............ 03 SURG ...... RHINOPLASTY ............................................ 0.9535 1.9 2.7
57 ........ No ............ No ............ 03 SURG ...... T&A PROC, EXCEPT TONSILLECTOMY 1.0220 2.1 3.2
&/OR ADENOIDECTOMY ONLY, AGE
>17.
58 ........ No ............ No ............ 03 SURG* ..... T&A PROC, EXCEPT TONSILLECTOMY 1.0220 * *
&/OR ADENOIDECTOMY ONLY, AGE
0–17.
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24274 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
59 ........ No ............ No ............ 03 SURG ...... TONSILLECTOMY &/OR 0.7380 1.8 2.4
ADENOIDECTOMY ONLY, AGE >17.
60 ........ No ............ No ............ 03 SURG* ..... TONSILLECTOMY &/OR 0.7380 1.4 1.7
ADENOIDECTOMY ONLY, AGE 0–17.
61 ........ No ............ No ............ 03 SURG ...... MYRINGOTOMY W TUBE INSERTION 1.5534 3.7 6.1
AGE >17.
62 ........ No ............ No ............ 03 SURG* ..... MYRINGOTOMY W TUBE INSERTION 1.5534 1.3 1.5
AGE 0–17.
63 ........ No ............ No ............ 03 SURG ...... OTHER EAR, NOSE, MOUTH & THROAT 1.4153 3.0 4.5
O.R. PROCEDURES.
64 ........ No ............ No ............ 03 MED ......... EAR, NOSE, MOUTH & THROAT MALIG- 1.2875 4.2 6.3
NANCY.
65 ........ No ............ No ............ 03 MED ......... DYSEQUILIBRIUM ....................................... 0.5799 2.3 2.8
66 ........ No ............ No ............ 03 MED ......... EPISTAXIS ................................................... 0.6790 2.4 3.1
67 ........ No ............ No ............ 03 MED ......... EPIGLOTTITIS ............................................. 0.9830 2.8 3.7
68 ........ No ............ No ............ 03 MED ......... OTITIS MEDIA & URI AGE >17 W CC ... 0.7572 3.1 3.8
69 ........ No ............ No ............ 03 MED ......... OTITIS MEDIA & URI AGE >17 W/O CC 0.5706 2.5 2.9
70 ........ No ............ No ............ 03 MED ......... OTITIS MEDIA & URI AGE 0–17 ................ 0.4794 2.0 2.3
71 ........ No ............ No ............ 03 MED ......... LARYNGOTRACHEITIS ............................... 0.9064 3.4 4.4
72 ........ No ............ No ............ 03 MED ......... NASAL TRAUMA & DEFORMITY ............... 0.7502 2.6 3.3
73 ........ Yes .......... No ............ 03 MED ......... OTHER EAR, NOSE, MOUTH & THROAT 0.9140 3.3 4.3
DIAGNOSES AGE >17.
74 ........ No ............ No ............ 03 MED* ....... OTHER EAR, NOSE, MOUTH & THROAT 0.9140 3.3 3.3
DIAGNOSES AGE 0–17.
75 ........ Yes .......... No ............ 04 SURG ...... MAJOR CHEST PROCEDURES ................. 3.0790 7.4 9.7
76 ........ Yes .......... No ............ 04 SURG ...... OTHER RESP SYSTEM O.R. PROCE- 2.7410 8.2 10.7
DURES W CC.
77 ........ Yes .......... No ............ 04 SURG ...... OTHER RESP SYSTEM O.R. PROCE- 1.1515 3.3 4.5
DURES W/O CC.
78 ........ Yes .......... No ............ 04 MED ......... PULMONARY EMBOLISM ........................... 1.3229 5.3 6.2
79 ........ Yes .......... No ............ 04 MED ......... RESPIRATORY INFECTIONS & INFLAM- 1.7331 6.7 8.3
MATIONS AGE >17 W CC.
80 ........ Yes .......... No ............ 04 MED ......... RESPIRATORY INFECTIONS & INFLAM- 1.0190 4.3 5.3
MATIONS AGE >17 W/O CC.
81 ........ No ............ No ............ 04 MED* ....... RESPIRATORY INFECTIONS & INFLAM- 1.7331 5.2 6.2
MATIONS AGE 0–7.
82 ........ Yes .......... No ............ 04 MED ......... RESPIRATORY NEOPLASMS .................... 1.4335 5.1 6.8
83 ........ Yes .......... No ............ 04 MED ......... MAJOR CHEST TRAUMA W CC ................ 1.1185 4.2 5.3
84 ........ Yes .......... No ............ 04 MED ......... MAJOR CHEST TRAUMA W/O CC ............ 0.6523 2.6 3.2
85 ........ Yes .......... No ............ 04 MED ......... PLEURAL EFFUSION W CC ....................... 1.2935 4.7 6.2
86 ........ Yes .......... No ............ 04 MED ......... PLEURAL EFFUSION W/O CC ................... 0.7154 2.7 3.5
87 ........ No ............ No ............ 04 MED ......... PULMONARY EDEMA & ESPIRATORY 1.5310 4.9 6.4
FAILURE.
88 ........ No ............ No ............ 04 MED ......... CHRONIC OBSTRUCTIVE PULMONARY 0.9557 4.0 4.9
DISEASE.
89 ........ Yes .......... No ............ 04 MED ......... SIMPLE PNEUMONIA & PLEURISY AGE 1.1291 4.6 5.6
>17 W CC.
90 ........ Yes .......... No ............ 04 MED ......... SIMPLE PNEUMONIA & PLEURISY AGE 0.7043 3.2 3.7
>17 W/O CC.
91 ........ No ............ No ............ 04 MED ......... SIMPLE PNEUMONIA & PLEURISY AGE 0.7054 2.5 3.4
0–17.
92 ........ Yes .......... No ............ 04 MED ......... INTERSTITIAL LUNG DISEASE W CC ....... 1.2410 4.8 6.0
93 ........ Yes .......... No ............ 04 MED ......... INTERSTITIAL LUNG DISEASE W/O CC ... 0.7539 3.0 3.8
94 ........ No ............ No ............ 04 MED ......... PNEUMOTHORAX W CC ............................ 1.2852 4.5 5.9
95 ........ No ............ No ............ 04 MED ......... PNEUMOTHORAX W/O CC ........................ 0.7018 2.7 3.4
96 ........ No ............ No ............ 04 MED ......... BRONCHITIS & ASTHMA AGE >17 W CC 0.8093 3.5 4.3
97 ........ No ............ No ............ 04 MED ......... BRONCHITIS & ASTHMA AGE >17 W/O 0.6199 2.8 3.4
CC.
98 ........ No ............ No ............ 04 MED ......... BRONCHITIS & ASTHMA AGE 0–17 .......... 0.6892 2.8 3.1
99 ........ No ............ No ............ 04 MED ......... RESPIRATORY SIGNS & SYMPTOMS W 0.7101 2.4 3.1
wwhite on PROD1PC61 with PROPOSALS2
CC.
100 ...... No ............ No ............ 04 MED ......... RESPIRATORY SIGNS & SYMPTOMS W/ 0.5098 1.7 2.1
O CC.
101 ...... Yes .......... No ............ 04 MED ......... OTHER RESPIRATORY DSYSTEM DIAG- 0.9106 3.2 4.2
NOSES W CC.
102 ...... Yes .......... No ............ 04 MED ......... OTHER RESPIRATORY SYSTEM DIAG- 0.5625 2.0 2.5
NOSES W/O CC.
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00280 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24275
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
103 ...... No ............ No ............ PRE SURG ...... HEART TRANSPLANT OR IMPLANT OF 19.5988 22.2 35.1
HEART ASSIST SYSTEM.
104 ...... Yes .......... No ............ 05 SURG ...... CARDIAC VALVE & OTH MAJOR 7.4447 12.8 15.1
CARDIOTHORACIC PROC W CARD
CATH.
105 ...... Yes .......... No ............ 05 SURG ...... CARDIAC VALVE & OTH MAJOR 5.6619 8.4 10.2
CARDIOTHORACIC PROC W/O CARD
CATH.
106 ...... No ............ No ............ 05 SURG ...... CORONARY BYPASS W PTCA .................. 5.9701 9.3 10.9
107 ...... Yes .......... No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
108 ...... Yes .......... No ............ 05 SURG ...... OTHER CARDIOTHORACIC PROCE- 5.4207 8.8 10.9
DURES.
109 ...... Yes .......... No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
110 ...... No ............ No ............ 05 SURG ...... MAJOR CARDIOVASCULAR PROCE- 3.6419 5.4 8.1
DURES W CC.
111 ...... No ............ No ............ 05 SURG ...... MAJOR CARDIOVASCULAR PROCE- 2.2318 2.3 3.1
DURES W/O CC.
112 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
113 ...... Yes .......... No ............ 05 SURG ...... AMPUTATION FOR CIRC SYSTEM DIS- 3.3828 10.8 13.7
ORDERS EXCEPT UPPER LIMB & TOE.
114 ...... Yes .......... No ............ 05 SURG ...... UPPER LIMB & TOE AMPUTATION FOR 1.8874 6.6 8.7
CIRC SYSTEM DISORDERS.
115 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
116 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
117 ...... No ............ No ............ 05 SURG ...... CARDIAC PACEMAKER REVISION EX- 1.2528 2.6 4.3
CEPT DEVICE REPLACEMENT.
118 ...... No ............ No ............ 05 SURG ...... CARDIAC PACEMAKER DEVICE RE- 1.3882 2.0 3.0
PLACEMENT.
119 ...... No ............ No ............ 05 SURG ...... VEIN LIGATION & STRIPPING ................... 1.4787 3.3 5.4
120 ...... Yes .......... No ............ 05 SURG ...... OTHER CIRCULATORY SYSTEM O.R. 2.3109 6.0 9.2
PROCEDURES.
121 ...... Yes .......... No ............ 05 MED ......... CIRCULATORY DISORDERS W AMI & 1.6883 5.2 6.5
MAJOR COMP, DISCHARGED ALIVE.
122 ...... No ............ No ............ 05 MED ......... CIRCULATORY DISORDERS W AMI W/O 0.9802 2.7 3.4
MAJOR COMP, DISCHARGED ALIVE.
123 ...... No ............ No ............ 05 MED ......... CIRCULATORY DISORDERS W AMI, EX- 1.6053 2.9 4.7
PIRED.
124 ...... No ............ No ............ 05 MED ......... CIRCULATORY DISORDERS EXCEPT 1.1670 3.3 4.4
AMI, W CARD CATH & COMPLEX DIAG.
125 ...... No ............ No ............ 05 MED ......... CIRCULATORY DISORDERS EXCEPT 0.7862 2.1 2.7
AMI, W CARD CATH W/O COMPLEX
DIAG.
126 ...... Yes .......... No ............ 05 MED ......... ACUTE & SUBACUTE ENDOCARDITIS ..... 2.5526 9.0 11.3
127 ...... Yes .......... No ............ 05 MED ......... HEART FAILURE & SHOCK ....................... 1.0635 4.1 5.1
128 ...... No ............ No ............ 05 MED ......... DEEP VEIN THROMBOPHLEBITIS ............ 0.8850 4.4 5.2
129 ...... No ............ No ............ 05 MED ......... CARDIAC ARREST, UNEXPLAINED .......... 1.1301 1.6 2.5
130 ...... Yes .......... No ............ 05 MED ......... PERIPHERAL VASCULAR DISORDERS W 1.0637 4.3 5.5
CC.
131 ...... Yes .......... No ............ 05 MED ......... PERIPHERAL VASCULAR DISORDERS 0.6813 3.1 3.7
W/O CC.
132 ...... No ............ No ............ 05 MED ......... ATHEROSCLEROSIS W CC ....................... 0.6482 2.2 2.8
133 ...... No ............ No ............ 05 MED ......... ATHEROSCLEROSIS W/O CC ................... 0.5237 1.8 2.1
134 ...... No ............ No ............ 05 MED ......... HYPERTENSION ......................................... 0.6464 2.5 3.1
135 ...... No ............ No ............ 05 MED ......... CARDIAC CONGENITAL & VALVULAR 0.9122 3.3 4.3
DISORDERS AGE >17 W CC.
136 ...... No ............ No ............ 05 MED ......... CARDIAC CONGENITAL & VALVULAR 0.5684 2.1 2.7
DISORDERS AGE >17 W/O CC.
137 ...... No ............ No ............ 05 MED* ....... CARDIAC CONGENITAL & VALVULAR 0.9122 * *
DISORDERS AGE 0–17.
138 ...... No ............ No ............ 05 MED ......... CARDIAC ARRHYTHMIA & CONDUCTION 0.8504 3.0 3.9
wwhite on PROD1PC61 with PROPOSALS2
DISORDERS W CC.
139 ...... No ............ No ............ 05 MED ......... CARDIAC ARRHYTHMIA & CONDUCTION 0.5221 2.0 2.4
DISORDERS W/O CC.
140 ...... No ............ No ............ 05 MED ......... ANGINA PECTORIS .................................... 0.5846 1.9 2.4
141 ...... No ............ No ............ 05 MED ......... SYNCOPE & COLLAPSE W CC ................. 0.7009 2.7 3.4
142 ...... No ............ No ............ 05 MED ......... SYNCOPE & COLLAPSE W/O CC ............. 0.5312 2.1 2.5
143 ...... No ............ No ............ 05 MED ......... CHEST PAIN ................................................ 0.5137 1.7 2.1
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00281 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24276 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
144 ...... Yes .......... No ............ 05 MED ......... OTHER CIRCULATORY SYSTEM DIAG- 1.3781 4.2 5.9
NOSES W CC.
145 ...... Yes .......... No ............ 05 MED ......... OTHER CIRCULATORY SYSTEM DIAG- 0.5993 2.0 2.5
NOSES W/O CC.
146 ...... Yes .......... No ............ 06 SURG ...... RECTAL RESECTION W CC ...................... 2.8001 8.4 9.9
147 ...... Yes .......... No ............ 06 SURG ...... RECTAL RESECTION W/O CC .................. 1.5698 4.9 5.6
148 ...... Yes .......... No ............ 06 SURG ...... MAJOR SMALL & LARGE BOWEL PRO- 3.5831 9.9 12.1
CEDURES W CC.
149 ...... Yes .......... No ............ 06 SURG ...... MAJOR SMALL & LARGE BOWEL PRO- 1.5441 5.1 5.7
CEDURES W/O CC.
150 ...... Yes .......... No ............ 06 SURG ...... PERITONEAL ADHESIOLYSIS W CC ........ 2.9172 8.7 10.8
151 ...... Yes .......... No ............ 06 SURG ...... PERITONEAL ADHESIOLYSIS W/O CC .... 1.3530 4.0 5.0
152 ...... No ............ No ............ 06 SURG ...... MINOR SMALL & LARGE BOWEL PRO- 2.0074 6.5 7.9
CEDURES W CC.
153 ...... No ............ No ............ 06 SURG ...... MINOR SMALL & LARGE BOWEL PRO- 1.1984 4.4 4.9
CEDURES W/O CC.
154 ...... Yes .......... No ............ 06 SURG ...... STOMACH, ESOPHAGEAL & DUODENAL 4.2032 9.7 13.2
PROCEDURES AGE >17 W CC.
155 ...... Yes .......... No ............ 06 SURG ...... STOMACH, ESOPHAGEAL & DUODENAL 1.3089 3.0 4.0
PROCEDURES AGE >17 W/O CC.
156 ...... No ............ No ............ 06 SURG ...... STOMACH, ESOPHAGEAL & DUODENAL 1.3089 8.9 9.3
PROCEDURES AGE 0–17.
157 ...... Yes .......... No ............ 06 SURG ...... ANAL & STOMAL PROCEDURES W CC ... 1.4076 4.2 5.8
158 ...... Yes .......... No ............ 06 SURG ...... ANAL & STOMAL PROCEDURES W/O CC 0.7114 2.1 2.6
159 ...... No ............ No ............ 06 SURG ...... HERNIA PROCEDURES EXCEPT INGUI- 1.4745 3.7 5.1
NAL & FEMORAL AGE >17 W CC.
160 ...... No ............ No ............ 06 SURG ...... HERNIA PROCEDURES EXCEPT INGUI- 0.8749 2.2 2.7
NAL & FEMORAL AGE >17 W/O CC.
161 ...... No ............ No ............ 06 SURG ...... INGUINAL & FEMORAL HERNIA PROCE- 1.2461 3.2 4.5
DURES AGE >17 W CC.
162 ...... No ............ No ............ 06 SURG ...... INGUINAL & FEMORAL HERNIA PROCE- 0.6982 1.7 2.1
DURES AGE >17 W/O CC.
163 ...... No ............ No ............ 06 SURG* ..... HERNIA PROCEDURES AGE 0–17 ........... 0.6982 2.3 2.8
164 ...... No ............ No ............ 06 SURG ...... APPENDECTOMY W COMPLICATED 2.2048 6.4 7.7
PRINCIPAL DIAG W CC.
165 ...... No ............ No ............ 06 SURG ...... APPENDECTOMY W COMPLICATED 1.1907 3.4 4.0
PRINCIPAL DIAG W/O CC.
166 ...... No ............ No ............ 06 SURG ...... APPENDECTOMY W/O COMPLICATED 1.3900 3.2 4.3
PRINCIPAL DIAG W CC.
167 ...... No ............ No ............ 06 SURG ...... APPENDECTOMY W/O COMPLICATED 0.8536 1.8 2.1
PRINCIPAL DIAG W/O CC.
168 ...... No ............ No ............ 03 SURG ...... MOUTH PROCEDURES W CC ................... 1.3278 3.4 4.9
169 ...... No ............ No ............ 03 SURG ...... MOUTH PROCEDURES W/O CC ............... 0.7643 1.9 2.4
170 ...... Yes .......... No ............ 06 SURG ...... OTHER DIGESTIVE SYSTEM O.R. PRO- 2.9351 7.8 10.9
CEDURES W CC.
171 ...... Yes .......... No ............ 06 SURG ...... OTHER DIGESTIVE SYSTEM O.R. PRO- 1.2434 3.1 4.2
CEDURES W/O CC.
172 ...... Yes .......... No ............ 06 MED ......... DIGESTIVE MALIGNANCY W CC .............. 1.4585 5.1 6.9
173 ...... Yes .......... No ............ 06 MED ......... DIGESTIVE MALIGNANCY W/O CC ........... 0.7562 2.7 3.5
174 ...... No ............ No ............ 06 MED ......... G.I. HEMORRHAGE W CC ......................... 1.1360 3.8 4.7
175 ...... No ............ No ............ 06 MED ......... G.I. HEMORRHAGE W/O CC ...................... 0.6295 2.4 2.9
176 ...... Yes .......... No ............ 06 MED ......... COMPLICATED PEPTIC ULCER ................ 1.1757 4.0 5.1
177 ...... No ............ No ............ 06 MED ......... UNCOMPLICATED PEPTIC ULCER W CC 0.9595 3.6 4.4
178 ...... No ............ No ............ 06 MED ......... UNCOMPLICATED PEPTIC ULCER W/O 0.6833 2.6 3.1
CC.
179 ...... No ............ No ............ 06 MED ......... INFLAMMATORY BOWEL DISEASE .......... 1.1460 4.5 5.8
180 ...... Yes .......... No ............ 06 MED ......... G.I. OBSTRUCTION W CC ......................... 1.0702 4.1 5.3
181 ...... Yes .......... No ............ 06 MED ......... G.I. OBSTRUCTION W/O CC ...................... 0.6400 2.8 3.3
182 ...... No ............ No ............ 06 MED ......... ESOPHAGITIS, GASTROENT & MISC DI- 0.9046 3.4 4.5
GEST DISORDERS AGE >17 W CC.
183 ...... No ............ No ............ 06 MED ......... ESOPHAGITIS, GASTROENT & MISC DI- 0.6078 2.4 2.9
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24277
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
187 ...... No ............ No ............ 03 MED ......... DENTAL EXTRACTIONS & RESTORA- 0.8880 3.1 4.2
TIONS.
188 ...... Yes .......... No ............ 06 MED ......... OTHER DIGESTIVE SYSTEM DIAG- 1.1808 4.1 5.5
NOSES AGE >17 W CC.
189 ...... Yes .......... No ............ 06 MED ......... OTHER DIGESTIVE SYSTEM DIAG- 0.6314 2.4 3.1
NOSES AGE >17 W/O CC.
190 ...... No ............ No ............ 06 MED ......... OTHER DIGESTIVE SYSTEM DIAG- 1.0119 3.5 4.9
NOSES AGE 0–17.
191 ...... Yes .......... No ............ 07 SURG ...... PANCREAS, LIVER & SHUNT PROCE- 3.9647 8.8 12.5
DURES W CC.
192 ...... Yes .......... No ............ 07 SURG ...... PANCREAS, LIVER & SHUNT PROCE- 1.7088 4.2 5.5
DURES W/O CC.
193 ...... No ............ No ............ 07 SURG ...... BILIARY TRACT PROC EXCEPT ONLY 3.4693 10.1 12.6
CHOLECYST W OR W/O C.D.E. W CC.
194 ...... No ............ No ............ 07 SURG ...... BILIARY TRACT PROC EXCEPT ONLY 1.6583 5.4 6.4
CHOLECYST W OR W/O C.D.E. W/O
CC.
195 ...... No ............ No ............ 07 SURG ...... CHOLECYSTECTOMY W C.D.E. W CC ..... 3.0330 8.8 10.6
196 ...... No ............ No ............ 07 SURG ...... CHOLECYSTECTOMY W C.D.E. W/O CC 1.5984 4.5 5.3
197 ...... Yes .......... No ............ 07 SURG ...... CHOLECYSTECTOMY EXCEPT BY 2.6196 7.4 9.1
LAPAROSCOPE W/O C.D.E. W CC.
198 ...... Yes .......... No ............ 07 SURG ...... CHOLECYSTECTOMY EXCEPT BY 1.2463 3.7 4.3
LAPAROSCOPE W/O C.D.E. W/O CC.
199 ...... No ............ No ............ 07 SURG ...... HEPATOBILIARY DIAGNOSTIC PROCE- 2.3139 6.4 9.0
DURE FOR MALIGNANCY.
200 ...... No ............ No ............ 07 SURG ...... HEPATOBILIARY DIAGNOSTIC PROCE- 3.0580 6.5 10.4
DURE FOR NON-MALIGNANCY.
201 ...... No ............ No ............ 07 SURG ...... OTHER HEPATOBILIARY OR PANCREAS 3.6519 10.0 13.6
O.R. PROCEDURES.
202 ...... No ............ No ............ 07 MED ......... CIRRHOSIS & ALCOHOLIC HEPATITIS .... 1.4205 4.6 6.2
203 ...... No ............ No ............ 07 MED ......... MALIGNANCY OF HEPATOBILIARY SYS- 1.3745 4.8 6.5
TEM OR PANCREAS.
204 ...... No ............ No ............ 07 MED ......... DISORDERS OF PANCREAS EXCEPT 1.1749 4.1 5.4
MALIGNANCY.
205 ...... Yes .......... No ............ 07 MED ......... DISORDERS OF LIVER EXCEPT 1.2942 4.4 5.9
MALIG,CIRR,ALC HEPA W CC.
206 ...... Yes .......... No ............ 07 MED ......... DISORDERS OF LIVER EXCEPT 0.7720 3.0 3.8
MALIG,CIRR,ALC HEPA W/O CC.
207 ...... No ............ No ............ 07 MED ......... DISORDERS OF THE BILIARY TRACT W 1.2145 4.1 5.3
CC.
208 ...... No ............ No ............ 07 MED ......... DISORDERS OF THE BILIARY TRACT W/ 0.6986 2.4 3.0
O CC.
209 ...... No ............ No ............ 08 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
210 ...... Yes .......... Yes .......... 08 SURG ...... HIP & FEMUR PROCEDURES EXCEPT 2.0150 6.0 6.8
MAJOR JOINT AGE >17 W CC.
211 ...... Yes .......... Yes .......... 08 SURG ...... HIP & FEMUR PROCEDURES EXCEPT 1.3653 4.3 4.6
MAJOR JOINT AGE >17 W/O CC.
212 ...... No ............ No ............ 08 SURG ...... HIP & FEMUR PROCEDURES EXCEPT 0.9730 2.2 2.5
MAJOR JOINT AGE 0–17.
213 ...... Yes .......... No ............ 08 SURG ...... AMPUTATION FOR MUSCULOSKELETAL 2.2463 7.1 9.5
SYSTEM & CONN TISSUE DISORDERS.
214 ...... No ............ No ............ 08 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
215 ...... No ............ No ............ 08 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
216 ...... Yes .......... No ............ 08 SURG ...... BIOPSIES OF MUSCULOSKELETAL SYS- 1.7169 3.1 5.4
TEM & CONNECTIVE TISSUE.
217 ...... Yes .......... No ............ 08 SURG ...... WND DEBRID & SKN GRFT EXCEPT 3.1361 9.0 12.8
HAND,FOR MUSCSKELET & CONN
TISS DIS.
218 ...... Yes .......... No ............ 08 SURG ...... LOWER EXTREM & HUMER PROC EX- 1.7105 4.4 5.5
CEPT HIP,FOOT,FEMUR AGE >17 W
CC.
wwhite on PROD1PC61 with PROPOSALS2
219 ...... Yes .......... No ............ 08 SURG ...... LOWER EXTREM & HUMER PROC EX- 1.1071 2.7 3.2
CEPT HIP,FOOT,FEMUR AGE >17 W/O
CC.
220 ...... No ............ No ............ 08 SURG* ..... LOWER EXTREM & HUMER PROC EX- 1.1071 2.6 4.0
CEPT HIP,FOOT,FEMUR AGE 0–17.
221 ...... No ............ No ............ 08 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
222 ...... No ............ No ............ 08 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
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24278 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
223 ...... No ............ No ............ 08 SURG ...... MAJOR SHOULDER/ELBOW PROC, OR 1.1303 2.4 3.3
OTHER UPPER EXTREMITY PROC W
CC.
224 ...... No ............ No ............ 08 SURG ...... SHOULDER,ELBOW OR FOREARM 0.8067 1.6 1.9
PROC,EXC MAJOR JOINT PROC, W/O
CC.
225 ...... Yes .......... No ............ 08 SURG ...... FOOT PROCEDURES ................................. 1.3235 3.8 5.4
226 ...... Yes .......... No ............ 08 SURG ...... SOFT TISSUE PROCEDURES W CC ........ 1.6783 4.6 6.5
227 ...... Yes .......... No ............ 08 SURG ...... SOFT TISSUE PROCEDURES W/O CC .... 0.8719 2.1 2.6
228 ...... No ............ No ............ 08 SURG ...... MAJOR THUMB OR JOINT PROC,OR 1.1877 2.9 4.2
OTH HAND OR WRIST PROC W CC.
229 ...... No ............ No ............ 08 SURG ...... HAND OR WRIST PROC, EXCEPT 0.7617 2.0 2.5
MAJOR JOINT PROC, W/O CC.
230 ...... No ............ No ............ 08 SURG ...... LOCAL EXCISION & REMOVAL OF INT 1.4347 3.6 5.4
FIX DEVICES OF HIP & FEMUR.
231 ...... No ............ No ............ 08 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
232 ...... No ............ No ............ 08 SURG ...... ARTHROSCOPY .......................................... 0.9804 1.9 2.7
233 ...... Yes .......... Yes .......... 08 SURG ...... OTHER MUSCULOSKELET SYS & CONN 1.8831 4.4 6.4
TISS O.R. PROC W CC.
234 ...... Yes .......... Yes .......... 08 SURG ...... OTHER MUSCULOSKELET SYS & CONN 1.1441 1.9 2.7
TISS O.R. PROC W/O CC.
235 ...... Yes .......... No ............ 08 MED ......... FRACTURES OF FEMUR ........................... 0.9366 3.8 4.9
236 ...... Yes .......... No ............ 08 MED ......... FRACTURES OF HIP & PELVIS ................. 0.8791 3.8 4.5
237 ...... No ............ No ............ 08 MED ......... SPRAINS, STRAINS, & DISLOCATIONS 0.7345 3.0 3.8
OF HIP, PELVIS & THIGH.
238 ...... Yes .......... No ............ 08 MED ......... OSTEOMYELITIS ......................................... 1.5466 6.5 8.4
239 ...... Yes .......... No ............ 08 MED ......... PATHOLOGICAL FRACTURES & MUS- 1.2001 4.9 6.2
CULOSKELETAL & CONN TISS MALIG-
NANCY.
240 ...... Yes .......... No ............ 08 MED ......... CONNECTIVE TISSUE DISORDERS W 1.4523 4.9 6.5
CC.
241 ...... Yes .......... No ............ 08 MED ......... CONNECTIVE TISSUE DISORDERS W/O 0.7172 3.0 3.6
CC.
242 ...... No ............ No ............ 08 MED ......... SEPTIC ARTHRITIS .................................... 1.2350 5.1 6.5
243 ...... No ............ No ............ 08 MED ......... MEDICAL BACK PROBLEMS ..................... 0.8680 3.6 4.5
244 ...... Yes .......... No ............ 08 MED ......... BONE DISEASES & SPECIFIC 0.8186 3.6 4.5
ARTHROPATHIES W CC.
245 ...... Yes .......... No ............ 08 MED ......... BONE DISEASES & SPECIFIC 0.5581 2.5 3.1
ARTHROPATHIES W/O CC.
246 ...... No ............ No ............ 08 MED ......... NON-SPECIFIC ARTHROPATHIES ............ 0.6742 2.8 3.6
247 ...... No ............ No ............ 08 MED ......... SIGNS & SYMPTOMS OF MUSCULO- 0.6852 2.6 3.3
SKELETAL SYSTEM & CONN TISSUE.
248 ...... No ............ No ............ 08 MED ......... TENDONITIS, MYOSITIS & BURSITIS ....... 0.9368 3.8 4.8
249 ...... No ............ No ............ 08 MED ......... AFTERCARE, MUSCULOSKELETAL SYS- 0.8157 2.8 4.0
TEM & CONNECTIVE TISSUE.
250 ...... Yes .......... No ............ 08 MED ......... FX, SPRN, STRN & DISL OF FOREARM, 0.7774 3.2 3.9
HAND, FOOT AGE >17 W CC.
251 ...... Yes .......... No ............ 08 MED ......... FX, SPRN, STRN & DISL OF FOREARM, 0.5561 2.3 2.8
HAND, FOOT AGE >17 W/O CC.
252 ...... No ............ No ............ 08 MED* ....... FX, SPRN, STRN & DISL OF FOREARM, 0.5561 * *
HAND, FOOT AGE 0–17.
253 ...... Yes .......... No ............ 08 MED ......... FX, SPRN, STRN & DISL OF DUPARM, 0.9049 3.8 4.6
LOWLEG EX FOOT AGE >17 W CC.
254 ...... Yes .......... No ............ 08 MED ......... FX, SPRN, STRN & DISL OF UPARM, 0.5741 2.6 3.1
LOWLEG EX FOOT AGE >17 W/O CC.
255 ...... No ............ No ............ 08 MED* ....... FX, SPRN, STRN & DISL OF UPARM, 0.5741 * *
LOWLEG EX FOOT AGE 0–17.
256 ...... Yes .......... No ............ 08 MED ......... OTHER MUSCULOSKELETAL SYSTEM & 0.9598 3.9 5.1
CONNECTIVE TISSUE DIAGNOSES.
257 ...... No ............ No ............ 09 SURG ...... TOTAL MASTECTOMY FOR MALIG- 0.9016 2.0 2.6
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NANCY W CC.
258 ...... No ............ No ............ 09 SURG ...... TOTAL MASTECTOMY FOR MALIG- 0.7045 1.5 1.7
NANCY W/O CC.
259 ...... No ............ No ............ 09 SURG ...... SUBTOTAL MASTECTOMY FOR MALIG- 0.9445 1.8 2.8
NANCY W CC.
260 ...... No ............ No ............ 09 SURG ...... SUBTOTAL MASTECTOMY FOR MALIG- 0.6437 1.2 1.4
NANCY W/O CC.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24279
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
261 ...... No ............ No ............ 09 SURG ...... BREAST PROC FOR NON-MALIGNANCY 0.8875 1.6 2.2
EXCEPT BIOPSY & LOCAL EXCISION.
262 ...... No ............ No ............ 09 SURG ...... BREAST BIOPSY & LOCAL EXCISION 1.0346 3.2 4.6
FOR NON-MALIGNANCY.
263 ...... Yes .......... No ............ 09 SURG ...... SKIN GRAFT &/OR DEBRID FOR SKN 2.2702 8.3 11.1
ULCER OR CELLULITIS W CC.
264 ...... Yes .......... No ............ 09 SURG ...... SKIN GRAFT &/OR DEBRID FOR SKN 1.2644 4.9 6.4
ULCER OR CELLULITIS W/O CC.
265 ...... Yes .......... No ............ 09 SURG ...... SKIN GRAFT &/OR DEBRID EXCEPT FOR 1.6907 4.2 6.7
SKIN ULCER OR CELLULITIS W CC.
266 ...... Yes .......... No ............ 09 SURG ...... SKIN GRAFT &/OR DEBRID EXCEPT FOR 0.9200 2.2 3.0
SKIN ULCER OR CELLULITIS W/O CC.
267 ...... No ............ No ............ 09 SURG ...... PERIANAL & PILONIDAL PROCEDURES .. 0.9870 2.8 4.2
268 ...... No ............ No ............ 09 SURG ...... SKIN, SUBCUTANEOUS TISSUE & 1.2352 2.4 3.7
BREAST PLASTIC PROCEDURES.
269 ...... Yes .......... No ............ 09 SURG ...... OTHER SKIN, SUBCUT TISS & BREAST 1.8802 6.0 8.2
PROC W CC.
270 ...... Yes .......... No ............ 09 SURG ...... OTHER SKIN, SUBCUT TISS & BREAST 0.8949 2.7 3.6
PROC W/O CC.
271 ...... Yes .......... No ............ 09 MED ......... SKIN ULCERS ............................................. 1.2353 5.6 7.1
272 ...... Yes .......... No ............ 09 MED ......... MAJOR SKIN DISORDERS W CC .............. 1.1364 4.5 5.9
273 ...... Yes .......... No ............ 09 MED ......... MAJOR SKIN DISORDERS W/O CC .......... 0.6838 2.9 3.7
274 ...... No ............ No ............ 09 MED ......... MALIGNANT BREAST DISORDERS W CC 1.2180 4.5 6.2
275 ...... No ............ No ............ 09 MED ......... MALIGNANT BREAST DISORDERS W/O 0.6697 2.3 3.3
CC.
276 ...... No ............ No ............ 09 MED ......... NON-MALIGANT BREAST DISORDERS .... 0.8441 3.6 4.6
277 ...... Yes .......... No ............ 09 MED ......... CELLULITIS AGE >17 W CC ...................... 1.0015 4.5 5.5
278 ...... Yes .......... No ............ 09 MED ......... CELLULITIS AGE >17 W/O CC .................. 0.6817 3.4 4.0
279 ...... No ............ No ............ 09 MED* ....... CELLULITIS AGE 0–17 ............................... 0.6817 3.9 4.2
280 ...... Yes .......... No ............ 09 MED ......... TRAUMA TO THE SKIN, SUBCUT TISS & 0.8212 3.2 4.1
BREAST AGE >17 W CC.
281 ...... Yes .......... No ............ 09 MED ......... TRAUMA TO THE SKIN, SUBCUT TISS & 0.5678 2.3 2.8
BREAST AGE >17 W/O CC.
282 ...... No ............ No ............ 09 MED* ....... TRAUMA TO THE SKIN, SUBCUT TISS & 0.5678 * *
BREAST AGE 0–17.
283 ...... Yes .......... No ............ 09 MED ......... MINOR SKIN DISORDERS W CC .............. 0.8525 3.5 4.6
284 ...... Yes .......... No ............ 09 MED ......... MINOR SKIN DISORDERS W/O CC ........... 0.5295 2.3 2.9
285 ...... Yes .......... No ............ 10 SURG ...... AMPUTAT OF LOWER LIMB FOR ENDO- 2.3169 8.1 10.3
CRINE, NUTRIT, & METABOL DIS-
ORDERS.
286 ...... No ............ No ............ 10 SURG ...... ADRENAL & PITUITARY PROCEDURES .. 1.9369 3.8 5.2
287 ...... Yes .......... No ............ 10 SURG ...... SKIN GRAFTS & WOUND DEBRID FOR 2.0354 7.6 10.0
ENDOC, NUTRIT & METAB DIS-
ORDERS.
288 ...... No ............ No ............ 10 SURG ...... O.R. PROCEDURES FOR OBESITY .......... 1.7332 2.9 3.7
289 ...... No ............ No ............ 10 SURG ...... PARATHYROID PROCEDURES ................. 0.8548 1.6 2.4
290 ...... No ............ No ............ 10 SURG ...... THYROID PROCEDURES ........................... 0.8454 1.5 2.0
291 ...... No ............ No ............ 10 SURG ...... THYROGLOSSAL PROCEDURES .............. 0.5867 1.3 1.5
292 ...... Yes .......... No ............ 10 SURG ...... OTHER ENDOCRINE, NUTRIT & METAB 2.6043 7.3 10.2
O.R. PROC W CC.
293 ...... Yes .......... No ............ 10 SURG ...... OTHER ENDOCRINE, NUTRIT & METAB 1.3605 3.4 4.7
O.R. PROC W/O CC.
294 ...... Yes .......... No ............ 10 MED ......... DIABETES AGE >35 .................................... 0.8642 3.3 4.3
295 ...... No ............ No ............ 10 MED ......... DIABETES AGE 0–35 .................................. 0.9301 2.8 3.7
296 ...... Yes .......... No ............ 10 MED ......... NUTRITIONAL & MISC METABOLIC DIS- 0.9041 3.6 4.7
ORDERS AGE >17 W CC.
297 ...... Yes .......... No ............ 10 MED ......... NUTRITIONAL & MISC METABOLIC DIS- 0.5589 2.5 3.0
ORDERS AGE >17 W/O CC.
298 ...... No ............ No ............ 10 MED ......... NUTRITIONAL & MISC METABOLIC DIS- 0.7622 2.5 3.6
ORDERS AGE 0–17.
299 ...... No ............ No ............ 10 MED ......... INBORN ERRORS OF METABOLISM ........ 1.1353 3.8 5.1
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300 ...... Yes .......... No ............ 10 MED ......... ENDOCRINE DISORDERS W CC .............. 1.1666 4.6 5.9
301 ...... Yes .......... No ............ 10 MED ......... ENDOCRINE DISORDERS W/O CC ........... 0.6427 2.7 3.4
302 ...... No ............ No ............ 11 SURG ...... KIDNEY TRANSPLANT ............................... 5.5466 6.8 8.0
303 ...... No ............ No ............ 11 SURG ...... KIDNEY, URETER & MAJOR BLADDER 2.3084 5.7 7.3
PROCEDURES FOR NEOPLASM.
304 ...... Yes .......... No ............ 11 SURG ...... KIDNEY, URETER & MAJOR BLADDER 2.3631 6.0 8.5
PROC FOR NON-NEOPL W CC.
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24280 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
305 ...... Yes .......... No ............ 11 SURG ...... KIDNEY, URETER & MAJOR BLADDER 1.1498 2.5 3.1
PROC FOR NON-NEOPL W/O CC.
306 ...... No ............ No ............ 11 SURG ...... PROSTATECTOMY W CC .......................... 1.3307 3.6 5.6
307 ...... No ............ No ............ 11 SURG ...... PROSTATECTOMY W/O CC ...................... 0.6569 1.7 2.0
308 ...... No ............ No ............ 11 SURG ...... MINOR BLADDER PROCEDURES W CC .. 1.7066 3.9 6.2
309 ...... No ............ No ............ 11 SURG ...... MINOR BLADDER PROCEDURES W/O 0.9014 1.6 2.0
CC.
310 ...... No ............ No ............ 11 SURG ...... TRANSURETHRAL PROCEDURES W CC 1.1913 3.1 4.5
311 ...... No ............ No ............ 11 SURG ...... TRANSURETHRAL PROCEDURES W/O 0.6397 1.5 1.9
CC.
312 ...... No ............ No ............ 11 SURG ...... URETHRAL PROCEDURES, AGE >17 W 1.1947 3.3 4.9
CC.
313 ...... No ............ No ............ 11 SURG ...... URETHRAL PROCEDURES, AGE >17 W/ 0.7523 1.8 2.4
O CC.
314 ...... No ............ No ............ 11 SURG* ..... URETHRAL PROCEDURES, AGE 0–17 ..... 0.7523 29.4 89.0
315 ...... No ............ No ............ 11 SURG ...... OTHER KIDNEY & URINARY TRACT O.R. 1.9482 3.7 6.7
PROCEDURES.
316 ...... Yes .......... No ............ 11 MED ......... RENAL FAILURE ......................................... 1.3481 4.8 6.3
317 ...... No ............ No ............ 11 MED ......... ADMIT FOR RENAL DIALYSIS ................... 0.8454 2.4 3.5
318 ...... No ............ No ............ 11 MED ......... KIDNEY & URINARY TRACT NEOPLASMS 1.2571 4.4 6.0
W CC.
319 ...... No ............ No ............ 11 MED ......... KIDNEY & URINARY TRACT NEOPLASMS 0.6169 1.9 2.6
W/O CC.
320 ...... Yes .......... No ............ 11 MED ......... KIDNEY & URINARY TRACT INFECTIONS 0.9538 4.1 5.1
AGE >17 W CC.
321 ...... Yes .......... No ............ 11 MED ......... KIDNEY & URINARY TRACT INFECTIONS 0.6512 3.0 3.6
AGE >17 W/O CC.
322 ...... No ............ No ............ 11 MED ......... KIDNEY & URINARY TRACT INFECTIONS 0.7212 3.1 3.6
AGE 0–17.
323 ...... No ............ No ............ 11 MED ......... URINARY STONES W CC, D&/OR ESW 0.8239 2.3 3.1
LITHOTRIPSY.
324 ...... No ............ No ............ 11 MED ......... URINARY STONES W/O CC ....................... 0.5233 1.6 1.8
325 ...... No ............ No ............ 11 MED ......... KIDNEY & URINARY TRACT SIGNS & 0.7334 2.9 3.7
SYMPTOMS AGE >17 W CC.
326 ...... No ............ No ............ 11 MED ......... KIDNEY & URINARY TRACT SIGNS & 0.4932 2.1 2.6
SYMPTOMS AGE >17 W/O CC.
327 ...... No ............ No ............ 11 MED ......... KIDNEY & URINARY TRACT SIGNS & 0.3724 1.8 2.0
SYMPTOMS AGE 0–17.
328 ...... No ............ No ............ 11 MED ......... URETHRAL STRICTURE AGE >17 W CC 0.7346 2.5 3.4
329 ...... No ............ No ............ 11 MED ......... URETHRAL STRICTURE AGE >17 W/O 0.4671 1.4 1.7
CC.
330 ...... No ............ No ............ 11 MED* ....... URETHRAL STRICTURE AGE 0–17 .......... 0.4671 * *
331 ...... Yes .......... No ............ 11 MED ......... OTHER KIDNEY & URINARY TRACT DI- 1.1580 4.2 5.5
AGNOSES AGE >17 W CC.
332 ...... Yes .......... No ............ 11 MED ......... OTHER KIDNEY & URINARY TRACT DI- 0.6602 2.4 3.1
AGNOSES AGE >17 W/O CC.
333 ...... No ............ No ............ 11 MED ......... OTHER KIDNEY & URINARY TRACT DI- 1.1833 3.7 5.4
AGNOSES AGE 0–17.
334 ...... No ............ No ............ 12 SURG ...... MAJOR MALE PELVIC PROCEDURES W 1.4154 3.3 4.0
CC.
335 ...... No ............ No ............ 12 SURG ...... MAJOR MALE PELVIC PROCEDURES W/ 1.0701 2.2 2.5
O CC.
336 ...... No ............ No ............ 12 SURG ...... TRANSURETHRAL PROSTATECTOMY W 0.8824 2.4 3.2
CC.
337 ...... No ............ No ............ 12 SURG ...... TRANSURETHRAL PROSTATECTOMY W/ 0.5989 1.6 1.8
O CC.
338 ...... No ............ No ............ 12 SURG ...... TESTES PROCEDURES, FOR MALIG- 1.4072 3.7 5.8
NANCY.
339 ...... No ............ No ............ 12 SURG ...... TESTES PROCEDURES, NON-MALIG- 1.3418 3.3 5.2
NANCY AGE >17.
340 ...... No ............ No ............ 12 SURG* ..... TESTES PROCEDURES, NON-MALIG- 1.3418 * *
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24281
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
345 ...... No ............ No ............ 12 SURG ...... OTHER MALE REPRODUCTIVE SYSTEM 1.3524 3.4 5.4
O.R. PROC EXCEPT FOR MALIG-
NANCY.
346 ...... No ............ No ............ 12 MED ......... MALIGNANCY, MALE REPRODUCTIVE 1.1351 4.5 5.9
SYSTEM, W CC.
347 ...... No ............ No ............ 12 MED ......... MALIGNANCY, MALE REPRODUCTIVE 0.5734 2.0 2.7
SYSTEM, W/O CC.
348 ...... No ............ No ............ 12 MED ......... BENIGN PROSTATIC HYPERTROPHY W 0.7721 3.1 4.0
CC.
349 ...... No ............ No ............ 12 MED ......... BENIGN PROSTATIC HYPERTROPHY W/ 0.4942 2.1 2.6
O CC.
350 ...... No ............ No ............ 12 MED ......... INFLAMMATION OF THE MALE REPRO- 0.8552 3.6 4.5
DUCTIVE SYSTEM.
351 ...... No ............ No ............ 12 MED* ....... STERILIZATION, MALE ............................... 0.8690 * *
352 ...... No ............ No ............ 12 MED ......... OTHER MALE REPRODUCTIVE SYSTEM 0.8690 3.0 4.2
DIAGNOSES.
353 ...... No ............ No ............ 13 SURG ...... PELVIC EVISCERATION, DRADICAL 1.7446 4.5 6.0
HYSTERECTOMY & RADICAL
VULVECTOMY.
354 ...... No ............ No ............ 13 SURG ...... UTERINE, ADNEXA PROC FOR NON- 1.5594 4.5 5.6
OVARIAN/ADNEXAL MALIG W CC.
355 ...... No ............ No ............ 13 SURG ...... UTERINE, ADNEXA PROC FOR NON- 0.9349 2.8 3.0
OVARIAN/ADNEXAL MALIG W/O CC.
356 ...... No ............ No ............ 13 SURG ...... FEMALE REPRODUCTIVE SYSTEM RE- 0.7426 1.6 1.9
CONSTRUCTIVE PROCEDURES.
357 ...... No ............ No ............ 13 SURG ...... UTERINE & ADNEXA PROC FOR OVAR- 2.2785 6.4 8.0
IAN OR ADNEXAL MALIGNANCY.
358 ...... No ............ No ............ 13 SURG ...... UTERINE & ADNEXA PROC FOR NON- 1.1816 3.1 3.9
MALIGNANCY W CC.
359 ...... No ............ No ............ 13 SURG ...... UTERINE & ADNEXA PROC FOR NON- 0.8258 2.1 2.3
MALIGNANCY W/O CC.
360 ...... No ............ No ............ 13 SURG ...... VAGINA, CERVIX & VULVA PROCE- 0.8803 2.0 2.5
DURES.
361 ...... No ............ No ............ 13 SURG ...... LAPAROSCOPY & INCISIONAL TUBAL 1.1046 2.1 3.0
INTERRUPTION.
362 ...... No ............ No ............ 13 SURG* ..... ENDOSCOPIC TUBAL INTERRUPTION .... 1.1046 1.0 1.0
363 ...... No ............ No ............ 13 SURG ...... D&C, CONIZATION & RADIO-IMPLANT, 1.0198 2.8 4.1
FOR MALIGNANCY.
364 ...... No ............ No ............ 13 SURG ...... D&C, CONIZATION EXCEPT FOR MALIG- 0.9331 3.0 4.2
NANCY.
365 ...... No ............ No ............ 13 SURG ...... OTHER FEMALE REPRODUCTIVE SYS- 2.0803 5.3 7.9
TEM O.R. PROCEDURES.
366 ...... No ............ No ............ 13 MED ......... MALIGNANCY, FEMALE REPRODUCTIVE 1.2888 4.6 6.3
SYSTEM W CC.
367 ...... No ............ No ............ 13 MED ......... MALIGNANCY, FEMALE REPRODUCTIVE 0.5895 2.3 3.0
SYSTEM W/O CC.
368 ...... No ............ No ............ 13 MED ......... INFECTIONS, FEMALE REPRODUCTIVE 1.2262 5.0 6.4
SYSTEM.
369 ...... No ............ No ............ 13 MED ......... MENSTRUAL & OTHER FEMALE REPRO- 0.6696 2.5 3.3
DUCTIVE SYSTEM DISORDERS.
370 ...... No ............ No ............ 14 SURG ...... CESAREAN SECTION W CC ...................... 1.1080 4.0 5.0
371 ...... No ............ No ............ 14 SURG ...... CESAREAN SECTION W/O CC .................. 0.7664 3.1 3.4
372 ...... No ............ No ............ 14 MED ......... VAGINAL DELIVERY W COMPLICATING 0.7390 2.7 3.5
DIAGNOSES.
373 ...... No ............ No ............ 14 MED ......... VAGINAL DELIVERY W/O COMPLI- 0.5276 2.1 2.2
CATING DIAGNOSES.
374 ...... No ............ No ............ 14 SURG ...... VAGINAL DELIVERY W STERILIZATION 0.7708 2.4 3.0
&/OR D&C.
375 ...... No ............ No ............ 14 SURG ...... VAGINAL DELIVERY W O.R. PROC EX- 1.2156 4.0 6.2
CEPT STERIL &/OR D&C.
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376 ...... No ............ No ............ 14 MED ......... POSTPARTUM & POST ABORTION DIAG- 0.7273 2.5 3.3
NOSES W/O O.R. PROCEDURE.
377 ...... No ............ No ............ 14 SURG ...... POSTPARTUM & POST ABORTION DIAG- 1.5307 3.1 4.4
NOSES W O.R. PROCEDURE.
378 ...... No ............ No ............ 14 MED ......... ECTOPIC PREGNANCY .............................. 0.7782 1.8 2.2
379 ...... No ............ No ............ 14 MED ......... THREATENED ABORTION ......................... 0.5628 2.2 3.2
380 ...... No ............ No ............ 14 MED ......... ABORTION W/O D&C .................................. 0.4872 1.5 2.0
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24282 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
381 ...... No ............ No ............ 14 SURG ...... ABORTION W D&C, ASPIRATION 0.7239 1.7 2.4
CURETTAGE OR HYSTEROTOMY.
382 ...... No ............ No ............ 14 MED ......... FALSE LABOR ............................................. 0.2783 1.3 1.5
383 ...... No ............ No ............ 14 MED ......... OTHER ANTEPARTUM DIAGNOSES W 0.6683 2.6 3.7
MEDICAL COMPLICATIONS.
384 ...... No ............ No ............ 14 MED ......... OTHER ANTEPARTUM DIAGNOSES W/O 0.4601 1.7 2.5
MEDICAL COMPLICATIONS.
385 ...... No ............ No ............ 15 MED* ....... NEONATES, DIED OR TRANSFERRED 1.4095 * *
TO ANOTHER ACUTE CARE FACILITY.
386 ...... No ............ No ............ 15 MED* ....... EXTREME IMMATURITY OR RES- 4.648 * *
PIRATORY DISTRESS SYNDROME,
NEONATE.
387 ...... No ............ No ............ 15 MED* ....... PREMATURITY W MAJOR PROBLEMS .... 3.1744 * *
388 ...... No ............ No ............ 15 MED* ....... PREMATURITY W/O MAJOR PROBLEMS 1.9153 * *
389 ...... No ............ No ............ 15 MED* ....... FULL TERM NEONATE W MAJOR PROB- 3.2608 1.8 2.0
LEMS.
390 ...... No ............ No ............ 15 MED* ....... NEONATE W OTHER SIGNIFICANT 1.1541 * *
PROBLEMS.
391 ...... No ............ No ............ 15 MED* ....... NORMAL NEWBORN .................................. 0.1562 * *
392 ...... No ............ No ............ 16 SURG ...... SPLENECTOMY AGE >17 .......................... 3.1188 6.3 8.8
393 ...... No ............ No ............ 16 SURG* ..... SPLENECTOMY AGE 0-–7 ......................... 3.1188 * *
394 ...... No ............ No ............ 16 SURG ...... OTHER O.R. PROCEDURES OF THE 1.8725 4.4 7.3
BLOOD AND BLOOD FORMING OR-
GANS.
395 ...... Yes .......... No ............ 16 MED ......... RED BLOOD CELL DISORDERS AGE >17 0.9413 3.2 4.3
396 ...... No ............ No ............ 16 MED ......... RED BLOOD CELL DISORDERS AGE 0– 0.6888 2.5 3.0
17.
397 ...... No ............ No ............ 16 MED ......... COAGULATION DISORDERS ..................... 1.3611 3.7 5.1
398 ...... No ............ No ............ 16 MED ......... RETICULOENDOTHELIAL & IMMUNITY 1.2912 4.4 5.7
DISORDERS W CC.
399 ...... No ............ No ............ 16 MED ......... RETICULOENDOTHELIAL & IMMUNITY 0.7064 2.7 3.4
DISORDERS W/O CC.
400 ...... No ............ No ............ 17 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
401 ...... Yes .......... No ............ 17 SURG ...... LYMPHOMA & NON-ACUTE LEUKEMIA W 2.8703 8.1 11.2
OTHER O.R. PROC W CC.
402 ...... Yes .......... No ............ 17 SURG ...... LYMPHOMA & NON-ACUTE LEUKEMIA W 1.1380 2.8 3.9
OTHER O.R. PROC W/O CC.
403 ...... Yes .......... No ............ 17 MED ......... LYMPHOMA & NON-ACUTE LEUKEMIA W 1.8986 5.7 8.0
CC.
404 ...... Yes .......... No ............ 17 MED ......... LYMPHOMA & NON-ACUTE LEUKEMIA 0.9137 3.0 4.0
W/O CC.
405 ...... No ............ No ............ 17 MED* ....... ACUTE LEUKEMIA W/O MAJOR O.R. 3.4703 * *
PROCEDURE AGE 0–17.
406 ...... No ............ No ............ 17 SURG ...... MYELOPROLIF DISORD OR POORLY 2.7839 6.7 9.4
DIFF NEOPL W MAJ O.R.PROC W CC.
407 ...... No ............ No ............ 17 SURG ...... MYELOPROLIF DISORD OR POORLY 1.1617 2.9 3.5
DIFF NEOPL W MAJ O.R.PROC W/O
CC.
408 ...... No ............ No ............ 17 SURG ...... MYELOPROLIF DISORD OR POORLY 2.1388 5.1 8.2
DIFF NEOPL W OTHER O.R.PROC.
409 ...... No ............ No ............ 17 MED ......... RADIOTHERAPY ......................................... 1.2059 4.5 6.0
410 ...... No ............ No ............ 17 MED ......... CHEMOTHERAPY W/O ACUTE LEU- 1.0178 2.9 3.8
KEMIA AS SECONDARY DIAGNOSIS.
411 ...... No ............ No ............ 17 MED* ....... HISTORY OF MALIGNANCY W/O ENDOS- 0.6205 1.6 2.0
COPY.
412 ...... No ............ No ............ 17 MED* ....... HISTORY OF MALIGNANCY W ENDOS- 0.6205 1.4 1.5
COPY.
413 ...... No ............ No ............ 17 MED ......... OTHER MYELOPROLIF DIS OR POORLY 1.4097 5.1 6.8
DIFF NEOPL DIAG W CC.
414 ...... No ............ No ............ 17 MED ......... OTHER MYELOPROLIF DIS OR POORLY 0.8055 3.0 4.0
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24283
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
419 ...... No ............ No ............ 18 MED ......... FEVER OF UNKNOWN ORIGIN AGE >17 0.8951 3.4 4.4
W CC.
420 ...... No ............ No ............ 18 MED ......... FEVER OF UNKNOWN ORIGIN AGE >17 0.6263 2.6 3.2
W/O CC.
421 ...... No ............ No ............ 18 MED ......... VIRAL ILLNESS AGE >17 ........................... 0.8210 3.1 4.0
422 ...... No ............ No ............ 18 MED ......... VIRAL ILLNESS & FEVER OF UNKNOWN 0.8240 2.6 3.7
ORIGIN AGE 0–17.
423 ...... Yes .......... No ............ 18 MED ......... OTHER INFECTIOUS & PARASITIC DIS- 1.9053 5.9 8.2
EASES DIAGNOSES.
424 ...... No ............ No ............ 19 SURG ...... O.R. PROCEDURE W PRINCIPAL DIAG- 2.3978 7.4 11.4
NOSES OF MENTAL ILLNESS.
425 ...... No ............ No ............ 19 MED ......... ACUTE ADJUSTMENT REACTION & PSY- 0.7075 2.6 3.5
CHOSOCIAL DYSFUNCTION.
426 ...... No ............ No ............ 19 MED ......... DEPRESSIVE NEUROSES ......................... 0.7464 3.2 4.5
427 ...... No ............ No ............ 19 MED ......... NEUROSES EXCEPT DEPRESSIVE .......... 0.8104 3.2 4.7
428 ...... No ............ No ............ 19 MED ......... DISORDERS OF PERSONALITY & IM- 1.1577 4.5 7.3
PULSE CONTROL.
429 ...... Yes .......... No ............ 19 MED ......... ORGANIC DISTURBANCES & MENTAL 0.9614 4.4 5.8
RETARDATION.
430 ...... Yes .......... No ............ 19 MED ......... PSYCHOSES ............................................... 1.2316 5.9 8.0
431 ...... No ............ No ............ 19 MED ......... CHILDHOOD MENTAL DISORDERS .......... 1.0504 4.3 6.8
432 ...... No ............ No ............ 19 MED ......... OTHER MENTAL DISORDER DIAGNOSES 0.7280 2.7 4.0
433 ...... No ............ No ............ 20 MED ......... ALCOHOL/DRUG ABUSE OR DEPEND- 0.4017 2.1 2.8
ENCE, LEFT AMA.
434 ...... No ............ No ............ 20 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
435 ...... No ............ No ............ 20 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
436 ...... No ............ No ............ 20 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
437 ...... No ............ No ............ 20 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
438 ...... No ............ No ............ 20 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
439 ...... No ............ No ............ 21 SURG ...... SKIN GRAFTS FOR INJURIES ................... 2.0857 5.4 8.4
440 ...... Yes .......... No ............ 21 SURG ...... WOUND DEBRIDEMENTS FOR INJURIES 2.0128 5.6 8.5
441 ...... No ............ No ............ 21 SURG ...... HAND PROCEDURES FOR INJURIES ...... 1.0682 2.3 3.5
442 ...... Yes .......... No ............ 21 SURG ...... OTHER O.R. PROCEDURES FOR INJU- 2.6213 5.9 8.9
RIES W CC.
443 ...... Yes .......... No ............ 21 SURG ...... OTHER O.R. PROCEDURES FOR INJU- 1.0919 2.7 3.5
RIES W/O CC.
444 ...... Yes .......... No ............ 21 MED ......... TRAUMATIC INJURY AGE >17 W CC ....... 0.8329 3.2 4.1
445 ...... Yes .......... No ............ 21 MED ......... TRAUMATIC INJURY AGE >17 W/O CC .... 0.5792 2.3 2.8
446 ...... No ............ No ............ 21 MED* ....... TRAUMATIC INJURY AGE 0–17 ................ 0.5792 * *
447 ...... No ............ No ............ 21 MED ......... ALLERGIC REACTIONS AGE >17 ............. 0.6470 1.9 2.6
448 ...... No ............ No ............ 21 MED* ....... ALLERGIC REACTIONS AGE 0–17 ............ 0.6470 * *
449 ...... No ............ No ............ 21 MED ......... POISONING & TOXIC EFFECTS OF 0.9882 2.7 3.7
DRUGS AGE >17 W CC.
450 ...... No ............ No ............ 21 MED ......... POISONING & TOXIC EFFECTS OF 0.5741 1.6 2.0
DRUGS AGE >17 W/O CC.
451 ...... No ............ No ............ 21 MED* ....... POISONING & TOXIC EFFECTS OF 0.5741 10.2 10.5
DRUGS AGE 0–17.
452 ...... No ............ No ............ 21 MED ......... COMPLICATIONS OF TREATMENT W CC 1.1377 3.5 4.9
453 ...... No ............ No ............ 21 MED ......... COMPLICATIONS OF TREATMENT W/O 0.5867 2.2 2.8
CC.
454 ...... No ............ No ............ 21 MED ......... OTHER INJURY, POISONING & TOXIC 0.9136 3.0 4.1
EFFECT DIAG W CC.
455 ...... No ............ No ............ 21 MED ......... OTHER INJURY, POISONING & TOXIC 0.5053 1.8 2.3
EFFECT DIAG W/O CC.
456 ...... No ............ No ............ 22 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
457 ...... No ............ No ............ 22 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
458 ...... No ............ No ............ 22 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
459 ...... No ............ No ............ 22 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
460 ...... No ............ No ............ 22 MED ......... NO LONGER VALID .................................... 0.0000 0.0 0.0
461 ...... No ............ No ............ 23 SURG ...... O.R. PROC W DIAGNOSES OF OTHER 1.5386 3.3 5.6
CONTACT W HEALTH SERVICES.
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462 ...... Yes .......... No ............ 23 MED ......... REHABILITATION ........................................ 1.5753 8.4 9.9
463 ...... Yes .......... No ............ 23 MED ......... SIGNS & SYMPTOMS W CC ...................... 0.7661 3.1 3.9
464 ...... Yes .......... No ............ 23 MED ......... SIGNS & SYMPTOMS W/O CC .................. 0.5663 2.4 2.9
465 ...... No ............ No ............ 23 MED ......... AFTERCARE W HISTORY OF MALIG- 0.6205 2.5 3.6
NANCY AS SECONDARY DIAGNOSIS.
466 ...... No ............ No ............ 23 MED ......... AFTERCARE W/O HISTORY OF MALIG- 0.7848 2.7 5.0
NANCY AS SECONDARY DIAGNOSIS.
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24284 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
467 ...... No ............ No ............ 23 MED ......... OTHER FACTORS INFLUENCING 0.5408 1.9 2.7
HEALTH STATUS.
468 ...... Yes .......... No ............ .......... SURG ...... EXTENSIVE O.R. PROCEDURE UNRE- 3.8122 9.6 12.9
LATED TO PRINCIPAL DIAGNOSIS.
469 ...... No ............ No ............ .......... ** .............. PRINCIPAL DIAGNOSIS INVALID AS DIS- 0.0000 0.0 0.0
CHARGE DIAGNOSIS.
470 ...... No ............ No ............ .......... ** .............. UNGROUPABLE .......................................... 0.0000 0.0 0.0
471 ...... Yes .......... Yes .......... 08 SURG ...... BILATERAL OR MULTIPLE MAJOR JOINT 2.7365 4.2 4.6
PROCS OF LOWER EXTREMITY.
472 ...... No ............ No ............ 22 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
473 ...... No ............ No ............ 17 MED ......... ACUTE LEUKEMIA W/O MAJOR O.R. 3.4703 7.3 12.7
PROCEDURE AGE >17.
474 ...... No ............ No ............ 04 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
475 ...... Yes .......... No ............ 04 MED ......... RESPIRATORY SYSTEM DIAGNOSIS 3.8279 7.9 10.9
WITH VENTILATOR SUPPORT.
476 ...... No ............ No ............ .......... SURG ...... PROSTATIC O.R. PROCEDURE UNRE- 2.1079 6.9 10.0
LATED TO PRINCIPAL DIAGNOSIS.
477 ...... Yes .......... No ............ .......... SURG ...... NON-EXTENSIVE O.R. PROCEDURE UN- 2.0694 5.9 8.6
RELATED TO PRINCIPAL DIAGNOSIS.
478 ...... Yes .......... No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
479 ...... No ............ No ............ 05 SURG ...... OTHER VASCULAR PROCEDURES W/O 1.2715 1.9 2.6
CC.
480 ...... No ............ No ............ PRE SURG ...... LIVER TRANSPLANT AND/OR INTES- 11.7482 14.0 19.2
TINAL TRANSPLANT.
481 ...... No ............ No ............ PRE SURG ...... BONE MARROW TRANSPLANT ................ 7.1983 18.7 22.0
482 ...... Yes .......... No ............ PRE SURG ...... TRACHEOSTOMY FOR FACE,MOUTH & 3.5956 9.4 11.8
NECK DIAGNOSES.
483 ...... No ............ No ............ PRE SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
484 ...... No ............ No ............ 24 SURG ...... CRANIOTOMY FOR MULTIPLE SIGNIFI- 5.3652 8.6 12.8
CANT TRAUMA.
485 ...... Yes .......... No ............ 24 SURG ...... LIMB REATTACHMENT, HIP AND FEMUR 3.5846 8.1 9.9
PROC FOR MULTIPLE SIGNIFICANT
TRAUMA.
486 ...... No ............ No ............ 24 SURG ...... OTHER O.R. PROCEDURES FOR MUL- 5.1310 8.5 12.3
TIPLE SIGNIFICANT TRAUMA.
487 ...... Yes .......... No ............ 24 MED ......... OTHER MULTIPLE SIGNIFICANT TRAU- 2.1184 5.2 7.1
MA.
488 ...... No ............ No ............ 25 SURG ...... HIV W EXTENSIVE O.R. PROCEDURE ..... 4.8181 12.2 17.5
489 ...... No ............ No ............ 25 MED ......... HIV W MAJOR RELATED CONDITION ...... 1.7760 5.8 8.2
490 ...... No ............ No ............ 25 MED ......... HIV W OR W/O OTHER RELATED CONDI- 1.0808 3.8 5.3
TION.
491 ...... No ............ No ............ 08 SURG ...... MAJOR JOINT & LIMB REATTACHMENT 1.5997 2.5 3.0
PROCEDURES OF UPPER EXTREMITY.
492 ...... No ............ No ............ 17 MED ......... CHEMOTHERAPY W ACUTE LEUKEMIA 3.6663 8.9 13.8
OR W USE OF HI DOSE
CHEMOAGENT.
493 ...... No ............ No ............ 07 SURG ...... LAPAROSCOPIC CHOLECYSTECTOMY 1.7812 4.6 6.0
W/O C.D.E. W CC.
494 ...... No ............ No ............ 07 SURG ...... LAPAROSCOPIC CHOLECYSTECTOMY 0.9795 2.1 2.7
W/O C.D.E. W/O CC.
495 ...... No ............ No ............ PRE SURG ...... LUNG TRANSPLANT ................................... 10.0630 14.2 17.0
496 ...... No ............ No ............ 08 SURG ...... COMBINED ANTERIOR/POSTERIOR SPI- 5.3926 6.4 8.8
NAL FUSION.
497 ...... Yes .......... Yes .......... 08 SURG ...... SPINAL FUSION EXCEPT CERVICAL W 3.3300 4.8 5.7
CC.
498 ...... Yes .......... Yes .......... 08 SURG ...... SPINAL FUSION EXCEPT CERVICAL W/O 2.5267 3.3 3.7
CC.
499 ...... No ............ No ............ 08 SURG ...... BACK & NECK PROCEDURES EXCEPT 1.3408 3.0 4.2
SPINAL FUSION W CC.
500 ...... No ............ No ............ 08 SURG ...... BACK & NECK PROCEDURES DEXCEPT 0.8707 1.8 2.2
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24285
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
504 ...... No ............ No ............ 22 SURG ...... EXTEN. BURNS OR FULL THICKNESS 13.2723 21.0 28.3
BURN W/MV 96+HRS W/SKIN GFT.
505 ...... No ............ No ............ 22 MED ......... EXTEN. BURNS OR FULL THICKNESS 3.0532 2.8 6.4
BURN W/MV 96+HRS W/O SKIN GFT.
506 ...... No ............ No ............ 22 SURG ...... FULL THICKNESS BURN W DSKIN 4.7246 10.9 15.2
GRAFT OR INHAL INJ W CC OR SIG
TRAUMA.
507 ...... No ............ No ............ 22 SURG ...... FULL THICKNESS BURN W SKIN GRFT 2.2603 5.5 7.8
OR INHAL INJ W/O CC OR SIG TRAU-
MA.
508 ...... No ............ No ............ 22 MED ......... FULL THICKNESS BURN W/O SKIN GRFT 1.6171 5.3 7.5
OR INHAL INJ W CC OR SIG TRAUMA.
509 ...... No ............ No ............ 22 MED ......... FULL THICKNESS BURN W/O SKIN GRFT 1.1338 3.7 5.3
OR INH INJ W/O CC OR SIG TRAUMA.
510 ...... No ............ No ............ 22 MED ......... NON-EXTENSIVE BURNS W CC OR SIG- 1.4467 4.1 6.1
NIFICANT TRAUMA.
511 ...... No ............ No ............ 22 MED ......... NON-EXTENSIVE BURNS W/O CC OR 0.8610 2.6 3.7
SIGNIFICANT DTRAUMA.
512 ...... No ............ No ............ PRE SURG ...... SIMULTANEOUS PANCREAS/KIDNEY 9.9384 11.1 13.5
TRANSPLANT.
513 ...... No ............ No ............ PRE SURG ...... PANCREAS TRANSPLANT ......................... 6.5546 8.8 10.0
514 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
515 ...... No ............ No ............ 05 SURG ...... CARDIAC DEFIBRILLATOR IMPLANT W/O 4.1471 2.2 3.8
CARDIAC CATH.
516 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
517 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
518 ...... No ............ No ............ 05 SURG ...... PERC CARDIO PROC W/O CORONARY 1.1424 1.8 2.5
ARTERY STENT OR AMI.
519 ...... No ............ No ............ 08 SURG ...... CERVICAL SPINAL FUSION W CC ............ 2.2859 2.9 4.7
520 ...... No ............ No ............ 08 SURG ...... CERVICAL SPINAL FUSION W/O CC ........ 1.4721 1.6 1.9
521 ...... Yes .......... No ............ 20 MED ......... ALCOHOL/DRUG ABUSE OR DEPEND- 0.9157 4.0 5.4
ENCE W CC.
522 ...... Yes .......... No ............ 20 MED ......... ALC/DRUG ABUSE OR DEPEND W RE- 1.0575 8.1 10.5
HABILITATION THERAPY W/O CC.
523 ...... No ............ No ............ 20 MED ......... ALC/DRUG ABUSE OR DEPEND W/O RE- 0.5474 3.2 3.8
HABILITATION THERAPY W/O CC.
524 ...... No ............ No ............ 01 MED ......... TRANSIENT ISCHEMIA ............................... 0.6913 2.6 3.1
525 ...... No ............ No ............ 05 SURG ...... OTHER HEART ASSIST SYSTEM IM- 12.0673 7.7 14.5
PLANT.
526 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
527 ...... No ............ No ............ 05 SURG ...... NO LONGER VALID .................................... 0.0000 0.0 0.0
528 ...... No ............ No ............ 01 SURG ...... INTRACRANIAL VASCULAR PROC W 7.3829 13.3 16.4
PDX HEMORRHAGE.
529 ...... Yes .......... No ............ 01 SURG ...... VENTRICULAR SHUNT PROCEDURES W 2.2423 4.7 7.5
CC.
530 ...... Yes .......... No ............ 01 SURG ...... VENTRICULAR SHUNT PROCEDURES W/ 1.1697 2.3 3.0
O CC.
531 ...... Yes .......... No ............ 01 SURG ...... SPINAL PROCEDURES W CC ................... 3.0552 6.3 9.1
532 ...... Yes .......... No ............ 01 SURG ...... SPINAL PROCEDURES W/O CC ............... 1.3777 2.8 3.6
533 ...... No ............ No ............ 01 SURG ...... EXTRACRANIAL PROCEDURES W CC .... 1.4911 2.3 3.7
534 ...... No ............ No ............ 01 SURG ...... EXTRACRANIAL PROCEDURES W/O CC 0.9668 1.4 1.7
535 ...... No ............ No ............ 05 SURG ...... CARDIAC DEFIB IMPLANT W CARDIAC 5.8951 6.9 9.2
CATH W AMI/HF/SHOCK.
536 ...... No ............ No ............ 05 SURG ...... CARDIAC DEFIB IMPLANT W CARDIAC 5.2199 5.5 7.3
CATH W/O AMI/HF/SHOCK.
537 ...... Yes .......... No ............ 08 SURG ...... LOCAL EXCIS & REMOV OF INT FIX DEV 1.8568 4.7 6.6
EXCEPT HIP & FEMUR W CC.
538 ...... Yes .......... No ............ 08 SURG ...... LOCAL EXCIS & REMOV OF INT FIX DEV 1.0223 2.2 2.9
EXCEPT HIP & FEMUR W/O CC.
539 ...... No ............ No ............ 17 SURG ...... LYMPHOMA & LEUKEMIA W MAJOR OR 3.1235 6.8 10.5
PROCEDURE W CC.
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540 ...... No ............ No ............ 17 SURG ...... LYMPHOMA & LEUKEMIA W MAJOR OR 1.1837 2.6 3.5
PROCEDURE W/O CC.
541 ...... Yes .......... No ............ PRE SURG ...... ECMO OR TRACH W MV 96+HRS OR 19.9990 36.9 44.1
PDX EXC FACE, MOUTH & NECK W
MAJ O.R..
542 ...... Yes .......... No ............ PRE SURG ...... TRACH W MV 96+HRS OR PDX EXC 12.5966 27.2 32.6
FACE, MOUTH & NECK W/O MAJ O.R..
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24286 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 5.—LIST OF DIAGNOSIS-RELATED GROUPS, RELATIVE WEIGHTING FACTORS, AND GEOMETRIC AND ARITHMETIC
MEAN LENGTH OF STAY (LOS)—Continued
FY 07 pro- FY 07 pro-
posed rule posed rule Geometric Arithmetic
DRG MDC Type DRG title Weights
post-acute special pay mean LOS mean LOS
care DRG DRG
543 ...... Yes .......... No ............ 01 SURG ...... CRANIOTOMY W/IMPLANT OF CHEMO 4.6474 8.4 12.0
AGENT OR ACUTE COMPLX CNS PDX.
544 ...... Yes .......... No ............ 08 SURG ...... MAJOR JOINT REPLACEMENT OR RE- 1.8941 4.0 4.4
ATTACHMENT OF LOWER EXTREMITY.
545 ...... Yes .......... Yes .......... 08 SURG ...... REVISION OF HIP OR KNEE REPLACE- 2.4127 4.5 5.2
MENT.
546 ...... No ............ No ............ 08 SURG ...... SPINAL FUSION EXC CERV WITH CUR- 4.8421 6.9 8.7
VATURE OF THE SPINE OR MALIG.
547 ...... Yes .......... No ............ 05 SURG ...... CORONARY BYPASS W CARDIAC CATH 5.6862 10.9 12.4
W MAJOR CV DX.
548 ...... Yes .......... No ............ 05 SURG ...... CORONARY BYPASS W CARDIAC CATH 4.1762 8.1 8.9
W/O MAJOR CV DX.
549 ...... Yes .......... Yes .......... 05 SURG ...... CORONARY BYPASS W/O CARDIAC 4.8829 8.7 10.3
CATH W MAJOR CV DX.
550 ...... Yes .......... Yes .......... 05 SURG ...... CORONARY BYPASS W/O CARDIAC 3.4598 6.2 6.8
CATH W/O MAJOR CV DX.
551 ...... No ............ No ............ 05 SURG ...... PERMANENT CARDIAC PACEMAKER 2.6339 4.2 6.1
IMPL W MAJ CV DX OR AICD LEAD OR
GNRTR.
552 ...... No ............ No ............ 05 SURG ...... OTHER PERMANENT CARDIAC PACE- 1.7670 2.5 3.5
MAKER IMPLANT W/O MAJOR CV DX.
553 ...... Yes .......... No ............ 05 SURG ...... OTHER VASCULAR PROCEDURES W CC 2.8371 6.3 9.3
W MAJOR CV DX.
554 ...... Yes .......... No ............ 05 SURG ...... OTHER VASCULAR PROCEDURES W CC 1.9483 3.7 5.6
W/O MAJOR CV DX.
555 ...... No ............ No ............ 05 SURG ...... PERCUTANEOUS CARDIOVASCULAR 1.8654 3.4 4.8
PROC W MAJOR CV DX.
556 ...... No ............ No ............ 05 SURG ...... PERCUTANEOUS CARDIOVASC PROC W 1.2241 1.6 2.0
NON-DRUG-ELUTING STENT W/O MAJ
CV DX.
557 ...... No ............ No ............ 05 SURG ...... PERCUTANEOUS CARDIOVASCULAR 2.1323 3.0 4.1
PROC W DRUG-ELUTING STENT W
MAJOR CV DX.
558 ...... No ............ No ............ 05 SURG ...... PERCUTANEOUS CARDIOVASCULAR 1.4299 1.5 1.8
PROC W DRUG-ELUTING STENT W/O
MAJ CV DX.
559 ...... No ............ No ............ 08 MED ......... ACUTE ISCHEMIC STROKE WITH USE 2.2370 5.4 6.9
OF THROMBOLYTIC AGENT.
DRGS 469 and 470 contain cases which could not be assigned to valid drgs.
Note: An asterisk in the gmlos or amlos column indicates there is no data to compute.
Note: Arithmetic mean is presented for informational purposes only.
Note: Geometric mean is used only to determine payment for transfer cases.
Note: Relative weights are based on medicare patient data and may not be appropriate for other patients.
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24287
379.60 ...... Inflammation (infection) of postprocedural bleb, unspecified ...................................................... N 2 46, 47, 48
379.61 ...... Inflammation (infection) of postprocedural bleb, stage 1 ............................................................ N 2 46, 47, 48
379.62 ...... Inflammation (infection) of postprocedural bleb, stage 2 ............................................................ N 2 46, 47, 48
379.63 ...... Inflammation (infection) of postprocedural bleb, stage 3 ............................................................ N 2 46, 47, 48
389.15 ...... Sensorineural hearing loss, unilateral ......................................................................................... N 3 73, 74
389.16 ...... Sensorineural hearing loss, asymmetrical ................................................................................... N 3 73, 74
429.83 ...... Takotsubo syndrome ................................................................................................................... N 5 144, 145
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649.60 ...... Uterine size date discrepancy, unspecified as to episode of care or not applicable .................. N 14 469
649.61 ...... Uterine size date discrepancy, delivered, with or without mention of antepartum condition ...... N 14 370, 371, 372,
373, 374, 375
649.62 ...... Uterine size date discrepancy, delivered, with mention of postpartum complication ................. N 14 370, 371, 372,
373, 374, 375
649.63 ...... Uterine size date discrepancy, antepartum condition or complication ........................................ N 14 383, 384
649.64 ...... Uterine size date discrepancy, postpartum condition or complication ........................................ N 14 376, 377
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39.74 ........ Endovascular removal of obstruction from head and neck vessel(s) ......................................... Y 1 1, 2, 3, 543
21 442, 443
24 486
68.41 ........ Laparoscopic total abdominal hysterectomy ............................................................................... Y 13 354, 355, 357,
14 358, 359
375
68.49 ........ Other and unspecified total abdominal hysterectomy ................................................................. Y 13 354, 355,
14 357,358, 359
375
68.61 ........ Laparoscopic radical abdominal hysterectomy ............................................................................ Y 13 353
14 375
68.69 ........ Other and unspecified radical abdominal hysterectomy ............................................................. Y 13 353
14 375
68.71 ........ Laparoscopic radical vaginal hysterectomy [LRVH] .................................................................... Y 13 353
14 375
68.79 ........ Other and unspecified radical vaginal hysterectomy ................................................................... Y 13 353
14 375
1 Assigned to DRG 120 when both Code 00.56 and Code 00.57 are reported.
238.7 ........ Other lymphatic and hematopoietic tissues ................................................................................. N 17 401, 402, 403,
404, 539, 540
277.3 ........ Amyloidosis .................................................................................................................................. N 8 240, 241
284.0 ........ Constitutional aplastic anemia ..................................................................................................... Y 16 395, 396
288.0 ........ Agranulocytosis ............................................................................................................................ Y 16 398, 399 490
25
323.0 ........ Encephalitis in viral diseases classified elsewhere ..................................................................... N 1 20, 543
323.4 ........ Other encephalitis due to infection classified elsewhere ............................................................ N 1 20, 543
323.5 ........ Encephalitis following immunization procedures ......................................................................... N 1 20, 543
323.6 ........ Postinfectious encephalitis ........................................................................................................... N 1 20, 543
323.7 ........ Toxic encephalitis ........................................................................................................................ N 1 34, 35, 543
323.8 ........ Other causes of encephalitis ....................................................................................................... N 1 20, 543 489
25
333.7 ........ Symptomatic torsion dystonia ...................................................................................................... N 1 12
478.1 ........ Other diseases of nasal cavity and sinuses ................................................................................ N 3 73, 74 391 1
15
519.1 ........ Other diseases of trachea and bronchus, not elsewhere classified ........................................... N PRE 482
4 96, 97, 98
521.8 ........ Other specific diseases of hard tissues of teeth ......................................................................... N PRE 482
3 185, 186, 187
523.0 ........ Acute gingivitis ............................................................................................................................. N PRE 482
3 185, 186, 187
523.1 ........ Chronic gingivitis .......................................................................................................................... N PRE 482
3 185, 186, 187
523.3 ........ Acute periodontitis ....................................................................................................................... N PRE 482
3 185, 186, 187
523.4 ........ Chronic periodontitis .................................................................................................................... N PRE 482
3 185, 186, 187
528.0 ........ Stomatitis ..................................................................................................................................... N PRE 482
3 185, 186, 187
608.2 ........ Torsion of testis ........................................................................................................................... N 12 352
616.8 ........ Other specified inflammatory diseases of cervix, vagina, and vulva .......................................... N 13 358, 359, 368
629.8 ........ Other specified disorders of female genital organs ..................................................................... N 13 358, 359, 369
784.9 ........ Other symptoms involving head and neck .................................................................................. N 3 73, 74
793.9 ........ Other nonspecific abnormal findings on radiological and other examinations of body structure N 23 463, 464
995.2 ........ Unspecified adverse effect of drug, medicinal and biological substance ................................... N 15 387 2, 389 2
21 449, 450, 451
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551 4, 553 4,
555 4, 557 4
15 387 5, 389 5
404.10 ...... Hypertensive heart and chronic kidney disease, benign, without heart failure and with N 5 134
chronic kidney disease stage I through stage IV, or unspecified.
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404.11 ...... Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic Y 5 121 2, 124 3,
kidney disease stage I through stage IV, or unspecified. 127, 535,
547 4, 549 4,
551 4, 553 4,
555 4, 557 4
15 387 5, 389 5
404.12 ...... Hypertensive heart and chronic kidney disease, benign, without heart failure and with Y PRE 512 1, 513 1
chronic kidney disease stage V or end stage renal disease. 11 315, 316
404.13 ...... Hypertensive heart and chronic kidney disease, benign, with heart failure and chronic kid- Y PRE 512 1, 513 1
ney disease stage V or end stage renal disease. 5 121 2, 124 3,
127, 535,
547 4, 549 4,
551 4, 553 4,
5554, 557 4
15 387 5, 389 5
404.90 ...... Hypertensive heart and chronic kidney disease, unspecified, without heart failure and with N 5 134
chronic kidney disease stage I through stage IV, or unspecified.
404.91 ...... Hypertensive heart and chronic kidney disease, unspecified, with heart failure and with Y 5 121 2, 124 3,
chronic kidney disease stage I through stage IV, or unspecified. 127, 535,
547 4, 549 4,
551 4, 553 4,
555 4, 557 4
15 387 5, 389 5
404.92 ...... Hypertensive heart and chronic kidney disease, unspecified, without heart failure and with Y PRE 512 1, 513 1
chronic kidney disease stage V or end stage renal disease. 11 315, 316
404.93 ...... Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic Y PRE 512 1, 513 1
kidney disease stage V or end stage renal disease. 5 121 2, 124 3,
127, 535,
547 4, 549 4,
551 4, 553 4,
555 4, 557 4
15 387 5, 389 5
524.21 ...... Malocclusion, Angle’s class I .................................................................................................... N PRE 482
3 185, 186, 187
524.22 ...... Malocclusion, Angle’s class II ................................................................................................... N PRE 482
3 185, 186, 187
524.23 ...... Malocclusion, Angle’s class III .................................................................................................. N PRE 482
3 185, 186, 187
524.35 ...... Rotation of tooth/teeth ............................................................................................................... N PRE 482
3 185, 186, 187
600.00 ...... Hypertrophy (benign) of prostate withouturinary obstruction and other lower urinary tract N 12 348, 349
(LUTS)symptoms (LUTS).
600.01 ...... Hypertrophy (benign) of prostate with urinary obstruction and other lower urinary tract N 12 348, 349
symptoms (LUTS).
600.20 ...... Benign localized hyperplasia of prostate without urinary obstruction and other lower urinary N 12 348, 349
tract symptoms (LUTS).
600.21 ...... Benign localized hyperplasia of prostate with urinary obstruction and other lower urinary N 12 348, 349
tract symptoms (LUTS).
600.90 ...... Hyperplasia of prostate, unspecified, without urinary obstruction and other lower urinary N 12 348, 349
symptoms (LUTS).
600.91 ...... Hyperplasia of prostate, unspecified, with urinary obstruction and other lower urinary symp- N 12 348, 349
toms (LUTS).
780.31 ...... Febrile convulsions (simple), unspecified ................................................................................. Y 1 15 24, 25, 26
387 5, 389 5
780.95 ...... Excessive crying of child, adolescent, or adult ......................................................................... N 23 463, 464
790.93 ...... Elevated prostate specific antigen [PSA] .................................................................................. N 23 463, 464
873.63 ...... Tooth (broken) (fractured) (due to trauma), without mention of complication .......................... N 3 185, 186,
24 187 487
873.73 ...... Tooth (broken) (fractured) (due to trauma), complicated ......................................................... N 3 185, 186, 187
24 487
995.91 ...... Sepsis ........................................................................................................................................ Y 18 416, 417
995.92 ...... Severe sepsis ............................................................................................................................ Y 18 416, 417
995.93 ...... Systemic inflammatory response syndrome due to noninfectious process without acute Y 18 416, 417
organ dysfunction.
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995.94 ...... Systemic inflammatory response syndrome due to noninfectious process with acute organ Y 18 416, 417
dysfunction.
V26.31 ..... Testing of female for genetic disease carrier status ................................................................ N 23 467
V26.32 ..... Other genetic testing of female ................................................................................................. N 23 467
1 Principal or secondary diagnosis.
2 Principal or secondary diagnosis of major complication.
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37.26 ........ Catheter based invasive electrophysiologic testing ..................................................................... N* 5 104, 518, 555,
556, 557, 558
*Non-O.R. code that affects DRG assignment.
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24310 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24312 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24314 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24316 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24318 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24320 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24321
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24322 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24324 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24326 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24328 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24329
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24330 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24332 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24334 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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24336 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24337
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24338 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24339
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24340 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24341
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24342 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24343
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24344 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24345
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24346 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24347
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24348 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24349
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24350 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24351
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24352 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24353
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24354 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24355
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24356 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24357
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24358 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24359
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24360 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 6G.—ADDITIONS TO THE CC TABLE 6G.—ADDITIONS TO THE CC TABLE 6H.—DELETIONS FROM THE CC
EXCLUSIONS LIST—Continued EXCLUSIONS LIST—Continued EXCLUSIONS LIST—Continued
[CCs that are added to the list, effective Octo- [CCs that are added to the list, effective Octo- [CCs that are deleted from the list, effective
ber 1, 2006, are included in this table. Each ber 1, 2006, are included in this table. Each October 1, 2006, are included in this table.
of the principal diagnoses is shown with an of the principal diagnoses is shown with an Each of the principal diagnoses is shown
asterisk, and the revisions to the CC Exclu- asterisk, and the revisions to the CC Exclu- with an asterisk, and the revisions to the CC
sions List are provided in an indented col- sions List are provided in an indented col- Exclusions List are provided in an indented
umn immediately following the affected prin- umn immediately following the affected prin- column immediately following the affected
cipal diagnosis.] cipal diagnosis.] principal diagnosis.]
8972 95213 2840
8973 95214 *2813
8974 95215 2840
8975 95216 *2814
8976 95217 2840
8977 95218 *2818
90000 95219 2840
90001 9522 *2819
90002 9523 2840
90003 9524 *2820
9001 9528 2840
90081 9529 *2821
90082 9530 2840
90089 9531 *2822
9009 9532 2840
9010 9533 *2823
9011 9534 2840
9012 9535 *28241
9013 9538 2840
90141 9539 *28242
90142 9580 2840
90183 9581 *28249
9020 9582 2840
90210 9583 *2825
90211 9584 2840
90219 9585 *28260
90220 9587 2840
90222 *9973 *28261
90223 5187 2840
90224 *99791 *28262
90225 5187 2840
90226 *99799 *28263
90227 5187 2840
90229 *99881 *28264
90231 5187 2840
90232 *99883 *28268
90233 5187 2840
90234 *99889 *28269
90239 5187 2840
90240 *9989 *2827
90241 5187 2840
90242 *2828
90249 2840
90250 TABLE 6H.—DELETIONS FROM THE CC *2829
90251 EXCLUSIONS LIST 2840
90252 [CCs that are deleted from the list, effective *2830
90253 October 1, 2006, are included in this table. 2840
90254 Each of the principal diagnoses is shown *28310
90259 with an asterisk, and the revisions to the CC 2840
90287 Exclusions List are provided in an indented *28311
9251 column immediately following the affected 2840
9252 principal diagnosis.] *28319
9290 2840
95200 *2800 *2832
95201 2840 2840
95202 *2801 *2839
95203 2840 2840
95204 *2808 *2840
95205 2840 2800
wwhite on PROD1PC61 with PROPOSALS2
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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24361
TABLE 6H.—DELETIONS FROM THE CC TABLE 6H.—DELETIONS FROM THE CC TABLE 6H.—DELETIONS FROM THE CC
EXCLUSIONS LIST—Continued EXCLUSIONS LIST—Continued EXCLUSIONS LIST—Continued
[CCs that are deleted from the list, effective [CCs that are deleted from the list, effective [CCs that are deleted from the list, effective
October 1, 2006, are included in this table. October 1, 2006, are included in this table. October 1, 2006, are included in this table.
Each of the principal diagnoses is shown Each of the principal diagnoses is shown Each of the principal diagnoses is shown
with an asterisk, and the revisions to the CC with an asterisk, and the revisions to the CC with an asterisk, and the revisions to the CC
Exclusions List are provided in an indented Exclusions List are provided in an indented Exclusions List are provided in an indented
column immediately following the affected column immediately following the affected column immediately following the affected
principal diagnosis.] principal diagnosis.] principal diagnosis.]
28262 *2880 34982
28263 2880 *3237
28264 2881 34982
28268 28981 *3238
28269 28982 34982
2830 *2881 *3337
28310 2880
7817
28311 *2882
28319 2880 *5173
2832 *2883 2840
2839 2880 *5191
2840 *2888 51900
2848 2880 51901
2849 *2889 51902
2850 2880 51909
2851 *28981 *5280
*2848 2840 5283
2840 2880 *6168
*2849 *28982 6140
2840 2840 6143
*2850 2880
6145
2840 *28989
*2851 2840 6150
2840 2880 6163
*28521 *2899 6164
2840 2840 *6298
*28522 2880 6140
2840 *3230 6143
*28529 34982 6145
2840 *3234 6150
*2858 34982 6163
2840 *3235 6164
*2859 34982 6207
2840 *3236
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00367 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24362 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00368 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24363
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00369 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24364 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00370 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24365
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00371 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24366 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00372 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24367
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00373 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24368 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7A.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V23.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00374 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24369
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
71 ................................. 70 4.3429 1 2 3 5 7
72 ................................. 1,338 3.3169 1 2 3 4 6
73 ................................. 9,943 4.2956 1 2 3 5 8
74 ................................. 3 3.3333 3 3 3 4 4
75 ................................. 46,669 9.5793 3 5 7 12 19
76 ................................. 48,046 10.4814 3 5 8 13 20
77 ................................. 2,086 4.4971 1 2 4 6 9
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00375 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24370 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00376 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24371
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00377 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24372 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00378 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24373
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00379 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24374 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00380 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules 24375
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
VerDate Aug<31>2005 17:10 Apr 24, 2006 Jkt 208001 PO 00000 Frm 00381 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2
24376 Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Proposed Rules
TABLE 7B.—MEDICARE PROSPECTIVE PAYMENT SYSTEM SELECTED PERCENTILE LENGTHS OF STAY FY 2005 MEDPAR
UPDATE DECEMBER 2005 GROUPER V24.0—Continued
Arithmetic
Number of 10th 25th 50th 75th 90th
DRG mean
discharges percentile percentile percentile percentile percentile
length-of-stay
TABLE 8A.—STATEWIDE AVERAGE OP- TABLE 8A.—STATEWIDE AVERAGE OP- TABLE 8B.—STATEWIDE AVERAGE
ERATING COST-TO-CHARGE RA- ERATING COST-TO-CHARGE RA- CAPITAL COST-TO-CHARGE RA-
TIOS—MARCH 2006 TIOS—MARCH 2006—Continued TIOS—MARCH 2006—Continued
Alabama .................... 0.265 0.334 Puerto Rico ............... 0.461 ................ Kentucky ....................................... 0.031
Alaska ....................... 0.423 0.719 Rhode Island ............ 0.409 ................ Louisiana ...................................... 0.031
Arizona ...................... 0.285 0.37 South Carolina .......... 0.294 0.297 Maine ............................................ 0.035
Arkansas ................... 0.34 0.357 South Dakota ............ 0.375 0.461 Maryland ....................................... 0.013
California ................... 0.24 0.347 Tennessee ................ 0.324 0.386 Massachusetts .............................. 0.034
Colorado ................... 0.314 0.486 Texas ........................ 0.282 0.369
Connecticut ............... 0.428 0.5 Michigan ....................................... 0.032
Utah .......................... 0.423 0.589
Delaware ................... 0.528 0.508 Minnesota ..................................... 0.029
Vermont .................... 0.555 0.627
District of Columbia .. 0.397 ................ Virginia ...................... 0.366 0.378 Mississippi .................................... 0.03
Florida ....................... 0.252 0.3 Washington ............... 0.427 0.469 Missouri ........................................ 0.027
Georgia ..................... 0.355 0.404 West Virginia ............ 0.488 0.454 Montana ........................................ 0.039
Hawaii ....................... 0.384 0.432 Wisconsin ................. 0.442 0.481 Nebraska ...................................... 0.038
Idaho ......................... 0.48 0.528 Wyoming ................... 0.4 0.561 Nevada ......................................... 0.021
Illinois ........................ 0.326 0.418 New Hampshire ............................ 0.037
Indiana ...................... 0.424 0.454
New Jersey ................................... 0.013
Iowa .......................... 0.39 0.467 TABLE 8B.—STATEWIDE AVERAGE
Kansas ...................... 0.299 0.454 New Mexico .................................. 0.034
Kentucky ................... 0.386 0.394
CAPITAL COST-TO-CHARGE RA- New York ...................................... 0.03
Louisiana .................. 0.308 0.374 TIOS—MARCH 2006 North Carolina .............................. 0.037
Maine ........................ 0.496 0.475 North Dakota ................................ 0.04
Maryland ................... 0.763 0.882 State Ratio Ohio .............................................. 0.031
Massachusetts .......... 0.472 ................ Oklahoma ..................................... 0.031
Michigan ................... 0.376 0.474 Alabama ........................................ 0.026 Oregon .......................................... 0.032
Minnesota ................. 0.391 0.52 Alaska ........................................... 0.042 Pennsylvania ................................ 0.023
Mississippi ................ 0.331 0.38 Arizona .......................................... 0.026
Puerto Rico ................................... 0.035
Missouri .................... 0.333 0.387 Arkansas ....................................... 0.027
California ....................................... 0.016 Rhode Island ................................ 0.023
Montana .................... 0.431 0.478
Colorado ....................................... 0.03 South Carolina .............................. 0.027
Nebraska .................. 0.361 0.475
Nevada ..................... 0.24 0.477 Connecticut ................................... 0.03 South Dakota ................................ 0.037
New Hampshire ........ 0.463 0.463 Delaware ....................................... 0.042 Tennessee .................................... 0.033
New Jersey ............... 0.18 ................ District of Columbia ...................... 0.027 Texas ............................................ 0.028
New Mexico .............. 0.385 0.39 Florida ........................................... 0.024 Utah .............................................. 0.039
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New York .................. 0.365 0.526 Georgia ......................................... 0.032 Vermont ........................................ 0.043
North Carolina .......... 0.439 0.433 Hawaii ........................................... 0.033 Virginia .......................................... 0.037
North Dakota ............ 0.43 0.455 Idaho ............................................. 0.037 Washington ................................... 0.035
Ohio .......................... 0.376 0.549 Illinois ............................................ 0.027 West Virginia ................................ 0.034
Oklahoma ................. 0.321 0.405 Indiana .......................................... 0.038 Wisconsin ..................................... 0.038
Oregon ...................... 0.474 0.475 Iowa .............................................. 0.03 Wyoming ....................................... 0.047
Pennsylvania ............ 0.282 0.444 Kansas .......................................... 0.032
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